Medical Necessity and Your Practice: It’s More Than Just ‘Doctor’s Orders’

Medical Necessity

A quick Google search for the term “medical necessity” doesn’t turn up anything you don’t already know. In fact, most sites give some version of this definition: “health care services that a physician, exercising prudent clinical judgment, would provide to a patient.” The definition’s vagueness is due, in part, to the fact that medical necessity means different things to physicians, coders, billers, and payers—and often decisions must be made on a case-by-case basis based on the patient’s current condition.

Don’t get lost in the confusion, says coding and reimbursement consultant Kim Huey in her live audio conference with ProfEdOnDemand. During her presentation on medical necessity documentation guidelines, Huey outlines what medical necessity means specifically to your practice, and how to help your physicians document appropriately to get reimbursed on time every time.

4 Basic Requirements

You already know that, to be reimbursed for a given service, the documentation must prove that such a service was medically necessary. However, just because a physician ordered a certain service doesn’t mean that payers will see it as necessary for the patient’s current condition, says billing consultant Bill Dacey—and this is where things can get very complicated.

Medically necessary does not mean performing services at the convenience of a doctor—such as inducing labor before a physician’s vacation or admitting a patient to the hospital just to have quicker access to the patient. What medical necessity is tends to be grey rather than black and white, as each physician will have to evaluate based on the patient’s health at the time. But  these are a few basic things your documentation must contain to prove medical necessity:

  • The documentation must be from that day’s visit (e.g., notes are not cloned)
  • The patient’s correct status must be noted (e.g., in observation vs. admitted)
  • The patient’s correct setting must be documented (e.g., intensive care unit (ICU) versus emergency room (ER))
  • The documentation must include reasoning for how the service will improve the patient’s condition.

Pay Attention:  It may sound like a worn-out theme by now, but check each payer’s rules for medical necessity documentation guidelines, including the use of the modifiers below, before submitting claims. You don’t want to be denied by a private payer because you followed Medicare’s rules, or vice versa.

Master 2 Modifiers

What happens when a patient knows a service isn’t covered by insurance and/or isn’t medically necessary for the specific condition, but he or she requests it anyway?

Doctors can and do still perform these services, but only after a thorough discussion with the patient about payment responsibilities. The patient must sign an Advanced Beneficiary Notice (ABN), and that ABN should be in the patient’s medical record before you proceed to use modifier GA. If there’s no ABN, modifier GZ gives you options. Here are scenarios in which to use these modifiers :

  • GA: This modifier indicates that an ABN is in the patient record and allows for the provider to bill the patient directly if the service is not covered by Medicare. This modifier can never be used with other liability modifiers.
  • GZ: Use this modifier when there should have been an ABN, but there wasn’t. Medicare will deny these claims, and the provider will not be allowed to bill the patient either. If you see there was no ABN, try to get in touch with the provider first. Use modifier GZ after either (a) not being able to communicate with the provider or (b) obtaining confirmation from the provider that an ABN was never issued.

Another one: In situations where a patient requires services for a condition that insurance considers “not covered,” use modifier GY.

Hone in on Rules for Your Practice

Medicare rules are extensive, but by knowing what to focus on, you can save your practice a lot of headaches and claims denials, says Huey. Start with thorough documentation, and then implement specific tips to impress payers with your claims.

To join the conference or see a replay, order a DVD or transcript, or read more

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