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How your practice can avoid medical necessity denials


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.


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.

Also by the Painters: How to charge for E&M services, procedure on same date

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.

Next: " 'Cookbook medicine,' with exceptions, is here to stay."


In any particular case, the rules may make sense or may not make sense. But as we’ve said before, “it is the way it is” and we have to learn to live with it. Yes, “cookbook medicine,” with exceptions, is here to stay.

The problem is much greater than a denied claim and lost revenue. A payer that determines that services were medically unnecessary after payment was made will ask for a refund, and if this “mistake” has been made over a number of years, they may extrapolate the mistakes discovered in the reviewed charts and factor this into a request for payment for that same percent of mistakes over many years, plus interest.

Read - Telemedicine: Reimbursement in fee-for-service, quality models

If Medicare determines that you knew that you were being paid for medically unnecessary services, according to the rules, you can be prosecuted for fraud and fined up to $10,000 for each service plus three times the amount you were overpaid, and you can even be excluded from Medicare.

Of course, you would never do anything intentionally fraudulent. Unfortunately, ignorance is not a defense. You are responsible for knowing all published rules. If CMS or a carrier, through a report, special bulletin, etc. has notified the provider community about a coverage issue, then “you should have known,” according to the law. The larger fraud cases that we have been involved with have revolved around expensive tests or drugs in which the physician profited from the provision of the service that were provided outside of published guidelines.

What can you do?

Develop a better working knowledge of the payment system. “You need to know what you need to know,” but you don’t have to become a certified coder or a billing expert. The billing system is complicated and detailed. The majority of the tasks involved in submitting a clean claim should be delegated to other members of the team. However, there are certain tasks that should not be delegated.

Familiarize yourself with AUA guidelines and standard of practice. Many of the payer “medical necessity” rules are based on guidelines and standards of practice.

Become knowledgeable enough to know whether your team is doing their job.

Document clearly the reason you provide each service. If this service is an exception to the guidelines or common standard of practice, document in detail why it was provided.

Identify all services provided and communicate the reason for the service to your billing team. No one knows better than you what services you provided and why you provided them. This is a task that should not be delegated. To avoid mistakes, this is a task you should perform.

Also see - Established patient return visits: How to avoid a denial

Assign the task of verifying all ICD-10 codes as to accuracy and compliance to published policies (LCDs/NCDs) to those who are trained and have access to these guidelines. However, you will also need to implement policies that do not allow reporting of ICD-10 codes that fit policies but are not supported by the medical record for that visit.

Periodically review the services you typically provide with your billing staff to be sure you are coding and billing correctly, and more important, be sure you’re not continuing to bill for services that should not be reported.

Next: Reassess your knowledge and the function of your team.


Reassess your knowledge and the function of your team. Most physicians feel they have adequate knowledge (but, do you?) and that their team does a good job Unfortunately, in addition to being good at delegating, physicians can be trusting to a fault. We all believe and trust that our team is doing an excellent job. But, do they? Without reporting metrics and consistent review of processes and results, your office may be losing money or increasing your risk of take backs. What you do not know can cost you. Rules change; make it mandatory that you have systems in place to keep up.

Appeal. If you have followed the rules and documented well the medically necessary services you have provided to your patients, do not be afraid to challenge the payer’s initial determination. Many medically necessary denials, especially those without clear published coverage restrictions, will be overturned on the first submission. Others may take more steps. Remember that a payer that does not see an appeal for a flimsy medical necessity denial will likely continue to play the same game.

Read: How will quality be measured under MIPS?

Consider charging the patient. If your office is well educated and well organized, you may be able to charge the patient for services considered to be medically unnecessary. Make sure you understand and are complying with the rules and notify your patients prior to providing the service for these services and/or supplies.

In summary, this system is becoming increasingly complicated. Payers are tightening the criteria for many services for which they will pay. Again, we have to learn to live with it. As we progress toward value-based payment, the skills required to document support for the services you provide, in combination with a clear understanding of evidence-based medicine, should be honed in the fee-for-service environment of today. We anticipate that medical necessity will be a defining factor for those who do well in the value-based world of tomorrow.

In most cases, medical necessity comes back to accurate documentation of the services you provide and clear support for why you have provided them. In our experience in working with lawyers in your defense and auditing thousands of charts, we have concluded that urologist documentation is a weak link. Get educated and get involved.

More from Urology Times:

Value-based pay in 2017: Where does urology fit?

MedPAC proposals seek to mitigate Part B spending

How to choose the right investment strategy

The information in this column is designed to be authoritative, and every effort has been made to ensure its accuracy at the time it was written. However, readers are encouraged to check with their individual carrier or private payers for updates and to confirm that this information conforms to their specific rules.

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