Coding
The Organized Chaos of 'Medical Necessity'
Donna Lahey, RNFA
Chair, NASS Coding Committee Scottsdale, AZ
Manish Kasliwal, MD, MCh
Department of Neurological Surgery, University Hospitals Cleveland Medical Center NASS Coding Committee Cleveland, OH
One of the most frequently used explanations for a denied claim is that the treatment or procedure was not deemed medically necessary. Medical necessity denials often lead to a delay in patient care and have a significant impact on the patient and their families as well as the physician patient relationship. As stated above, one of the primary reasons for denials stems from what is deemed “medically necessary.” Medicare, as well as every private insurance company, has their own definition of what they deem “medically necessary.” The term medically necessary is defined by Medicare as “health care services or supplies needed to diagnose or treat an illness, injury, condition, disease, or its symptoms and that meet accepted standards of medicine.” Unfortunately, Medicare does not provide a list of “accepted standards of medicine” which makes this definition somewhat ambiguous. Along with this, although not in their official definition, Medicare also refers to services as “reasonable and necessary” which provides further confusion. What, truly, do each of these terms mean?
The criteria Medicare Administrative Contractors (MACs) use to decide if services or items are “medically necessary” include if the service is:
Furnished in accordance with accepted standards of medical practice for the diagnosis or treatment of the patient’s condition or to improve the function of a malformed body member;
Furnished in a setting appropriate to the patient’s medical needs and condition;
Ordered and furnished by qualified personnel;
Meets, but does not exceed, the patient’s medical need; and is At least as beneficial as an existing and available medically appropriate alternative; OR
Covered by commercial insurers, unless evidence supports that differences between Medicare beneficiaries and commercially insured individuals are clinically relevant.
In January of 2021 The Centers for Medicare & Medicaid Services (CMS) finalized a regulatory definition for determining whether an item or service is “reasonable and necessary.” The definition has three main elements:
Is it safe and effective?
Is it not experimental or investigational?
Is it appropriate for the Medicare patient?
Medicare coverage uses the following three main factors to determine the above:
Federal and state laws.
National coverage decisions made by Medicare about whether or not something is covered.
Local coverage decisions made by the MACs in each state that process claims for Medicare. These companies decide whether something is medically necessary and should be covered in their area.
Therefore, to determine if Medicare considers services to be medically reasonable and necessary, national coverage determinations (NCDs) and local coverage determinations (LCDs) should be consulted. These documents provide information regarding Common Procedural Techniques (CPT) and Healthcare Common Procedure Coding System (HCPCS) codes, ICD-10 codes, billing information, and service delivery requirements. CMS offers an online, searchable Medicare Coverage Database to search NCDs, LCDs, and other Medicare coverage documents. This can be found at https://www.cms.gov/medicare-coverage-database/search.aspx. The database allows searching by a variety of different parameters including but not limited to Medicare contractor, key words, and CPT codes. Commercial insurance companies also have similar types of information about their clinical coverage guidelines on their websites for you to use to evaluate the medical necessity of a requested services. However, these criteria can sometimes be rigid and fail to account for the unique circumstances of individual patients thereby causing a conflict between what you as a physician considers medically necessary treatment and what the insurance company’s coverage rules state. Staying up-to-date on the policies for local private payers and having all the facts pertaining to what each insurer considers medically necessary treatment will help to avoid denials and ensure that claims are processed correctly and in a timely fashion. As most physicians participate in a variety of different insurance plans, and these coverage documents change frequently, keeping up with the evolving medical necessity criteria remains a significant burden for physicians across all specialties. This can be a rather discouraging and frustrating process, as navigating through what insurance companies require involves a complex interplay of appropriate care, correct pre-authorization, documentation, coding, and knowing what each insurance company covers and excludes, but it is critical for physicians to have a thorough understanding of medical necessity for each of their carriers to minimize denials and delays in care for patients, and to be paid for medical services rendered or surgeries performed. Several of these areas of interplay are discussed in more detail below. As a first step, the front office staff should check the patients’ insurance coverage and authorization for office visits prior to the patient being seen. The front desk staff should be verifying insurance, validating patient benefits, verifying demographic information, and obtaining any missing referral authorizations before service. Taking the time to do this saves a significant amount of time and loss of revenue in denied claims.
