Medical necessity documentation, or lack of it, is one of the most common reasons for claim denials.

For a service to be considered medically necessary, it must be reasonable and necessary to diagnosis or treat a patient’s medical condition. When submitting claims for payment, it is the diagnosis codes reported with the service that tells the payer “why” a service was performed. The diagnosis reported can be the determining factor in supporting or not supporting the medical necessity of the procedure.

For example, if the patient came in with an earache and was diagnosed with Otitis Media, and the provider billed for a chest x ray, insurance would not pay for it. This is because it is not medically necessary to perform a chest x ray on a patient who is not having any breathing or chest related symptoms or problems.

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.

Not all diagnoses for all procedures are considered medically necessary. CMS (Centers for Medicare and Medicaid Services) and also commercial payers have coverage policies that specify the diagnosis codes that support medical necessity for certain procedures.

It is important to note that a diagnosis code should never be altered to match one of the diagnosis codes listed in a coverage policy as supporting medical necessity. The diagnosis code submitted must be supported and reflected in the medical documentation. It would be inappropriate to report a diagnosis just because it is on an approved list of diagnosis codes that meet medical necessity by a payer.

Reporting a diagnosis that the patient does not have solely for the purpose of obtaining reimbursement for a service is construed as fraud, and will most likely result in fines / penalties and, in some cases, even criminal prosecution.

Medical Necessity and Evaluation and Management Services:

Per CMS; Medical necessity of a service is the overarching criterion for payment in addition to the individual requirements of a CPT code. It would not be medically necessary or appropriate to bill a higher level of evaluation and management service when a lower level of service is warranted. The volume of documentation should not be the primary influence upon which a specific level of service is billed.

It may be appropriate to perform a highly detailed history and physical even when the patient presents with an uncomplicated problem and no workup is planned.  However, in these cases it is best to base the final E/M code selection on the level of medical necessity, even if a coding tool suggests a higher level of service based on what is documented.

Remember; claims denials can be reduced by letting medical necessity guide the care provided and by documenting the care accurately.