Making Sense of Medical Necessity

Season #1

Hi, and welcome back to Revenue Cycle Decoded where we are making sense of revenue cycle for medical practice managers. Today, I’m talking about meeting medical necessity. So, what exactly is medical necessity and why does it matter when you are coding your claims? Well, our payers consider whether a treatment or service we provide is medically necessary for the patient’s condition on the date of service, and if so, the claim will be paid, assuming we submit a clean claim and everything else on the claim is correct, and the treatment is medically necessary to care for our patient on that date of service. In that case, we would meet medical necessity according to payer guidelines. However, payers also may decide that some treatments are not medically necessary for that patient on that date of service for a variety of reasons, and we’ll look at a couple of examples here in a minute. But for example, if a treatment is considered to be investigational or experimental, in that case, the payer likely will not consider the treatment to be medically necessary and they may not pay you if you perform that treatment for your patient. Another reason would be if we performed a treatment that doesn’t match up with what the patient’s condition is on that date of service. So how does a payer tell if a treatment or a service that we provided matches up with the patient’s condition to determine if it’s medically necessary. Well, the way is ICD-10 codes and CPT or HCPCS codes. As we know, computers understand computer language, they understand numbers. We submit these codes on our claims. Our ICD-10 codes tell the payer why we did what we did on the date of service. This is the diagnosis, or the diagnoses, of the patient’s condition or conditions. And then, the CPT or HCPCS code(s) tells the payer what we did. And so, if what we did matches up with why we did it (the ICD-10 code), that all links up and makes sense, then it meets medical necessity. However, if it doesn’t, then it wouldn’t. So, let’s look at an example here. In the first case, we have a patient who has presented to us with a displaced comminuted fracture of the left tibia. Now, one of the treatments for this, in addition to perhaps surgery, would be placement of a long leg cast. According to best practices, this would be one of the treatments provided for this condition. So, in this case, the ICD-10 code would match up with the CPT code that tells the payer what treatment we provided for the patient’s fracture. That way, the payer sees that this treatment is medically necessary, and they pay for the treatment. But if we submit on our claim an ICD-10 code, a diagnosis of why we did something, and a CPT or HCPCS code, the “what” we did, and it doesn’t match up or link up in the payer’s system, in this case, it’s going to not meet medical necessity and it’s going to get denied. So, what’s an example of this? In this case, we have a patient who has presented with a sprain of the left ankle, and we’ve applied a short leg cast. Well, that wouldn’t usually be the treatment for a sprain, a simple sprain of the ankle, where the physician may recommend wrapping the ankle or putting ice on it, but we generally are not going to cast a sprained ankle. And so, those codes don’t match up – they don’t make sense to go together. And so, your payer system is going to recognize that and deny that claim as not medically necessary if it was submitted this way. Now, what does the payer say? Well, we are going to have to check the payer policy to see what they consider to be medically necessary for a specific condition. And they may not have a policy for everything, but for the things that you are doing in your office, you certainly should be aware if they do have policies. For Medicare, this will be your Local Coverage Determinations or your National Coverage Determinations and also your Local Coverage Articles. Since 2019, Medicare has been moving the ICD-10 codes and the CPT codes into the Local Coverage Articles that often accompany a Local Coverage Determination, so you would want to check both to see which treatments and services are considered medically necessary for a patient’s condition. For a commercial payer policy, you may need to go out to their website and look to see if they have a policy for the particular treatment that you want to perform. And I just want to make a quick mention of unspecified codes. We know with ICD-10, we should be coding to the highest degree of specificity. If we submit so-called unspecified codes on the claim, they may not meet medical necessity in every case. You should be aware of how the payer views submission of unspecified codes on the claim and whether they will pay for those codes or not. Sometimes, it’s simply educating your physicians and providers to document in order to choose the most specific, most granular ICD-10 codes. So that is medical necessity in a nutshell. I hope this has been helpful to you. If it is, please like, subscribe, follow. I’ll be creating many more videos to help you make sense and demystify revenue cycle. I look forward to talking to you soon – have a great day! Follow us on social media: YouTube: Facebook: LinkedIn: Twitter: