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How to understand medical necessity and how it controls physician payment


A lot of the questions and answers I see in Coding Insights involve “medical necessity.” Who defines this? How does this directly impact payments?

Q: A lot of the questions and answers I see in Coding Insights involve “medical necessity.” Who defines this? How does this directly impact payments?

Most contracts between a provider and a payer state somewhere that payment will be made to the providers for “covered and medically necessary service,” and define the term “medical necessity.” These are also often related to other limitations on payment.

Most physicians have a kinder version of necessity: Is a particular intervention capable of providing a medical benefit to a given patient at a given point in time? 

The example contractual language below is what governs your payments:

“The PLAN reserves the right to determine whether in its judgment a service or supply is medically necessary. Medically Necessary Services are: a) consistent with the symptom or diagnosis and treatment of the condition, disease, ailment, or injury; and b) not primary for the convenience of the subscriber, his or her physician, or other provider; and c) not primarily custodial care. The PLAN shall not be obligated to pay for and the physician shall not charge subscriber for services denied by the PLAN as not being Medically Necessary.”

The fact that a physician has performed or prescribed a procedure or treatment or the fact that it may be the only treatment for a particular problem or injury does not mean that it is a medically necessary covered health service as defined in the covered person’s benefit contract.

Q: I hear a lot about note cloning. Is there an actual law or rule about this that can be enforced?


A:Yes there is. Medicare was the first payer many years ago to publish some very specific guidance on this-it is a Medical Necessity violation.

Documentation is considered cloned when each entry in the medical record for a beneficiary is worded exactly like or similar to the previous entries. Cloning also occurs when medical documentation is exactly the same from beneficiary to beneficiary. It would not be expected that every patient had the exact same problem or symptoms and required the exact same treatment.

Cloned documentation does not meet medical necessity requirements for coverage of services rendered due to the lack of specific, individual information. All documentation in the medical record must be specific to the patient and her/his situation at the time of the encounter. Cloning of documentation is considered a misrepresentation of the medical necessity requirement for coverage of services. Use of this type of documentation will lead to denial of services for lack of medical necessity and recompense of all overpayments made.

Not all copying, cut/paste is inappropriate. It has become commonplace to carry forward some HPI info from the admit, or earlier days in a hospitalization, to provide context for later days. And this is fine as long as we can see what work is done that day. After the “common” portion of a note, say “today ……” or date it and label a section as “Interval History.” 

Payers do not mind how you do your work, they just need to be able to see what that work is-today’s work-the work they are paying for with the code you submit. 

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