Coding and Billing

Coding & Billing: Understand All Definitions of “Medical Necessity”

By Mark Wright, OD, FCOVD,
and Carole Burns, OD, FCOVD

Jan. 3, 2018

You and I may define medical necessity differently than a medical third-party carrier. Our definition is a simple one: whatever is medical necessary to diagnose or treat the patient. Medical carriers have a more complex definition. Since medical necessity is at the heart of all billing to medical carriers, it is important to understand the definition of medical necessity for each medical carrier where we are a participating provider.

We’ll start with Medicare’s definition, and then we’ll show you that Cigna expanded the definition.

Medicare defines medical necessity as:
“Services or supplies that are proper and needed for the diagnosis or treatment of the patient’s medical conditions, are provided for the diagnosis, direct care and treatment of the patient’s medical condition, meet the standards of good medical practice in the local area and aren’t mainly for the convenience of the patient or the physician.” Let’s unpack this definition to make sure we are following it correctly.

There are three main parts to the Medicare definition of medical necessity. We’ve teased each part out for clarity. Here they are:

“… proper and needed …”
The tests or procedures you do on patients are justified for billing to a third-party insurance company when they meet the criteria that they are “… proper and needed for the diagnosis or treatment of the patient’s medical conditions …” In plain English, that means you just can’t bill medical carriers for tests or procedures that aren’t related to the diagnosis or treatment of the patient’s medical conditions.

A practical example would be a healthy 21-year-old patient presented in your office for a comprehensive eye examination last week using their vision insurance to cover the visit. No medical problems were discovered. The same patient shows up today in your office with a subconjunctival hemorrhage due to excessive eye rubbing after a sleepless night. Based on the definition of medical necessity, it would be inappropriate to bill a comprehensive medical eye exam today to the patient’s medical insurance. Your examination today should be based on the presenting medical condition.

An example of where your definition and the medical carrier’s definition may be different would be for a baseline retinal photograph. You may feel that it is “proper and needed,” but the medical carrier’s rules say that without the discovery of a problem on the retina, it is inappropriate to bill the carrier for a retinal photograph. That does not mean that you cannot bill that photograph to the patient. It is entirely appropriate to bill the baseline retinal photo to the patient – just make sure you have a signed Advance Beneficiary Notice of Noncoverage (ABN). You can find the Medicare ABN rules and form HERE.

“… meet the standards of good medical practice in the local area …”
This is an interesting phrase as it implies that there may be different standards of good medical practice in different areas of the country. We can see this clearly with National Carrier Determinations and Local Carrier Determinations. National Carrier Determinations are rules an insurance carrier creates for the entire country. Local Carrier Determinations are usually tighter rules applied to a local area, but not to the entire country. Because of this system, it is possible that different areas of the country have different coverage rules.

Medicare National Carrier Determinations can be found HERE.

Medicare Local Carrier Determinations can be found HERE.

There is another issue here. There is not uniformity of laws, rules and regulations across all states for the delivery of optometric care. Many states have state-specific standards of care and have codified these into state laws and state-specific rules and regulations. These variations contribute to differences in meeting “… the standards of good medical practice in the local area …”

“… aren’t mainly for the convenience of the patient or the physician …”
One definition of “convenience” is: “Something that increases comfort or saves work.” It’s a lot less work for our practices to train the staff to do exactly the same tests on everyone who comes into the office versus providing an examination tailored to the presenting medical condition of each patient. It is harder for scheduling purposes to provide a variety of examinations based on patients’ chief complaints than to schedule comprehensive exams on the hour and on the half hour all day long for every patient seen. We need to make sure that we are providing a variety of examinations based on the complexity of the reason for the visit.

To show you that not all medical third parties have exactly the same definition of medical necessity, Cigna expands the “convenience” portion of the definition to include “… not more costly than an alternative service or sequence of services at least as likely to produce equivalent therapeutic or diagnostic results as to the diagnosis or treatment of that patient’s illness, injury or disease. …” As you can see, money found its way into the definition of medical necessity.

ACTION PLAN
1) Know the definition of medical necessity for each medical carrier for which you are a provider.

2) If the medical carrier does not have a specific definition of medical necessity, then follow the Medicare definition and use the current CPT definitions and guidelines.

References
Medical necessity at https://www.cms.gov/apps/glossary/default.asp?Letter=M&Language=English
https://www.thefreedictionary.com/convenience
https://cignaforhcp.cigna.com/public/content/pdf/resourceLibrary/behavioral/2017_CBH_SGandMNC-Final.pdf; page 7

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