What is medical necessity?

Dennis Barry’s Reimbursement Advisor poses this question. Here is their answer:

Medical necessity is the determination that the level of care provided to a patient is appropriate and necessary to treat a patient’s medical condition and ensure a patient’s safety or health, such that a less intensive setting or service would jeopardize patient care. Medical necessity is documented by physician orders and outlined in local coverage and national coverage determinations.

Documenting medical necessity is required for Medicare to pay for the service. A service may benefit the patient, but it may not be a covered benefit if it does not meet medical necessity.

According to the Web site Payment Accuracy, “Approximately 99,500 claims were reviewed for the 2009 reporting period and the inpatient hospital short stays error rate was 12.4 percent, or $35.4 billion in estimated improper payments. The primary causes of improper payments were medically unnecessary services and insufficient documentation errors.” [See www.payment accuracy.gov.]

Short stays are a large-risk area for medical necessity inquiries. Providers must validate the necessity of short stay admissions. Providers cannot admit patients simply for the convenience of housing the patient overnight. Many short stays are found not to be medically necessary because the procedure or services provided could have been administered in an outpatient setting with no additional health risk to the patient. The fact that a patient was admitted only for a short period of time raises the question as to whether the patient should have been admitted at all.

Medical record documentation is essential to prove the validity of the claim. What is documented provides a clear directive for a medical necessity determination.

CMS considers claims medically unnecessary when they identify enough documentation to make an informed decision that the services billed were not medically necessary. This is based on Medicare coverage policies. An insufficient documentation error occurs when the provider does not submit sufficient documentation to determine whether the claim should have been paid.

The idea that medical necessity is driving some patients toward outpatient care is interesting to think about in the context of something we blogged about earlier this week.

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