How does Medical Necessity Benefits the Provider?

Medical Necessity - PrognoCIS EHR

According to one recent study, healthcare spending in the United States grew by a massive 4.1% in 2022. It hit a combined $4.5 trillion, breaking down to about $13,400 per individual.

One concept that plays a huge role in not only all that spending but in the healthcare industry in general, is called “medical necessity.” It’s a concept that dates back to the 1940s but that has evolved tremendously in the years since, particularly when it comes to how it helps healthcare organizations protect their revenue.

What is Medical Necessity?

The term “medical necessity” describes a situation where a payer only actually pays for services that are deemed “medically necessary,” which may not actually include all services that have been performed.

To rise to this status, a service needs to meet a few basic criteria:

  • It must have been ordered to either diagnose or treat an illness, following medical standards as they exist today.
  • It must be deemed clinically appropriate.
  • It cannot have been performed primarily for the sake of convenience.
  • It cannot be more expensive than alternative services that are likely to yield the same results.

Essentially, medical necessity is a tool used to determine which services an insurer will cover. If a patient is trying to get an insurance provider to cover a service that is totally elective and that has no major impact on their larger health and wellness, they’re likely going to run into issues. If that patient is suspected of having a disease like Multiple Sclerosis and only a spinal tap will yield a definitive diagnosis, it will likely be deemed medically necessary and will therefore be covered.

The Importance of Medical Necessity: What You Need to Know

A big part of the reason why medical necessity is so important is because it helps to standardize the definition of the term across the entirety of the healthcare industry.

Everything from coverage decisions to the way that claims are processed to reimbursement and beyond is streamlined and simplified, removing as much subjectivity as possible from the equation. You’re eliminating the possibility that one insurance company might deem a specific cancer treatment as covered, while another does not for seemingly arbitrary reasons.

The guidelines for what is or isn’t medically necessary were established by esteemed medical organizations like the American Medical Association and the Centers for Medicare & Medicaid Services. They’re not set by insurance companies or other payers at all. This again allows patients to rest easy knowing that their odds of receiving (and getting coverage for) anything they absolutely need in terms of their health is greatly increased.

The Benefits of Medical Necessity for Healthcare Providers

Benefits of Medical Necessity

In an overarching sense, one of the biggest benefits of medical necessity for healthcare providers is that it encourages them to carefully consider if a test or procedure is absolutely necessary before ordering or performing it. This can save a lot of time on the road to a critical diagnosis for patients as only essential tests are happening, thus increasing the speed at which their situation can be fully understood. It also frees up valuable time for medical professionals so they can spend less time wading through the results of unnecessary tests and procedures and more time having face-to-face interactions with those patients.

From a logistical point-of-view, medical necessity also helps a healthcare team consider alternative methods that are likely to achieve the same results as whatever step they were prepared to take. If Test A and Test B are functionally identical but the former costs five times what the latter does, there isn’t necessarily a compelling reason to choose Test A. Some facilities may do so however because “it’s just the way things have always been done,” or they’re unaware that Test B even exists. Medical necessity can at least force them to temporarily consider other options.

Finally, medical necessity benefits healthcare providers from a business perspective, too. When you’re only ordering tests and procedures that are deemed medically necessary and that you know insurance companies are willing to pay for, it dramatically reduces the rate of denials and the number of hours spent filing appeals. This also makes sure that healthcare organizations are actually generating revenue for the services they’re performing, which helps them generate more sustainable growth as well.

What are the Challenges in Medical Necessity?

Perhaps the biggest challenge in medical necessity comes by way of the fact that not all patients are created equally. Meaning, not everyone’s situation is as cut and dried as the rigid criteria of medical necessity might like.

There may be situations where a patient has a diagnosis or condition that is absolutely supported by evidence-based medical data, but that is not recognized as a “covered diagnosis” according to payer criteria. This can make it exceedingly difficult to determine who will pay for the service or whether it will even be performed.

Because of the nature of medical necessity, it can also make things complicated on behalf of healthcare providers. In an effort to help automate claims processing as much as possible, payers like insurance companies determine in advance which ICD codes correspond to which medically necessary tests and services. For a service to be covered, that ICD code will need to be associated with data like the symptoms, the medical history of the patient, and even their family history in support of whatever procedure a physician wants to do.

This means that if a patient has four separate conditions, each legitimately warranting its own battery of tests, a healthcare provider needs to establish medical necessity for every test. You can’t simply establish it once and have everything covered from that point forward.

If there is an issue properly establishing medical necessity at any point, financial liability for any tests or treatments performed likely falls to the healthcare facility. Equally complicating things is the fact that medical necessity denials cannot be simply resubmitted. A formal appeal must be filed, greatly delaying the burden on both clinical and billing staff – not to mention increasing stress on behalf of the patient.

The Advantages of Choosing PrognoCIS - Medical Necessity

If the concept of medical necessity itself is designed to help streamline things and relieve administrative burden for healthcare organizations, the PrognoCIS EHR solution is designed to take those gains even further.

Remember that most medical professionals work with thousands of ICD codes – each of which is associated with a seemingly endless list of tests, treatments, and more. PrognoCIS makes things simple as when a provider orders a particular procedure, all they need to do is select the “medical Necessity” option. A popup will allow them to instantly add ICD codes from a list for that procedure, allowing them to explore alternatives or just to make sure that medical necessity is guaranteed at the time of treatment.

PrognoCIS also includes helpful alerts that help prevent medical professionals from making potentially costly errors. Based on what is entered in a patient’s assessment ICD screen, PrognoCIS will alert them if they’re ordering a procedure that doesn’t match any of the codes selected. Naturally, there may be certain situations where they want to go ahead anyway. At the very least, they need to understand that they may be recommending a “medically unnecessary” test or treatment so that they have the complete picture to work from.

PrognoCIS also comes with a variety of additional innovative features, too, including ones like:

  • Medical professionals have the ability to customize and build their own medical necessity codes, all to make sure things stay accurate and that the system is properly aligned with major payers that they’re working with.
  • Any claims for procedures that have been performed get automatically billed out along with the justified ICD codes.
  • A list of medical necessity codes is automatically provided for each procedure or test ordered, saving countless hours because providers and their staff don’t have to conduct this research on their own.

Physicians and other medical professionals save a tremendous amount of time that they can use for face-to-face interactions. Staff members at those healthcare facilities also free up valuable time so that they can focus on more important matters. Patients can rest easy knowing that their healthcare journey is moving as efficiently (and as quickly) as possible. The facilities themselves increase revenue by reducing denials and making sure that services are billed appropriately.

Medical necessity is a hot button topic, yes – but with the right EHR like PrognoCIS by your side, it’s something that can absolutely be a boost to your organization in more ways than one.

If you’d like to find out more information about the ins and outs of medical necessity in medical billing, or if you’re just eager to see what the right electronic health record systems can do for your organization, please don’t delay - contact Bizmatics, Inc. today.

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