Medical Necessity

Medical necessity is a three-decade hot-button topic among healthcare providers. Medical necessity plays an astronomical role in healthcare, and entities must comply to protect their revenue. Those who fail to do so experience an increased burden on their workforce and decreased revenue.

In this article, we introduce “medical necessity” simply and concisely. Then, we discuss the importance of incorporating medical necessity into the electronic health record. Third, we’ll share the medical necessity feature’s benefits for both the practice and the provider. 

What is Medical Necessity?

Payers only pay for medically necessary services. To elaborate, services charged to the payer are typically only paid if they are:

• ordered to diagnose or treat an illness; by following medical standards;
• clinically appropriate;
• not primary for convenience; and
• not more expensive than alternative services that are as likely to produce the same results.

To automate claims processing, payers determine in advance which ICD codes warrant which tests and services. Insurers will only pay a claim when services are paired with a diagnosis code that warrants the service.

In some cases, patients may have a unique circumstance, diagnosis, or condition that, while not recognized as a covered diagnosis according to national or local payer criteria, is supported by evidence-based medical data.

The payer may consider services without a justified ICD diagnosis, a screening test, or simple convenience for the patient. The ICD code assigned must indicate that the signs, symptoms, medical history, or family history support the procedure. If you treat a patient for four distinct conditions and perform tests for each, the provider must establish medical necessity for each test.

Failure to establish medical necessity can transfer the financial liability for those tests and treatments to the healthcare facility. And unlike other denials, most denials related to medical necessity can’t just be resubmitted; they typically require that an appeal is filed. This can increase the number of days in accounts receivable, making it difficult to maintain financial feasibility. It can also burden both clinical and billing staff and put undue hardship on the patient. Overall, the organization, the provider, and the patient experience negative outcomes.

The most common medical necessity denial reasons include inpatient criteria not met, length of stay, inappropriate use of the emergency department, and inappropriate care level. Likewise, the primary cause of denial is a lack of documentation to support the decision.

Why is it Essential to Incorporate Medical Necessity into an EHR?

Physicians and advanced practice clinicians work with thousands of ICD codes and hundreds of tests and treatments daily. This means the feasibility of memorizing medical necessity codes is very low. Furthermore, extensive physician involvement in medical billing can take away valuable face-to-face time with the patient. By incorporating medical necessity into the electronic health record, clients can automate medical necessity and prevent denials.

In the electronic health record, this feature serves two crucial functions:

1. When the provider orders a procedure in the EHR, they can click the Medical Necessity button. A popup is invoked, providing the opportunity to add ICDs from a list of medical necessity codes for that procedure and allowing the provider to ensure medical necessity at the time of treatment or identify the need to explore alternative tests or treatments.
2. It alerts the provider when they have ordered a procedure, and none of the medical necessity codes defined for that procedure are present in the patient’s assessment ICD screen. This allows the provider to add medical necessity codes and/or reconsider the diagnosis or treatment ordered.
3. If the provider attempts to close an encounter without selecting medical necessity codes for a procedure, the system will alert the provider that the medical necessity codes have not been selected. It then gives the provider a final opportunity to choose medical necessity codes or change their orders to ensure they meet medical necessity criteria.

These functions can reduce claim denials and foregone revenue for the client and improve patient safety and experience. 

How Does Medical Necessity Benefit the Providers?

The medical necessity feature in PrognoCIS by Bizmatics offers a myriad of benefits. Both the client (the healthcare organization) and the provider experience positive outcomes as a result.

The most notable benefits to the client or healthcare organization include:

• the ability to customize and build medical necessity codes to ensure accuracy and alignment with major payers
• foolproof automated prompting to encourage appropriate justification of services
• claims for procedures performed are always billed alongside justified ICD-10 codes
• the rate of denials, and therefore the productive hours invested in filing appeals, is reduced
• clients experience increased revenue when they receive payment for the services rendered (and days in AR are reduced as well when denials and appeals are limited)’

The most notable benefit to the provider is a readily available list of medical necessity codes for each procedure ordered. This prevents the need to manually research and increasing the time available for face-to-face patient interaction.

Finally, medical necessity benefits the patient by encouraging the team to consider whether a procedure is medically necessary before ordering it. Patients also gain when the healthcare team is encouraged to consider alternative treatments that are likely to achieve the same results.

Most EHRs offer a medical necessity feature, so what leads clients to choose prognoCIS by Bizmatics over other EHRs?

The Bizmatics Advantage:

• The client would meet LCD requirements
• The higher success rate of claim reimbursement for performed procedures
• Customer satisfaction

Our Medical necessity setup is not based on external resources but setup by local clinical users. Medical necessity as a concept has the ability to configure Medical Coverage Policies in PrognoCIS to prevent errors in coding and ensure clean claim submission. It works for hand in hand with LCD (Local Coverage Determinations).

LCDs, NCDs, and payer-specific coverage guidelines are designed to provide insights into the usage of diagnosis codes. Specifically, they provide guidance on correct and appropriate diagnosis codes to justify medical necessity for reported procedure codes. PrognoCIS provides in-built NCD / LCD validations for selected states & specialties. Users can also share the LCDs relevant to their practice in a predefined format. From there, PrognoCIS would ensure all claims and reported charges are scrubbed for these edits. This also helps achieve objectives of clean billing and reduce denials due to improper coding.

Watch: 6 Hidden Gems To Resolve Your Denied Medical Claims ▶

PrognoCIS offers workflows customized for over two dozen medical specialties, including surgery, psychiatry, urology, pediatrics, family practice, occupational medicine, and more, which means there’s a solution customized for your medical practice.

Next steps

This article introduced medical necessity and reviewed the numerous benefits of incorporating it into your EHR. Key takeaways surrounding medically necessary procedures include:

• proving medical necessity is required by all payers
• claims that are denied due to medical necessity must be appealed, not simply revised and resubmitted
• prognosis EHR automates medical necessity to prevent denials
• prognosis EHR is mature, customizable, and highly successful in reducing claim denials due to medical necessity

To learn more, request a demo from the experts at Bizmatics today!