Practice Management Alert

Hint: You may not need to conflate medical necessity with clinical care.

The phrase “medical necessity” is bandied about in all corners of healthcare, especially in coding and billing. But what does the phrase really mean? And how do you know you’re meeting the standards to establish medical necessity and, thus, justifying payment for an encounter or service?

Read on before you compromise your practice’s bottom line with a lack of knowledge about such an important phrase.

Discover ‘Medical Necessity’ Origins

According to the Social Security Act, enacted nearly 80 years ago, medical necessity is related to payment, rather than patient care, to make sure hospitals and physicians could feel assured they’d be paid for their services.

“It’s an important distinction, especially from a compliance and coding perspective, and one that has to be made clear when we’re talking about [medical necessity] with our co-workers,” said Linda Martien, CPC, COC, CPMA, CPC-I, CRC, in the AAPC HEALTHCON presentation “Dissecting Medical Necessity.”

As government payers and commercial payers and their respective legal teams started grappling with who should be accountable for definitions and enforcing the established guidelines, the concept of medical necessity became increasingly complicated, Martien said. Eighty years later, there are policies from each private payer, as well as national coverage determinations, and local coverage determinations — so many guidelines to navigate when reporting medical services!

Today, it may be helpful for coders/billers and providers to think about medical necessity as more of a coverage and payment concern than a justification of patient care.

Therefore, resourceful coders can really use the immense volume of guidelines to their advantage when figuring out why a claim was denied or educating providers about the ways and means of documentation. And payers are becoming increasingly transparent about their policies, leaving less guesswork about documentation requirements for coders, billers, and providers.

Food for thought: Consider retiring the adage “If it wasn’t documented, it wasn’t done,” Martien recommended. “Physicians or other providers might feel that it’s being implied that they’re not providing good care, or even committing fraud. Often they get defensive, and I think that’s where they’re coming from,” she said. Coders can lean on educating doctors about why documentation matters, rather than accusing them — however mildly — of not doing enough.

Look for These 5 Components

Figuring out what constitutes medical necessity may be complicated, but resources are available. The local coverage determination (LCD) from your respective MAC will detail exactly what you need to include when compiling the required documentation. Although an LCD document may be 30-40 pages, Martien said she looks for five specific things.

“When I look at an LCD, I look at the indications, the limitations, the coding information, the utilization — how many times can we perform this service — and the documentation requirements. If you can pick out those five things, you’ll have the guidance you need to substantiate your medical necessity or guide you in defining your medical necessity for a particular service. In my opinion, that’s all you need to know from that LCD” she said.

Use Critical Thinking, Too

There are other facets of medical necessity that can help a coder report an encounter. While CMS defines medical necessity as “reasonable and necessary,” Martien says coders may consider whether a payer will see a service as safe and effective (versus investigational or experimental) and appropriate — is the service being furnished within the accepted standards of medical practice?

Finding answers to these questions may involve more digging. For example, how does one figure out an accepted standard of medical practice? Martien says interested parties may look to the National Institute of Health (NIH), local or state specialty boards, or even local organizations.

The guidelines can become extremely specific and persnickety, depending on the service. For example, documenting hydration therapy involves navigating several treatment hierarchies, whereas other services may be a lot more straightforward.

There are other factors that aren’t necessarily related to medical necessity but affect provider reimbursement, Martien said. Payers who require providers to obtain prior authorization for a service may require extensive documentation but not guarantee reimbursement. Utilization factors can also affect claim denial and reimbursement, because some payers put limits on how often they will pay for a provider to perform a particular service or use a specific product. Understanding how to research and navigate these other aspects of reimbursement is helpful as coders strategize on the best ways to document and report the care their clinicians provide.

Bottom line: “Diagnosis drives medical necessity, but the documentation has to support it. That’s directly from CMS — from the payer viewpoint,” Martien said.