Medical necessity denials are encountered for many reasons—a cloak of many colors. Generally, medical necessity is used to describe care that is reasonable, necessary, and/or appropriate, based on evidence-based clinical standards of care. Payer policies and legal challenges for coverage of services are based on slight variation of this general definition and of course are subject to interpretation. Payers, in earlier years, would not have dared to deny a service provided by physician as “not medically necessary.” That has gradually changed, with the changes coming exponentially in the last few years.
The practical application of medical necessity has taken many forms, and in this increasingly complex world of health care, understanding these applications has become a critical component of your business. We will explore a few of these areas in this article and outline some solutions that can be implemented in your business process.
Necessity a factor in value-based pay
Although payment under fee-for-service systems is the primary focus of most medical necessity policies, value-based payment systems also rely on medical necessity for both payment comparison and as a measure of the care provided. In short, medical necessity is not going away as we move to value-based payment systems.
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Some of the best-known medical necessity-based payment policies fall under published coverage policies. Medicare policies include National Coverage Decisions (NCD), Local Coverage Decisions (LCD), and non-coverage decisions included in the fee schedule. Private payers and other government payers will have published policies as well. These policies will include:
- ICD-10 restrictions indicating that services will be considered medically necessary and payable only with listed Dx codes
- ICD-10 restrictions indicating that services will not be paid for certain diagnosis codes
- frequency restrictions indicating how often a service may be reported and paid
- treatment restrictions indicating treatments that have been provided and failed prior to considering a service or drug as medically necessary and payable
- time-based restrictions indicating when a service may be reported for a patient and considered medically necessary and payable in relation to other services or procedures provided
- coverage in total indicating that a service is considered either not yet proven to be medically necessary or has proven not to be medically necessary and therefore not payable or covered as medically unnecessary (ie, new technology or drugs)
- statutory/policy coverage exclusion indicating a service is not considered medically necessary because the service is not a part of the plan or service package as dictated by statute or by plan type (ie, cosmetic surgery and some preventive services).
Services provided that do not meet these published rules will be denied for medical necessity. Not all of these published guidelines make sense, and we have often received documents and calls pointing to the fact these guidelines do not conform to the true definition of “medically necessary.”
More recently, we have seen an increase in medical necessity denials that are not based on published policy but instead appear to be arbitrary denials that portend to be based on specialty society guidelines, standard of practice, or practice patterns. We add downcoding of services to this group of medical necessity denials. Many of these types of denials, although labeled as medical necessity denials, are actually a thinly disguised request to review medical records or hassle the physician group to avoid payment.