Understand medical necessity denial and how to avoid

What is a denial for lack of medical necessity?  Medicare defines medical necessity as:  “Services or supplies that are needed for the diagnosis or treatment of your medical condition, meet the standards of good medical practice in the local area, and aren’t mainly for the convenience of you or your doctor” (source: Medicare.gov). Physicians or coders translate the condition into an ICD.9 code paired with a CPT code and the claim is submitted for reimbursement. A denial for medical necessity means the diagnosis is not valid for the procedure and will not get paid.

Physicians should remember that what they consider an acceptable diagnosis code is not always viewed the same way by the insurance company. There are a number of reason whys this happens. It may be that the diagnosis that was submitted is not specific enough; it may be lack of sufficient documentation or it may be that the visit is not reimbursable.

Billing resources must actively manage and stay on top of all denials. Medical necessity denials can be easy to reverse with a simple effort, but many billing folks do not understand how and often view the balance as un-recoverable. This can be due to a lack of physician or staff understanding of the necessary steps to correct and prevent medical necessity denials.

Remember, payer policies are in motion and code deletions/replacements are common. As payers continue to tighten up, they are adhering to stricter guidelines for medical policies, therefore denying diagnosis codes that were previously paid.  Unfortunately, it’s not “a one size fits all” solution and there is no single acceptable policy per procedure or payer.  Medical necessity denials are happening across all specialties.

To correct a medical necessity denial, begin by examining the coding combination.   Confirm the diagnosis code is current for the date of service in question. Then review the payers’ policy specific to that code.

Some common examples are:
  • For a patient with osteoarthritis of the knee, the physician’s chart note should indicate whether the osteoarthritis is the primary or secondary diagnosis. Without this degree of specificity, a coder would not be able to properly select the correct diagnosis code.
  • Laboratory or diagnostic services that do not contain a physician’s order or valid requisition form with in the documentation for the specific date of service are typically denied as not medically necessary based on the omission from documentation.
  • A progress note or order without a legible identifier of the person who rendered or ordered the service would be denied as not medically necessary.
  • A physician who bills a 99214 — which requires 2 of 3 key components at the detailed level but the documentation submitted lists the required elements for a 99213 — was denied as “not medically necessary” at the level billed.
  • An initial hospital code — where documentation was requested and the physician’s physical exam was missing — was denied as “not medically necessary.”
  • A diagnosis that was submitted without the required additional diagnosis, condition, or manifestation code to support the procedure billed — such as: 110.1 — without listing a secondary diagnosis to indicate, pain, infection or difficulty in ambulation.
Medical necessity denials are an ongoing struggle that need continuous attention. The more the reasons are understood, the earlier they can be corrected. Ideally, physicians and staff are catching the potential denials prior to submitting the claims (the ultimate goal), but all involved with reimbursement need to ensure a strong denial follow-up program is in place to prevent impact to collections.

Dena K. Mallin, CPC, PCS

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