Medical Necessity: Understanding and determining medical necessity is not an easy process, and can be very complex for physicians, clinicians, coders and billers. . A physician or clinical provider of care may have a completely different understanding, interpretation and definition of medical necessity, than the patient or a patient’s family member. A third party insurance payer may also have a totally different understanding and application of the term “medically necessary’” or “medical necessity”. The quandary then becomes what is medical necessity? This then becomes difficult for the coder or biller, to understand and sort out as the term “medical necessity” lends itself to misinterpretation and misunderstanding of what needs to be communicated in a variety of areas.
CMS, also commonly known as Medicare, has a specific definition and it is stated under the Social Security Act as: “…… no Medicare payment shall be made for items or services that are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member.”
In essence, the driver of medical necessity is the diagnosis. Coders need to have a very good understanding of the diagnosis itself, then an understanding of what services, or treatment options are to be ordered or have been ordered for the patient to undergo. Medical necessity (i.e. the diagnosis) needs to include an ICD-9 code (soon to be ICD-10) to clearly define the total care of the patient to other care providers involved in the case, and to the 3rd party payers that will be involved in the reimbursement process.
Medical necessity also provides some confusion when it comes to who is going to pay for the procedure or services. Many 3rd party payers have specific coverage rules regarding what they consider ‘medically necessary’ or have riders and exclusions for specific procedures. Third Party payers may have a specific exclusion for procedures that they consider experimental, unproven for a specific diagnosis, or what they may consider as ‘cosmetic’. A good example of this is where a surgeon would like to do a laparoscopic surgery with a daVinci robotic surgical device. Upon pre-authorization for the surgery, the insurance payer states they will not pay for the surgery, if the daVinci is used. The insured’s policy has a rider in the plan that deems the daVinci as an ‘experimental’ surgical device, and therefore will not pay for a surgery if it is used. However, if a traditional laparoscopic or open procedure is performed, the third party payer would reimburse. In this case, the insurance carrier is not stating that the surgery is not medically necessary, just that they will not reimburse for this surgery if the robotic device is utilized.
Coders need to be aware that even if a particular procedure or service is deemed to be medically necessary, some payers have a limitation as to how many times or occurrences a specific service can be rendered within a specified time frame. These limitations are known as National Coverage Determinations and Limited Coverage Determination Policies (NCD’s or LCD’s) with Medicare and Medicaid. Private payers may simply refer to this type of limitation simply as a policy guideline or policy exclusion or rider.
Within some of these guidelines are circumstances where a payer may define where or when a specific service can or will be covered, but the coverage may be limited to a specific diagnosis. An example of this is with a screening wellness or preventive care benefit. Insurance policies may have a wellness or preventive care benefit, but may only be payable once per year. An example of this is a PSA blood test commonly performed to screen for prostate cancer. A screening diagnosis needs to be documented in coordination with the test. If the PSA test is performed on January 1, 2012, for screening, it may not be payable again until 365 days (or 1 calendar year) have elapsed. However, if the patient has a PSA blood test for screening first, and the test has abnormal results, another PSA test may be warranted to be performed, but the clinician and coder, need to submit that claim as a PSA blood test with the appropriate diagnosis for a sign, symptom, or abnormality, not screening.
Medical Necessity is a term that continues to be open for interpretation by all parties involved. Many 3rd party payers have stepped forward to create their “bullet list” of what they use to interpret medical necessity. These lists do not necessarily reflect all options, but for the payer, they have put this reference to medical necessity into their policy guidelines. The physicians and providers have not developed a comprehensive listing of these “medically necessary” qualifiers, so it remains a challenge for coders and clinicians to focus on good documentation and coding accuracy to communicate ‘medical necessity’ of services accurately to the payers. If medical services are denied for reimbursement by 3rd party payers, physicians, clinicians, and coders need to rely on the formal appeal process.
Medical necessity documentation from a physician or provider should include this type of documentation references.
- Documentation of the severity of the “signs and symptoms” or direct diagnosis exhibited by the patient,
- This is our diagnosis driver, and there may be multiple diagnoses involved
- What is the medical probability of an adverse outcome, or a positive outcome for the patient, and how that risk equates to the diagnosis currently being evaluated
- This is the medical risk vs./gain
- What is the need and/or availability of diagnostic studies and/or therapeutic intervention(s) to evaluate and investigate the presenting problem or current acute or chronic medical condition of the patient
- Does the facility/office/hospital have what the provider or clinician needs to render care?
If you look at these bullet points above, they similarly reflect the basics of Evaluation and Management (E&M) guidelines that are currently in place from CPT. ( i.e. the focus of History, Exam, and Medical Decision Making processes) When evaluating the medical necessity of care from this aspect, it is much clearer to understand as a coder. Of course, a good understanding of this integration of medical necessity within the E&M guidelines makes communicating this same principle to the providers a much easier process. Coders have the unique opportunity and ability to encourage the providers to continually enhance the documentation process and improve overall communication and documentation needed between the medical record, coding accuracy, and 3rd party payer reimbursement.
The 3rd party payers have a wide spectrum of policies outlining what they think medical necessity is and should encompass. Physicians, clinical providers and coders alike, should review what these payers have established within the 3rd party payer guidelines. This review should be scrutinized thoroughly if the physician office, hospital or medical facility is going to establish a contractual relationship with a particular 3rd party payer. This up-front communication will help avoid claim denials in the future. Below are some examples of what some 3rd party payers are currently including in their “medically necessary’ verbiage
§ Treatment is consistent with the symptoms or diagnosis of the illness, injury, or symptoms under review by the provider of care
§ • Treatment is necessary and consistent with generally accepted professional medical standards (i.e., not experimental or investigational)
§ • Treatment is not furnished primarily for the convenience of the patient, the attending physician, or another physician or supplier
§ • Treatment is furnished at the most appropriate level that can be provided safely and effectively to the patient, and is neither more or less than what the patient is requiring at that specific point in time.
§ The disbursement of medical care and/or treatment must not be related to the patient’s or the 3rd party payer’s monetary status or benefit.
§ Documentation of all medical care should accurately reflect the need for and outcome of the treatment.
§ Treatment or medical services deemed to be medically necessary, by the provider of those services,(e.g. physician, therapist, clinician etc) does not imply or infer that the service(s) provided will be covered by or deemed a medically necessary service payable by a 3rd party insurance payer.
In conclusion, coders need to be aware of the complex relationships that exist between the physician, the patient, the medical record documentation of that care, the coder, the biller, the insurance payer and the communication between all of these entities to successfully guide the interpretation of “Medical Necessity”.