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Medical necessity, or medically necessary?

August 2014
physician documenting billing on computer

Published in the August 2014 issue of Today’s Hospitalist

OVER THE YEARS, the following two words have generated a lot of angst for providers and confusion for patients: medical necessity.

While medical necessity has been defined in several ways, it comes with a critical distinction that must be made. On one hand, there is the way that medical necessity relates to an initial claim submission and payment. On the other hand, there is the medical necessity that you, as a physician, may need to establish based on your decisions for individual patients.

Is that just a case of semantics? No, it is not. As hospitalists are increasingly discovering, physicians may believe that a service is clinically appropriate and that it clearly demonstrates sound medical practice. But a payer may consider that service “not reasonable and necessary” in terms of coverage and payment.

That can trigger a whole cycle of payment denials and appeals. The trick is to know how to convincingly make your case in the patient record that a service is medically necessary the first time around.

What and why
Medicare defines medical necessity as “services or items that are reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member.”

Other industry definitions include the following: services, procedures, treatments, supplies, devices, equipment, facilities or drugs (all services) that a practitioner exercising prudent clinical judgment would provide to evaluate, diagnose or treat an illness, injury, disease or its symptoms.

Such services must be in accordance with generally accepted standards of practice. They also must be clinically appropriate in terms of type, frequency, extent, site and duration, and they must be considered effective for the individual’s condition or injury.

In addition, services may not be primarily for the convenience of the patient or provider. Nor may they be more costly than an alternative service or sequence of services that are at least as likely to produce equivalent therapeutic or diagnostic results.

When initially adjudicating a claim, most health plans rely on diagnosis criteria established by government payers in national and local coverage determinations, articles of coverage, and local medical-review policy.

Typically, insurers pay claims if a hospitalist submits a bill for a service or supply “as represented by a CPT or HCPCS code “with a diagnosis code (or codes) that represents a sign, symptom, problem or condition that clearly supports the reason for performing the service. CPT or HCPCS codes represent to a payer what services were done, while ICD-9 codes convey why those services were performed.

Both national and local coverage determinations typically contain a list of ICD-9 diagnosis codes that support medical necessity. And claim forms allow hospitalists to link specific ICD-9 codes to a particular service.

Supporting each service
But if you submit a claim for a service or supply without a “medically necessary” diagnosis code, a claims adjudication system is likely to deny it.
 As far as the payer is concerned, without an ICD-9 diagnosis to indicate the signs, symptoms, medical problems or family history that support a specific test or service, that service could be considered a screening test or a convenience for the patient. If you treat a patient for four distinct conditions and perform tests to help diagnose or manage each specific problem, each service must be supported by specific diagnosis code(s) that establish medical necessity for each distinct problem.

Let’s say that hospitalist Dr. Brown is treating John Doe, an observation patient, for a severe COPD exacerbation. While John also has diabetes and osteoarthritis, both conditions are under control.

Dr. Brown orders a CT of the abdomen, and he may have a compelling reason to do so. But the payer may call the medical necessity of that order into question because John’s diagnoses don’t clearly indicate why an abdominal CT should be ordered. Moreover, Dr. Brown doesn’t make a case for ordering it in the patient’s record.

Problems with more than one doctor
Health plans also often call medical necessity into question when a patient has multiple medical problems and when several specialists, including a hospitalist, are involved in that patient’s care.

Take Jane Doe, a 70-year-old with chronic renal failure secondary to diabetes. Jane has suffered a stroke that has left her with left-sided hemiparesis and dysphagia.

The hospitalist overseeing Jane’s stay and managing her diabetes calls in a neurologist to assist with the neurological deficits, an ENT to manage the dysphagia and a nephrologist to manage the CRF. But each physician won’t be paid appropriately unless each physician’s bill links his or her services to the ICD-9 diagnosis code(s) specific to the condition he or she is managing. If all the physicians submit the same diagnosis codes, the payer is likely to deny all but one physician’s claim for a given date, indicating that it is not “medically necessary” for four physicians to all see Jane the same day for the same conditions.

Common scenarios
From a clinical perspective, medical necessity means that patients may have a special circumstance, diagnosis or condition that, while not recognized as a covered diagnosis according to national or local payer criteria, is supported by evidence-based medical data. “Generally accepted standards” are those based on credible scientific evidence recognized by the relevant medical community and endorsed by national specialty societies.

Medical directors are often called upon to determine whether a service or supply is “medically necessary” for these three scenarios:

    • off-label use of a pharmaceutical for a medical condition or diagnosis that falls outside what are referred to as typical uses or covered conditions;
    • the use of a specific treatment or therapy not considered “standard medical practice” for the condition or disease at hand; and
    • the presence of several medical conditions and/or comorbidities that, together, establish a unique and compelling set of clinical circumstances.When it comes to medical necessity, offense is the best defense. Physician documentation should thoroughly spell out the rationale for ordering a specific test or performing a procedure, and it should address the following:
    • current signs, symptoms or diagnosis(es) for which the test or procedure is being considered;
    • comorbidities that may affect the diagnosis and management of a specific problem; and
    • the influences of age, gender, family history, occupation, lifestyle and pertinent risk factors.From a coding perspective, “medical necessity” is tied to ICD-9 diagnosis codes that a payer’s claim adjudication system uses. From a clinical perspective, a clinician uses evidence-based science and patient-specific information to determine if a service or supply is medically necessary. While that may sound like a case of “po-tay-to, po-tah-to,” documentation that clearly reflects the reason for an order and the use of highly specific diagnosis codes are key to making sure a claim gets paid.

Sue A. Lewis, RN, CPC, PCS, has more than 40 years of health care experience.