Pre-Authorization
Authorization or approval from a health plan before providing a service or treatment is known as prior authorization (PA). This allows payers to ensure care is medically necessary prior to the service being performed. Unfortunately, this is extremely burdensome, lacks appropriate oversight, and as all of us know, it does not necessarily guarantee payment. According to the 2022 American Medical Association survey on prior authorization, medical practices reported completing an average of 45 prior authorizations per physician per week, which required an average of two business days; 35% of practices have staff that work exclusively on the authorization process (up from 30% 4 years prior). In this same study, 94% of physicians reported that the PA process delayed access to necessary care with 33% reporting that PA led to a serious adverse event for a patient in their care, 25% reporting that PA led to a patient’s hospitalization, 19% reporting that PA led to a life-threatening event or required intervention to prevent permanent impairment or damage. Nine percent of physicians reported that PA led to disability/permanent bodily damage, congenital anomaly/birth defect or death. Furthermore, in this study, 80% of physicians reported that the wait for an authorization led the patient to treatment abandonment, loss of confidence in the physician, and patient dissatisfaction. While 98% of health plans in the study reported they used peer-reviewed evidence-based studies when designing their PA programs, 35% of physicians reported that PA criteria were rarely or never evidence-based. These are startling statistics which clearly demonstrate the prior authorization process needs to be re-evaluated and overhauled. To add further credence to why this overhaul is needed, consider the Medicare Advantage plan data. On April 28, 2022, the United States Department of Health and Human Services’ Office of Inspector General (OIG) reported finding that 15 of the largest Medicare Advantage Organizations (MAOs) in the United States had at times denied or delayed beneficiary access to care and provider payment requests for services that met Medicare coverage and MAO billing rules. These findings were based on a stratified random sample of 250 prior authorization and 250 payment denials selected from June 1–7, 2019, and determined that several factors impacted denials, including the imposition of MAO clinical criteria that were not contained in Medicare coverage rules, MAO requests for supplemental documentation despite sufficient demonstration of medical necessity, and both human and system errors.1 This report followed the OIG’s prior review of a stratified random sample of prior authorization denials in 2018, which found that 75% of prior authorizations reviewed and denied by the nation’s largest MAOs were ultimately approved through the MAO appeal process.2 This Report reiterated OIG’s concern that capitated payments under the Medicare Advantage program may have created incentives to limit access to necessary services and restrict or delay provider reimbursement. Additionally, as part of its oversight of Medicare Advantage plans, CMS requires Medicare Advantage insurers to submit data for each Medicare Advantage contract (which usually includes multiple plans) that includes the number of prior authorization determinations made during a year, and whether the requests were approved. Insurers are additionally required to indicate the number of initial decisions that were appealed and the outcome of that process. The Kaiser Family Foundation, a leading health care analysis company, used these data to examine prior authorization in Medicare Advantage during the 2021 calendar year. The results were alarming: more than 35 million prior authorization requests were submitted to Medicare Advantage insurers on behalf of Medicare Advantage enrollees. Of these, over 2 million prior authorization requests were fully or partially denied by Medicare Advantage insurers with just 11 percent of these prior authorization denials being appealed. The vast majority (82%) of appeals resulted in fully or partially overturning the initial prior authorization denial.3 Considering these findings, the OIG issued three recommendations to CMS, each of which CMS accepted. They recommend that CMS (1) enhance its oversight of MAO contracts including those with extremely high overturn rates and/or low appeal rates and take corrective action as appropriate; (2) address persistent problems related to inappropriate denials and insufficient denial letters in Medicare Advantage; and (3) provide beneficiaries with clear, easily accessible information about serious violations by MAOs. CMS concurred with all three recommendations. When CMS released their final rule for 2024 it contained the following changes to the prior authorization process in the Medicare Advantage (MA) program:
MA plans must establish a Utilization Management Committee to review all utilization management, including prior authorization, policies annually and ensure they are consistent with the coverage requirements, including current, traditional Medicare's national and local coverage decisions and guidelines.
Determinations are required to be “reviewed by a physician or other appropriate health care professional with expertise in the field of medicine or health care that is appropriate for the services at issue” when the plan expects to issue a partially or fully adverse medical necessity decision based on the initial review of the request.
Prior authorization policies for coordinated care plans may only be used to confirm the presence of diagnoses or other medical criteria and/or ensure that an item or service is medically necessary based on standards specified in the 2024 Final Rule.
An approval granted through prior authorization processes must be valid for as long as medically necessary to avoid disruptions in care in accordance with applicable coverage criteria, the patient's medical history, and the treating provider's recommendation.
MA organizations must grant a minimum 90-day transition period when an enrollee who is currently undergoing an active course of treatment switches to a new MA plan.
MA plans must comply with national coverage determinations (NCD), local coverage determinations (LCD), and general coverage and benefit conditions included in Traditional Medicare laws.
When coverage criteria are not fully established in a Medicare statute, regulation, NCD, or LCD, MA organizations may create publicly accessible internal coverage criteria that are based on current evidence in widely used treatment guidelines or clinical literature.
