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Medical Necessity Denials are on the Rise

It’s happened again — another denial for a medical necessity issue. And, it seems like this is happening more and more. Now what?

First, know that you are not alone. According to a recent study by the HFMA, medical necessity denials (which include pre-authorization) have increased 51% for outpatient claims.

These denials are frustrating because it stands to reason that the healthcare provider thought the procedure was medically necessary; otherwise, it wouldn’t have been ordered in the first place.

So, what is causing these denials and how can it be avoided?

There are mainly two culprits when it comes to medical necessity denials:

— A lack of either automation to ensure current pre-authorizations, or a breakdown in office workflow resulting in patients seen without the required pre-authorization

— Complex payer rules that constantly change

What are the steps to resolve these claims and get paid?

1. Confirm your coding is correct. Providers rarely prescribe procedures or medication that may be considered medically unnecessary. 

Plain-old common sense can be used to figure out if the diagnosis and corresponding procedures are the issues. Each procedure performed needs to correspond to a diagnosis. For example, if a physician orders an EKG without a history of heart disease, the EKG may be denied for lack of medical necessity. Another example is a patient that has a chest x-ray. If there is no “sick” diagnosis, revisit the patient record to discover why the x-ray was ordered. If a history code was missed in the notes that predicated the procedure, correct the claim and resubmit.

2. Check payer websites and newsletters to find medical necessity coding updates.

Since most organizations work with many payers, it can be challenging to stay up to date with the latest medical necessity requirements for each one. Assign a member of your billing staff to review payer communications so you can anticipate changes and avoid denials. Practices that use outsourced billing partners benefit from their professionals that monitor denials and payer rules.  

3. Sort out your pre-authorization process.

Many payers no longer issue ‘retro’ pre-authorizations, so it is crucial to ensure they are in place before the patient’s appointment. Some practices choose to use technology to obtain pre-authorizations, while others outsource this function. The vast majority of small to mid-size practices are still faxing and waiting for a response. If this is the case at your organization, it is essential to train front desk staff to alert patients that any visit or procedure performed without a pre-authorization will need to be paid at the time-of-service because it will not be covered.

Letter of Medical Necessity

If there is any question around payment for a drug, office visit or procedure, it is wise to write the payer a letter of medical necessity. This letter serves as an official request for payment and will be reviewed by the payer’s clinical staff. In most cases, it is written before the drug or procedure is administered. In cases where you are resolving an unexpected denial, it can be revised to use as part of the appeal. Remember, the main goal is to explain why the patient needs the service and the possible health consequences if they go without the procedure. These points need to ultimately lead to ensuring the procedure is medically necessary.

The standard points to remember when writing a letter of medical necessity:

— Use the official practice letterhead

— List the patient’s first and last name, birthdate, and insurance details

— Patient’s exact diagnosis & duration of the condition

— Refer to the diagnosis code as well as the CPTs for requested drugs and procedures

— Narrate why the decision was made to have the office visit, order the medication, or perform the procedure in the circumstances

— Include any supporting information such as lab results or physician notes

— Include studies or articles from healthcare journals that support the drug or procedure if it is new, experimental or unconventional

— Physician/patient relationship with physician authority on making such a decision

— How services will improve patient health moving forward, both short and long-term

— Signature of the healthcare provider

Click Here to download an example of a Letter of Medical Necessity!


Medusind improves the financial health of medical practices, groups, and hospitals with industry-leading medical billing expertise and technology.
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posted by OBarros
posted in Uncategorized
posted date Jul 2019