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Beware: Medical Necessity Denials Are Costing You Money!

bu005290By Dena K. Mallin, CPC, PCS

Over the last several months we have seen a continued rise in the denial rate for lack of medical necessity. Many physicians do not understand these denials and find themselves thinking about them from a defensive position.

What is a denial for lack of medical necessity?  Medicare defines medical necessity as:  “Services or supplies that are needed for the diagnosis or treatment of your medical condition, meet the standards of good medical practice in the local area, and aren’t mainly for the convenience of you or your doctor” (source: Medicare.gov). Physicians or coders translate the condition into an ICD.9 code paired with a CPT code and the claim is submitted for reimbursement. A denial for medical necessity means the diagnosis is not valid for the procedure and will not get paid.

Physicians should remember that what they consider an acceptable diagnosis code is not always viewed the same way by the insurance company. There are a number of reason whys this happens. It may be that the diagnosis that was submitted is not specific enough; it may be lack of sufficient documentation or it may be that the visit is not reimbursable.

Billing resources must actively manage and stay on top of all denials. Medical necessity denials can be easy to reverse with a simple effort, but many billing folks do not understand how and often view the balance as un-recoverable. This can be due to a lack of physician or staff understanding of the necessary steps to correct and prevent medical necessity denials.

Remember, payer policies are in motion and code deletions/replacements are common. As payers continue to tighten up, they are adhering to stricter guidelines for medical policies, therefore denying diagnosis codes that were previously paid.  Unfortunately, it’s not “a one size fits all” solution and there is no single acceptable policy per procedure or payer.  Medical necessity denials are happening across all specialties.

To correct a medical necessity denial, begin by examining the coding combination.   Confirm the diagnosis code is current for the date of service in question. Then review the payers’ policy specific to that code.

Many payer coverage policies are posted via their websites, although it is common to have to dig to find them. Even when you find the policy sometimes the guidance is not clear. However, sometimes nothing is available to provide direction and the case must be escalated via an appeal to a medical director inside the payer.  Once the policies have been researched, and acceptable diagnosis have been selected, physicians must review their documentation insuring that all required elements are present and that the information supplied would be adequate for a coder .

Some common examples are:

  • For a patient with osteoarthritis of the knee, the physician’s chart note should indicate whether the osteoarthritis is the primary or secondary diagnosis. Without this degree of specificity, a coder would not be able to properly select the correct diagnosis code.
  • Laboratory or diagnostic services that do not contain a physician’s order or valid requisition form with in the documentation for the specific date of service are typically denied as not medically necessary based on the omission from documentation.
  • A progress note or order without a legible identifier of the person who rendered or ordered the service would be denied as not medically necessary.
  • A physician who bills a 99214 — which requires 2 of 3 key components at the detailed level but the documentation submitted lists the required elements for a 99213 — was denied as “not medically necessary” at the level billed.
  • An initial hospital code — where documentation was requested and the physician’s physical exam was missing — was denied as “not medically necessary.”
  • A diagnosis that was submitted without the required additional diagnosis, condition, or manifestation code to support the procedure billed — such as: 110.1 — without listing a secondary diagnosis to indicate, pain, infection or difficulty in ambulation.

Medical necessity denials are an ongoing struggle that need continuous attention. The more the reasons are understood, the earlier they can be corrected. Ideally, physicians and staff are catching the potential denials prior to submitting the claims (the ultimate goal), but all involved with reimbursement need to ensure a strong denial follow-up program is in place to prevent impact to collections.

Dena K. Mallin, CPC, PCS, President of Claims Pro, can be reached at 215.732.7600 or dena@claimspro.net.


  1. Robert, unfortunately software is not a panacea for clinical documentation and its role i establishing medical necessity. Medical necessity spans beyond the mere documentation of a diagnosis in the record. The physician’s clinical thought process and clinical rationale for ordering a test, including signs and symptoms & HPI must be adquate and well documented, otherwise you run the risk of money being recouped if by chance the record is reviewed by the CERT contractor or the MACs

  2. Software in a situation like this can help avoid a denial. A program like Ingenix Encoder Pro lists a selection of “acceptable diagnosis” for a particular CPT code. These don’t always make rational medical sense but if your diagnosis would include one of the listed codes it would be smart to use it.

  3. If the appeals process to the insurance company is unsuccessful after legitimate efforts, and/or the company is unresponsive to inquiries, remember that you can in these cases contact your state’s insurance commissioner/department.

    They do have sway over these health insurance companies and record # of complaints per company, so the health insurers don’t like to hear from them. Sometimes a reference to that possibility is enough to get a more energized response from a recalcitrant payer.

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