Oncology & Hematology Coding Alert

A new definition of medical necessity, one that doesnt include the words experimental or investigational, is emerging among the nations managed-care health plans. Developed by researchers at Stanford Universitys Center for Health Policy, the new language places greater emphasis on allowing physicians and health plan medical directors to jointly determine the appropriateness of treatment and reducing the amount of variation in medical necessity decision-making. (To avoid denials, coders still need to be sure they have documentation backing up the medical necessity of the codes they use.)

The definition, which was discussed at the National Managed Health Care Congress (NMHCC) held in Atlanta in April 1999, states the following:

An intervention is medically necessary if, as recommended by the treating physician and determined by the health plans medical director or physician designee, it is (all of these attributes): a health intervention for the purpose of treating a medical condition; the most appropriate supply of level of service, considering potential benefits and harms to the patient; known to be effective in improving health outcomes. For new interventions, effectiveness is determined by scientific evidence. For existing interventions, effectiveness is determined first by scientific evidence, then by professional standards, then by expert opinion; cost effective for this condition compared to alternative interventions, including no intervention. Cost effective does not necessarily mean lower price.

Why Do We Need a New Definition?

Developers of the new definition hope managed-care plans will replace current vague definitions of medical necessity contained in their provider contracts with the Stanford definition.

Developed after year long study, the definition is a sharp departure from the usual vague language contained in most managed-care contracts, says Linda L. Bergthold, PhD, project director of the medical-necessity study and presenter at the NMHCC. In comparison to [medical-necessity definitions] that have been used in the past, the Stanford definition is more specific, Bergthold says. The vague language in managed-care contracts defining medical necessity, such as generally accepted practice or something similar, is almost useless in decision-making.

For some, denials come despite the provision of evidence about the effectiveness of treatment. A large part of the problem, Bergthold says, is that treating physicians and health plan medical directors greatly differ in medical necessity decision-making. For example, 34 medical directors surveyed in a study, which used the same case as an example for each participant, varied greatly in determining whether high-dose chemotherapy was an appropriate treatment for the patient.

Bergthold says one reason is that physicians and health plans often are not looking at the same evidence. She places some of the blame on health plans that dont give providers guidelines, have confusing authorization processes and underestimate the need to communicate with physicians about their decisions.

The Stanford definition instructs both treating physician and health plan to consider scientific evidence in medical necessity decision-making. It also brings professional standards and expert opinions into the decision-making process. This wont eliminate variations in medical necessity decision-making, but it will reduce it, Bergthold contends. The burden of proof still rests upon physicians to prove medical necessity. But physicians should be able to expect health plans to provide evidence to support their denials.

Reaction to the New Definition

In April, Hawaii adopted a Patients Bill of Rights, which included the Stanford medical necessity definition. Bergthold says a number of health plans are considering taking the whole definition or parts of it to replace current contractual language.

Medical necessity is the key to coverage and reimbursement, and the new definition stops far short of what most physicians would like: the complete return of medical decision-making into the hands of the treating physician.

Oncologists know that often it is difficult to persuade health plans to pay for treatment deemed experimental or investigational, a fact that frustrates both physician and patient. The Stanford definition, Bergthold says, is intended to promote a more collaborative relationship between physician and health plan, and they should expect the following things from each other:

Groups and plans should demonstrate evidence that they
are communicating directly with treatment providers
regarding potential and actual denials, and the reasons
for denial decisions;
Physicians and health plans should share in the process
of providing scientific evidence of effectiveness for
treatments that involve new or emerging technologies;
Physicians should explain the coverage decision-making process to patients when a request for authorization is required;
Physicians should engage patients in shared decision-
making about treatment options.