Determining what is “medically necessary” can be confusing since medical coverage policies are constantly changed by payers and health plans. What a physician defines as medically necessary may not be consistent with a health plan’s coverage policies. A physician who knowingly bills for services which are not medically necessary can be prosecuted for fraud by the Office of Inspector General (OIG). Violators face penalties of up to $10,000 for each service, an assessment of up to three times the amount billed, and exclusion from federal and state health care programs.1
The Centers for Medicare and Medicaid Services (CMS), pays for medical items and services that are "reasonable and necessary" for a variety of purposes. By statute, CMS may only pay for items and services that are "reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member.” CMS has numerous policies, including National coverage determinations (NCDs) and Local Coverage Determinations (LCDs), that describe coverage criteria.2 These policies may include a combination of CPT, HCPCS, and ICD codes, along with modifier usage and utilization guidelines. Other payers have their own coverage policies that may or may not follow CMS guidelines and depending on a patient’s coverage, multiple payer policies may need to be reviewed to determine medical necessity.
Even if a service is determined to be "reasonable and necessary," coverage could be limited if the service is provided more frequently than allowed under a CMS coverage policies and its utilization guidelines.2 Not only do providers have to determine the medical necessity requirements but they must also determine the frequency of the services or supplies and pharmaceuticals that are included in the policy and make an accounting of such services or supplies.
Claims for services which are considered not medically necessary will be denied by CMS. However, if CMS determines through an audit that services were medically unnecessary after payment has already been made, it is deemed an overpayment and the billed amount must be refunded with interest. Moreover, if a pattern of such claims are established and the physician knows or should know that the services are not medically necessary, the physician may face large monetary penalties, exclusion from the CMS program, and criminal prosecution.
Your best option is to know your coverage policies but with ever changing codes and requirements this self service approach can be a daunting task. The office manager, biller and ancillary staff are already overwhelmed with administrative tasks. Accessing coverage policies for multiple payers may be impossible before a patient’s office visit or procedure is performed and determining medical necessity afterwards would leave a physician or patient paying for a potentially expensive service.
ClaimsEditor® a medical claims editing solution offers Medical Necessity code combinations and utilization edits that can assist your practice not only in being compliant with coverage policies but to proactively assist in pre-audit checking for fraud. Avoiding fraudulent claim patterns will not flag your practice in payers’ system, however with ClaimsEditor® you can easily see your error patterns using: interactive dashboards, reporting, sorting and triggers such as by provider, cost or edits.
Medical Necessity data can also be used to identify potential patterns of billing errors and overpayments in post-payment claims also. Both pre and post-payment claims can be run through Context’s claims editing software. Our solution flags a claim if a service is not medically necessary. The “edits” include overutilization, incorrect ICD/CPT &HCPCS combinations based on policies.
Medical Necessity information for payers can be accessed through Context’s online solution or by incorporating our data files into your own billing or EHR software. Clients have used our medical necessity products to access medical necessity information when patients are scheduled for procedures and services and seamlessly integrating components into their software and workflow. Medical necessity can be determined before a procedure is performed or a service rendered avoiding un-billable charges.
Call us today and let us show you how we can help you be successful with your Medical Necessity challenges.
1. http://www.physiciansnews.com/law/802.miller.html Nancy W. Miller Esq.
2. Wikipedia - Medical Necessity Medicare