Medicare Compliance & Reimbursement

Tip: Clear and concise documentation can validate medical necessity, too.

A firm grasp of what medical necessity means can not only bolster your coding, but it can help you avoid denials and audits.

Additionally, understanding the concept of medical necessity is crucial to confidently incorporating the 2021 office/outpatient E/M service codes and perfecting the accuracy of your coding.

Know the Nuanced Definitions for ‘Medical Necessity’

Definitions of the term are, unsurprisingly, varied — and vague. However, there is some consensus among various medical institutions, according to Kim Huey, MJ, CPC, CPCO, COC, CHC, CCS-P, PCS, president, KGG Coding and Reimbursement Consulting and Sandy Giangreco Brown, BS, RHIT, CHC, CCS, CCS-P, CPC, CPC-1, COBGC, COC, PCS, director of coding and revenue integrity at CLA in their HEALTHCON 2021 presentation “Medical Necessity: Defining and Documenting to Support Billing.”

To meet the criteria of medical necessity, services should be:

• In accordance with “accepted standards of medical practice” (AMA);
• “Reasonable and necessary for the diagnosis or treatment of illness or injury” (Medicare);
• “Neither more nor less than what the patient requires at a specific point in time” (American College of Medical Quality); and
• Not for the economic benefit of the health plan, purchaser, provider, or even the patient (AMA).

Know Impact of Medical Necessity on E/M Coding

The Centers for Medicare & Medicaid Services (CMS) has always maintained that medical necessity is the fundamental basis of payment, which partly explains the recent changes to the office/outpatient E/M services. “As of Jan. 1, 2021, CMS removed the bullet-counting system for history, exam, and medical decision making [MDM] to a medical necessity-based system,” said Kathy Rowland, BSN, RN, CPC, CEMC, CHC, CPC-I, a healthcare compliance consultant in Franklin, Tennessee, during her HEALTHCON 2021 presentation “Ready, Aim, Fire: Understanding the Strategy of Medical Necessity.”

Even so, some things have not changed with the 2021 office/ outpatient E/M revisions, and the medical necessity of an E/M service is still expressed by the “frequency of services and the intensity, or CPT^® level, of services,” Huey and Brown explained. And the new wording of the descriptors for 99202-99215 (Office or other outpatient visit for the evaluation and management of a new/established patient which requires a medically appropriate history and/or examination and … medical decision making…) serves as a reminder that the history and exam portions of the service, while they are no longer used in documenting the service and determining the service level, remain “medically appropriate” in many, if not most, cases.

And the changes may have actually created some confusion, in that MDM and medical necessity are sometimes seen as interchangeable terms. However, it is important to remember that “MDM is the complexity involved in providing services, including the complexity of the presenting problem(s), management options, and overall risk to the patient. Medical necessity demonstrates why the provider performed the services,” Rowland clarified.

See How Medical Necessity Affects Procedure and Dx Coding

“Medical necessity denials have always been on our radar. They were tied to ICD-10 codes, though medical necessity of services has now risen to the top as a focus for reimbursement,” Rowland explained. Part of the reason for that lies in the fact that the diagnosis codes themselves may not be specific enough or do not convey enough information for treatment modalities, Huey and Brown elaborated.

Consider this example: A provider diagnoses an older patient with primary osteoarthritis of the left knee, coded to M17.12 (Unilateral primary osteoarthritis, left knee) and decides to treat the condition by injecting the knee with hyaluronate, which you document with the appropriate number of units of J7325 (Hyaluronan or derivative, Synvisc or Synvisc-One, for intra-articular injection, 1 mg) and 20610 (Arthrocentesis, aspiration and/or injection, major joint or bursa (eg, shoulder, hip, knee, subacromial bursa); without ultrasound guidance).

On the surface, such treatment may meet the accepted standards and reasonable and necessary definitions of medical necessity; however, a payer might disagree. One payer in particular argues that the injection would be medically necessary only if the patient had experienced the condition for six months or more; if the osteoarthritis was classified as grade II or III as confirmed by X-ray; and if the patient had already undergone other, more conservative treatment for the condition such as physical therapy, weight loss, and/or analgesic medication.

“None of that information is conveyed by the diagnosis code,” Huey and Brown noted. In this case, medical necessity is determined by payer standards, not by clinical standards of care. In other words, “just because a service or procedure is medically necessary in your physician’s eyes does not mean it is a covered service,” Huey and Brown cautioned.

Bottom line: “Tell a story with your documentation. Don’t rely on diagnosis documentation alone. And review any payer medical policies and document in their terms,” Huey and Brown concluded. Or, to put it another way, follow CMS’ 1995 Documentation Guidelines for Evaluation and Management Services, which state, “If not documented, the rationale for ordering diagnostic and other ancillary services should be easily inferred.”

Resource: Check out related Medicare guidance at www.cms.gov/outreach-and-education/medicare-learning-network-mln/mlnedwebguide/downloads/95docguidelines.pdf.