When additional, unspecified criteria are needed to interpret or supplement general provisions MA organization[s] must demonstrate that the additional criteria provide clinical benefits that are highly likely to outweigh any clinical harms, including from delayed or decreased access to items or services.
CMS also finalized a rule that requires plans to install electronic prior authorization by 2026 and implement the following changes:
Requiring impacted payers (excluding QHP issuers on the FFEs) to send prior authorization decisions within 72 hours for expedited (i.e., urgent) requests and seven calendar days for standard (ie, non-urgent) requests.
Requiring impacted payers to provide a specific reason for denied prior authorization decisions, regardless of the method used to send the prior authorization request. Such decisions may be communicated via portal, fax, email, mail, or phone. As with all policies in this final rule, this provision does not apply to prior authorization decisions for drugs.
Requiring impacted payers to publicly report certain prior authorization metrics annually by posting them on their website.
What can an individual practitioner do to help? When preauthorization is required, submitting the procedure to be performed and the diagnosis is essential. The diagnosis is one of the key criteria driving medical necessity. Diagnosis codes must be correct as they are part of the supporting evidence to show medical necessity. Providers also need to emphasize the severity of the diagnosis, any interventions or previous diagnostic studies, and the risk of not doing the ordered procedure. Common claim denials due to missing and/or invalid authorizations can easily be prevented. The goal, again, is to maximize efficiency within a practice to prevent loss of time and resources.
Documentation
High-quality documentation makes it easier for insurance companies to approve medically necessary treatment while improving your practice’s efficiency. Poor documentation and lack of specifics are some of the biggest reasons medical bills are denied. If the payer cannot determine the treatment was or will be effective, or covered under the patient’s plan, the treatment will be deemed medically unnecessary. Accurate detailed clinical documentation is essential to show relevance, support treatment, and level of care for the treatment being ordered. Documentation should include the following:
Documentation must be complete.
Documentation must support the billed services and validate the medical necessity for the treatment/care provided.
Documentation should show patient progress/non-progress and response to treatment and patient compliance fail to comply.
Diagnosis should also be documented for all diagnostic tests that are ordered. It is a common error for providers to document a single diagnosis and order several tests which may create confusion as to which tests relate to which diagnosis.
Documentation should include a review of the patient’s medical records, including surgical and procedure reports with attention to the specific aspects of the medical history and current condition that support the service or procedure.
It is important that physicians complete a thorough clinical evaluation to correlate a patient’s complaints to radiographic findings and to appropriately support the benefit of the treatment plan. A detailed history and physical examination outlining a patient’s pain complaints and limitations in activities of daily living is essential. Any discrepancy between the practitioner’s interpretation of radiographic images and that of the radiologist should lead to direct communication with the radiologist to resolve the discrepancy. For surgical procedures, simply stating that the patient has failed non-operative treatment is not satisfactory. A detailed description of the type of non-operative procedures, including different therapies, specific pain management interventions, and exercise regimen is important. Often, the documentation needs to be performed in a certain way to convey the exact same meaning to the payors such as physician directed/supervised physical therapy versus physical therapy. Providers must take care to not just establish medical necessity, but to validate it clinically.
Coding
Problems with incorrect diagnosis codes are a major obstacle to timely reimbursement. Experienced coders who have the skill sets to understand CPT codes and ICD-10 codes and the importance of how these codes link are a valuable resource. Coding experts must be well-versed in payer policies, contracts, and national and local coverage determination. When it comes to medical necessity, providers, billers, and coders all need to be on the same page closing gaps in the revenue cycle that may lead to denials. Organized societies such as NASS provides courses, webinars, and other pertinent information to address these topics in more depth. These resources can be helpful for keeping up with the medical necessity requirements. While all health care plans have appeal processes that allow patients and their health care providers to appeal when a claim is denied, this can add to the already cumbersome paperwork for which physicians are responsible. Avoiding denials and appeals via appropriate documentation, coding and authorization cannot be overemphasized.
References
- OIG, Some Medicare Advantage Organization Denials of Prior Authorization Requests Raise Concerns About Beneficiary Access to Medically Necessary Care, April 2022 available at https://oig.hhs.gov/oei/reports/OEI-09-18-00260.pdf
- OIG, Medicare Advantage Appeal Outcomes and Audit Findings Raise Concerns About Service and Payment Denials, September 2018 available at https://oig.hhs.gov/oei/reports/oei-09-16-00410.pdf
- https://www.kff.org/medicare/issue-brief/over-35-million-prior-authorization-requests-were-submitted-to-medicare-advantage-plans-in-2021/