How to Meet Medical Necessity Requirements

How to avoid claim denials and document medical necessity

Doctor making notes in a chart

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Meeting medical necessity requirements is essential for the financial success of a medical office. The term “medical necessity” received a great deal of attention during the era of health care reform.

While there is no one agency or governing body regarding the meaning and application of this very important word, the standard and accepted meaning is: "Specifically referring to services, treatments, items, or related activities which are necessary and appropriate based on medical evidence and standards of medical care to diagnose and/or treat an illness or injury or; treatments, services, or activities that will enhance a patient’s health or that the absence of same will harm the patient."

Determining Medical Necessity

Each payer may have their own definition of medical necessity based on the above standard definition. These payers are any entity other than the patient that finances or reimburses a provider for medical services for a patient including; insurance carriers, third party payers, or medical sponsors such as a union or employer. It is the responsibility of the patient to know the details of their insurance carrier’s or other payer’s definition, and it is the responsibility of each provider who accepts insurance to know the specifics of their contract with the individual insurance company or payer.

Medical necessity is based on “evidence-based clinical standards of care”. This means that there is evidence to support a course of treatment based on a set of symptoms or other diagnostic results. Evidence-based standards of care also have a set of standards for each diagnostic procedure, each medical or psychiatric procedure, each therapy, and the duration and number of any of these.

Documenting Medical Necessity

A physician must be thorough in their notes and explanations in order to give the payer’s medical reviewers sufficient data from which to determine the necessity of a diagnosis, a set of tests, or a treatment or therapy. The medical transcription and medical records team must be equally as careful in their attention to detail in order to make sure all of the correct information is transmitted in a timely manner. All of these individuals work together with the payer to ensure prompt and accurate payment for services rendered.

There are times when medical necessity is obvious, such as emergency situations. When a patient arrives at the emergency room by ambulance with chest pains, shortness of breath, and loss of consciousness, no one stops to consider whether the bill will be paid by the insurance carrier because the reasonable and customary course of treatment in this situation is to provide immediate, comprehensive health care services, to alleviate symptoms, and determine the reason for these symptoms. Not all incidences of medical necessity are so obvious and as such, some claims may be denied.

Avoiding Claim Denials Due to Lack of Medical Necessity

When a claim is denied for medical necessity, it can be due to a number of factors.

  1. Has all health information been submitted properly and in a timely manner to the patient's medical record?
  2. Has the patient's demographic information and other pertinent data been included in the medical record and correct for the patient, such as identification numbers, group numbers, date of birth?
  3. Have the necessary prior authorizations, precertifications, and referrals been obtained and documented accurately in the patient record?
  4. Are all diagnosis codes and procedure codes up-to-date and correctly recorded in the patient record based on the clinical information documented during the patient's visit?
  5. Is this a screening, a standard procedure or are there mitigating circumstances that need further explanation?
  6. Have less extensive courses of treatment been considered or attempted without success?

Simple mistakes can be the cause of a denial or a delay in payment. It is important to accurately document the medical record correctly to prevent an interruption in the quality of patient care and the integrity of revenue for the medical office.

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