What Is Medical Necessity?
Medical necessity refers to healthcare services or supplies needed to diagnose or treat a condition, consistent with accepted standards of medical practice. Payers use medical necessity criteria to determine whether a service will be reimbursed.
National and Local Coverage Determinations
National Coverage Determinations (NCDs) are issued by CMS and apply nationwide, specifying the circumstances under which a particular service is covered. Local Coverage Determinations (LCDs) are issued by Medicare Administrative Contractors (MACs) and apply within their specific jurisdiction, often filling gaps where no NCD exists.
Advance Beneficiary Notice (ABN)
An Advance Beneficiary Notice of Noncoverage (ABN) is given to a Medicare beneficiary when a provider believes a service may not be covered due to medical necessity concerns. The ABN informs the patient they may be financially responsible for the service and allows the provider to bill the patient if Medicare denies the claim.
Documentation Requirements
Coders and clinical documentation improvement specialists must ensure documentation clearly supports the medical necessity of ordered tests and procedures, linking the diagnosis to the service performed. Vague or missing documentation is a leading cause of medical necessity denials.
Denial Appeals
When a claim is denied for lack of medical necessity, providers can appeal through a structured process, often starting with a redetermination request and escalating through reconsideration, an administrative law judge hearing, and further levels if needed. Strong clinical documentation is essential to a successful appeal.
Exam Tip
Know the difference between NCDs (national) and LCDs (local/regional) and understand when an ABN must be issued.