Preventing Medical Necessity Denials

KAREN HOPPE

Although all hospitals must comply with a Medicare requirement that services provided to beneficiaries are reasonable and medically necessary for treatment and diagnosis, the criteria may be inconsistent among the agencies setting them. The Centers for Medicare & Medicaid Services (CMS) created policies that dictate the criteria that support medical necessity for many tests on a national level, regional Medicare administrative contractors have developed local coverage determinations, and commercial payers have their own set of medical necessity policies.

When it is determined that services do not meet medical necessity requirements, providers are required to notify beneficiaries by issuing an Advance Beneficiary Notice (ABN) for the non-covered service. An ABN is a written notice given to a Medicare beneficiary, prior to the service being furnished, informing the patient that the service may not be covered by Medicare. If the ABN is not issued, the patient cannot be billed, and the hospital will ultimately write off the denied claim. If the hospital has a high frequency of such denials, it could be found to be in violation of Medicare compliance, and the physician who ordered the service also may be found in violation for ordering medically unnecessary tests. Commercial payers can require a similar waiver or notice of non-coverage to be signed by the patient as well.

A hospital is most vulnerable to medical necessity denials when physicians and other clinical staff are not well-informed about the requirements for medical necessity, front-line staff lack the tools and resources to quickly and easily ascertain whether a test or service meets these requirements, and the hospital does not effectively monitor denials to track the frequency of such denials.

Medical Necessity Tools

It is nearly impossible to ascertain whether a test meets medical necessity without the proper education and tools. The registration staff receiving the order are unlikely to be trained in coding and do not have time to manually check policies with a room full of patients waiting for their tests. Patient access staff require a means for verifying medical necessity quickly online—e.g., checking a patient’s diagnosis and procedure against the appropriate insurer’s medical necessity policy—so they can notify a patient if his or her insurance might not cover a test prior to test administration. This tool should be set up to provide medical necessity verification for all the hospital’s payers, including links to the applicable medical necessity policy.

Physician Education

Physicians should be trained to take steps to avoid denials and regularly review denials incurred to better understand payer policies and requirements. The physician’s documentation may have deficiencies, or electronic ordering systems may not be set up correctly. For example, a physician should be able to specify whether a test is diagnostic or a screening. If the physician cannot do so, the incorrect test may be ordered, resulting in a denial.

Monitoring

Once the education and tools are in place, the hospital should begin monitoring the number of denials. If the denials do not decrease consistently in three months, then the educator may have to re-engage with the physician. Scorecards showing monthly trending by physician and test can help identify areas for improvement and show physicians how their performance compares with that of their peers. Over time, such metrics can help create sustainable change.

Claims denied for medical necessity typically are written off because chasing the denial is too labor intensive. The entire process to obtain a diagnosis after the service is provided is quite burdensome. It often takes multiple calls to a physician to obtain additional information that justifies the medical necessity of a test. When additional information is obtained, the claim needs to be recoded before it can go back to the biller to appeal to Medicare. Many hospitals do not have the resources to support this work effort. It is more cost-effective to prevent these denials from happening in the first place by verifying medical necessity status ahead of time.

Streamlined processes, supportive tools, and education that brings them together can mitigate compliance risks, decrease write offs, reduce the need for ABNs, improve efficiency, and reduce post-payment reviews.

Karen Hoppe is a senior consultant at Craneware in Atlanta, Georgia.

Publication Date: Monday, July 11, 2016