Medicare Compliance & Reimbursement

Question:  Recently, we had a few claims denied that really surprised both our clinical and billing staff. The payers said the services rendered by one of our physicians were not “medically necessary.” I’m sure the provider thought the services were medically necessary — otherwise he wouldn’t have performed them. What definitions are payers using to determine whether a service or product is medically necessary?

Codify Subscriber

Answer: According to the American Medical Association’s (AMA’s) 2011 report to the Institute of Medicine’s Committee on Determination of Essential Health Benefits, the AMA defines medical necessity as “Health care services or products that a prudent physician would provide to a patient for the purpose of preventing, diagnosing or treating an illness, injury, disease or its symptoms in a manner that is: (a) in accordance with generally accepted standards of medical practice; (b) clinically appropriate in terms of type, frequency, extent, site, and duration; and (c) not primarily for the economic benefit of the health plans and purchasers or for the convenience of the patient, treating physician, or other health care provider.”

The Centers for Medicare and Medicaid (CMS) defines medical necessity in the Social Security Act (Title XVIII of the Social Security Act, Section 1862 [a] [1] [a]) as follows: “No payment may be made under[Medicare] Part A or Part B for expenses incurred for items or services which are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member.”