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Medicare Reimbursement Payment for Medically Necessary Services

  • Published: 2011-05-15 (Revised/Updated 2015-10-26) : Author: Wachler & Associates PC
  • Synopsis: Information on reimbursement from Medicare and Medicaid for medically necessary services.

Quote: "Medicare will only pay for medically necessary services, which are defined by Medicare as "services or supplies that are needed for the diagnosis or treatment of your medical condition and meet accepted standards of medical practice.""

Main Document

Medical providers are challenged to comply with complex, specific documentation requirements for reimbursement from Medicare and Medicaid for medically necessary services.

As concerns regarding deficit-spending have emerged as part of the national dialog, lawmakers continue to reference the need to control health care fraud and reduce improper Medicare payments in order to conserve resources. According to the U.S. Government Accountability Office, in 2008 Medicaid and Medicare payments accounted for about half of reported improper payments in federal programs. In fact, the U.S. Department of Health and Human Services reported that improper Medicaid payments accounted for $18.6 billion in waste in that fiscal year.

As the government's methods of recovering improper payments continue to expand, hospitals, physicians and other medical providers must be increasingly vigilant in properly documenting that their services meet Medicare standards for reimbursement as such documentation is imperative in defending against audits by the Recovery Audit Contractors ("RACs") and Medicaid Integrity Contracts ("MICs") and investigations by Zone Program Integrity Contractors ("ZPICs") and Quality Improvement Organizations ("QIOs").

This article will highlight the concept of medical necessity as it relates to provider payments, explain some of the common problems medical providers have in documenting such necessities and provide some insight on how to avoid or face government recovery audits.

Medical Necessity

Medicare will only pay for medically necessary services, which are defined by Medicare as "services or supplies that are needed for the diagnosis or treatment of your medical condition and meet accepted standards of medical practice." However, reasonable opinions can differ as to what is considered medically necessary. For Medicare coverage purposes, federal law defines medical necessity. In very basic terms, the law requires for a treatment to be covered that it meet three criteria: - Fall within a category of benefit covered by the program - Be a service not specifically excluded by law - Meet the Medicare definition of "reasonable and necessary for the diagnosis or treatment of illness or injury"

In practice, determining what exactly is reasonable and necessary according to Medicare law can be an arduous task. Among the many thresholds to consider, a physician must be aware of which diagnoses and services are generally covered, frequency and utilization perimeters, and clinical efficacy. Each of these factors can influence whether Medicare will compensate the provider for the treatments billed.

Above all, medical documentation and records must support submitted claims. Hospitals, doctors and other providers must routinely keep detailed supporting data in patient files for tests and treatments ordered. It must be clear if the claim is questioned that the treating or examining professionals observed medical symptoms that reasonably suggested the course of action taken to diagnose or treat.

The Challenge of Billing Codes

Another important key to proper Medicare reimbursement is proper billing that complies with Medicare reporting guidelines. Proper coding has become extremely important to reimbursement. However, some providers are having continuing difficulties with certain CPT (current procedural terminology) codes, which invariably lead to billing errors and improper payments - potentially either over-payments or underpayments. Medicare reimbursement regulations require that physicians and other providers comply with complex documentation requirements. Many procedures are similar but choosing the wrong procedure to bill or not understanding what is included within certain CPT codes can lead to large over-payments that need to be returned to the government.

Additionally, many providers may not be properly listing the diagnoses for a patient. It is important that the biller always list the primary diagnosis first. Failure to list the proper primary diagnosis could lead to many payment problems.

Doctors, nurses and other staff should participate in their providers' compliance programs to learn about typical pitfalls that could lead to recovery audits. Such training programs may be offered by hospitals, third-party billing companies, local medical societies and insurance carriers. These trainings can: - help practitioners learn correct billing procedures - highlight areas of frequent misunderstandings so practitioners do not repeat past mistakes - teach strategies for proper documentation of medical necessity - assist practitioners in reducing the fear of mistakes

Billing mistakes can lead to accusations of unnecessary services, of failing to provide services that were billed for or of submitting false claims - charges that can lead to both civil and criminal repercussions.

Legal Counsel Essential

Medicare laws and regulations are extremely complicated, and hospitals, clinics and doctors should consult experienced health care lawyers to help them set up compliant record-keeping and billing systems. For a medical provider faced with a government Medicare audit, a law firm with experience in recovery audits can be very helpful in organizing documents and developing a strategy to respond to the auditor or investigator.

Should a medical provider be found in an audit to have over-billed the government because of insufficient proof of the medical necessity of billed services, a skilled health care attorney can assist in appealing the decision through the Medicare administrative process and in court, if necessary.

Your lawyer has two solid types of evidence that can be used to support the medical necessity of a procedure or treatment. First, the opinion of the treating physician that the actions taken were medically necessary under the circumstances carries significant weight. Borrowed from Social Security Disability law, great deference is usually given to the professional who was there in the examination room, observing the objective symptoms and talking to the patient. The knowledge and professional opinion of that treating doctor should carry more of a punch than that of an auditor who just reviewed the paper record.

Second, your attorney can bring in appropriate medical experts to review the case on your behalf, and provide his or her opinion to the government or court.

Don't face the full force of the government alone if you are a medical provider treating Medicare patients. Be sure you have the legal advice you need to comply with the law and collect for the services that you have provided.

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