The term “medically necessary” generally refers to care that is reasonable, necessary, and/or appropriate, based on evidence-based clinical standards of care. Medicare and private payers regard medical necessity as a deciding factor for claims payment. The interpretation and application of medical necessity can vary based on payer policies. With its inherent specificity requirements, ICD-10 has increased the potential for medical necessity denials. Medical billing and coding outsourcing companies can ensure accurate claim submission only if providers report diagnoses to inform the payer why a service was performed and support medical necessity. According to recent reports, many hospitals and practices are experiencing an increase in medical necessity and notification denials. Medical necessity denials can impact the organization’s bottom line. Regardless of how arduous or time-consuming the process can be, providers should appeal and recover denied insurance claims.

Strategies to Overturn and Prevent Medical Necessity Denials

Overturning medical necessity denials

A recently published www.outpatientsurgery.net article recommends three strategies to navigate denials based on a medical necessity decision:

  • Reviewing payer’s “medical necessity” documentation: Government and private insurance have specific guidelines as to what is considered medically necessary for certain items, procedures and/or services. These policies are available in the payers’ payment policies or clinical guidelines. The coverage policies for Medicare includes NCDs (National Coverage Determination), which are nationwide determinations for Medicare covered services and Local Coverage Determinations (LCDs) or determinations if a service is covered carrier-wide by a MAC (Medicare Administrative Contractor. Outpatient Surgery recommends that providers ask insurers for their state’s clinical criteria used to make treatment decisions and review it for relevance and accuracy. This will help develop a better case against exceptions that the payer makes to this type of guidance.
  • Demand peer review: Next, the Outpatient Surgery report advises appealing adverse decisions through independent external review organizations. Physicians can ask for a peer review by sub-specialty peer reviewers who have the expertise to conduct meaningful dialogue with providers regarding both treatment decisions and applicable coverage limitations. However, as sub-specialists are not easy to find, the report recommends that providers must be very specific about the credentials of the appeal reviewer. Appeal reports are based on the review of patient medical history and medical necessity that will justify the medical necessity of the treatment. A well-written rebuttal report can increase the physician’s likelihood of success in litigating the denied claims.
  • Chase multiple levels of appeal: Most insurers, including Medicare and Medicaid, have multiple levels of appeals. For instance, Original Medicare has five levels of appeal, each with its own unique requirements:
    • Level 1 – Redetermination by a Medicare Administrative Contractor (MAC)
    • Level 2 – Reconsideration by a Qualified Independent Contractor (QIC)
    • Level 3 – Hearing before an Administrative Law Judge (ALJ)
    • Level 4 – Review by the Medicare Appeals Council
    • Level 5 – Judicial Review in United States District Court
  • According to Outpatient Surgery, providers should pursue all levels of appeals and importantly, strive for higher-level appeal reviews to overturn mediocre appeal review components obtained at the lower levels of review. The best way to escalate to an external review process with independent decision makers is to obtain an authorization from the patient to pursue external appeal review. State departments of insurance and the Affordable Care Act (ACA) have granted consumers the right to an independent, external third level appeal of adverse coverage determinations by their health plans for issues such as medical necessity. Independent medical record review companies have professional medical review staff to meet the challenge of reviewing cases.

    Providers should submit complete medical documentation signed by the attending physician along with the appeal to overturn a medical necessity decision. The appeal letter should specifically address the objections raised in the denial letter. It should include information to support the initial codes, official coding guideline references and specific notation of record documentation location, and relevant clinical findings.

    Avoiding medical necessity denials

    Healthcare organizations need to take specific steps to avoid medical necessity denials.

    • Improve documentation processes: Poor documentation and a lack of specificity are the key reasons for medical necessity denials. Documentation must support treatment and level-of-care decisions. Ongoing education will help physicians understand the medical necessity implications of their documentation. Reviewing supporting documents for accuracy and relevance before claim submission can prevent incomplete documentation that can lead to medical necessity denials.
    • Have a skilled coding team: Medical coders translate the clinical documentation into codes which insurance companies use to determine if the services were medically necessary. Coders should therefore be aware of the medical necessity implications of the codes they report and how coding impacts the revenue cycle. They should be knowledgeable about local coverage determinations (LCDs), national coverage determinations (NCDs), and payer policies. Outsourcing medical coding to an experienced company can ensure that coding errors don’t cause medical necessity denials.
    • Update billing software: Billing software should be upgraded to incorporate the new codes. Outdated systems can cause errors and delays in billing and coding.
    • Prior authorization: Providers should ideally have an insurance verification company to verify and validate patients’ benefits and demographic information and obtain referrals and prior authorizations. The services of an insurance verification specialist can go a long way in preventing medical necessity denials.

    Providers should keep track of denials and appeals and use the data to identify trends and determine root causes of denials. This will help them take steps to avoid such mistakes in the future.

    Note: This post relied on content from “Coding & Billing: Yes, You Can Overturn Medical Necessity Denials” published by Outpatient Surgery.