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Know medical necessity,get it right from the start

Diagnostic ImagingDiagnostic Imaging Vol 30 No 12
Volume 30
Issue 12

Increasing use of imagingservices and rising costs forMedicare have not been kindto radiology providers.

Increasing use of imaging services and rising costs for Medicare have not been kind to radiology providers. Congress has issued several mandates to the Centers for Medicare and Medicaid Services to control these costs and to ensure quality data. Unfortunately, there is nothing radiology providers can do about these requirements except deal with the end result, which often means less income.

Radiology providers can do something, however, about the claims that Medicare and other third-party payers deny because the services billed are not considered to be medically necessary. There are steps you can take and management processes you can implement to reduce those denials. To do this, of course, requires a little elbow grease and cooperation on the part of referring providers as well as your testing facility's radiologists and staff.

Be sure you understand the definitions of medical necessity with which you must comply, including those used by Medicare and non-Medicare payers.

Although they will differ, most definitions incorporate the terms reasonable and necessary or appropriate in light of clinical practice standards.

The Medicare program defines medical necessity as services or items reasonable and necessary for the diagnosis or treatment of illness or injury (and within the scope of a Medicare benefit category). Note, however, that even if CMS considers a service to be reasonable and necessary, coverage may be limited.

Even more important than the CMS definitions are the definitions that your payers give to medical necessity. You may find those definitions on your payers' websites, but if you don't, request them in addition to their clinical review criteria.

In 2005, the American Medical Association issued the fourth edition of its Model Managed Care Contract, which is designed to help physicians negotiate with health plans (www.ama-assn.org/ama/pub/category/9559.html). Supplement 1 of the contract defines medical necessity as follows:

"Healthcare services or procedures that a prudent physician would provide to a patient for the purpose of preventing, diagnosing, or treating an illness, injury, disease or its symptoms in a manner that is (a) in accordance with generally accepted standards of medical practice; (b) clinically appropriate in terms of type, frequency, extent, site, and duration; and (c) not primarily for the economic benefit of the health plans and purchasers or for the convenience of the patient, treating physician, or other healthcare provider."


Become knowledgeable about Medicare's national coverage determinations (NCDs) and local coverage determinations (LCDs) for radiology services. Both sets of guidelines, as well as the guidelines you probably won't get from non-Medicare payers (see below), are very important to submitting medically necessary claims.

CMS develops its NCDs through an evidence-based process; currently, there are 29 NCDs for radiology services (See Information Sources). All Medicare contractors must apply these national guidelines as well as the frequency limitations that CMS establishes. If the services supplied to the Medicare beneficiary exceed a published limitation, claims may be denied.

Medical directors employed by Medicare contractors develop LCDs on a variety of topics, as needed, in addition to those covered by NCDs. Although the LCDs can be more detailed or specific than NCDs, they must be consistent with CMS's national guidance. LCDs and NCDs include the CPT codes covered for a procedure, indications and limitations of coverage and/ or medical necessity, and ICD-9-CM codes that support medical necessity. In other words, they contain key points you need to know to ascertain whether a referral will be paid.

Unfortunately, the coverage determinations of non- Medicare payers are not so straightforward or accessible. Some of these payers make their guidelines public, but most consider them proprietary and do not share them with physicians.

"In the case of non- Medicare payers, we're often left with the question of whether a procedure is covered or not," one radiologist said. "Sometimes the only way to know whether something is covered is when the claim gets denied or paid. You're behind the eight ball from the start, so you end up having to appeal the denial."


Generally, the coverage provided by these commercial payers must be as inclusive as Medicare's coverage. But radiologists or, more likely, their practice managers must be prepared to read the individual contracts and determine coverage provided. Even hiring an outside expert to analyze the contract before it's signed can, in the long run, help save you money.

Prior authorization also comes into play for non-Medicare payers, and it's up to you to find out which payers require this if they don't tell you up front. Better yet, assume that you need prior authorization and just call the payer. But be sure to make the call before the patient arrives for the appointment. While on the phone, write down the date of the call and get the name of the person who gave (or did not give) you the authorization. Getting the decision in writing is, of course, the best course, and you could ask to have the decision faxed to you so you can prove authorization.

Specialists may avoid denials by demanding peer-to-peer review of precertification requests, according to Tammy Tipton, president of Appeal Solutions in Houston.

"Generally, precertification requests are reviewed by a general practitioner and not a radiologist," she said. "Ask the payer to get its radiologist to speak with the radiologist requesting the authorization."


All diagnostic tests for Medicare beneficiaries, with the exception of mammography services, must be ordered by the physician who is treating the beneficiary (i.e., furnishes a consultation or treats a beneficiary for a specific medical problem and uses the results in the patient's care management), according to Section 410.32 of the Code of Federal Regulations. Tests not ordered by the physician who is treating the beneficiary are not reasonable and necessary.

What this means for the radiology provider is that, generally, it is the treating physician who issues an advance beneficiary notice (ABN) to the patient. Sometimes, however, a patient arrives at the radiology center for a test and the front desk staff discovers (after checking the LCD) that the payer won't cover the test for the diagnosis listed in the referral.

In such cases, the ordering physician should be called to confirm whether he or she really wants that test performed. Sometimes it's just a misunderstanding or mistake in information transferred, but sometimes the treating physician actually wants the test performed in spite of the lack of coverage. In that case, the radiology office staff should ask the patient to sign the ABN before the service or procedure is started. This signed document allows you to bill the patient when the payment is denied. You may not bill the patient if the ABN was signed after the procedure was started.


To reduce medical necessity denials, you must focus on front-end compliance. What this program includes will depend, of course, upon your specific setup, but consider a few guidelines:

  • Keep on top of Medicare cover-age information as well as coding and billing guidelines. Get in the habit of checking the websites of CMS, Medicare payers, and non-Medicare payers on a regular basis for new information and reading all bulletins they send to you (see Information Sources).

  • Without the right diagnosis codes and CPT codes, you will not get paid correctly, so it goes without saying that hiring topnotch coders with proper training and credentials should be a priority. Some providers have placed professional coders at the registration desk to ensure that coding issues are resolved promptly. Most professional coders also understand the terminology used in physician orders and documentation and have experience interacting with and querying physicians when confusion arises.

  • Be sure to link each ICD-9 code to the appropriate CPT code based upon the LCD. Correctly chosen ICD-9 codes have been called the first line of defense when it comes to medical necessity. To show payers why it was medically necessary for you to perform the services you did, you must have the ICD-9 codes in box 21 matched up with the CPT codes in box 24. Chapter 26 of the Medicare Claims Processing Manual (www.cms.hhs.gov/manuals/downloads/clm104c26.pdf) contains instructions for completing the CMS-1500 claim form.

See items 21, 24D, and 24E in that chapter.

  • If you don't already have software that validates medical necessity information, consider investing in it. Many information systems offer this option but, depending on your budget, consider an application that is customdesigned to link to your payers and the services you offer.


Industry experts estimate that more than 70% of denials can be overturned. Despite that encouraging statistic, the greatest challenge faced by most billing professionals is timely appeal submission, according to Tipton, whose company focuses entirely on the resolution of denied or disputed medical insurance claims.

She notes that Medicare appeals must be filed within 120 days of the claim decision; most commercial insurers require appeals within 180 days of the denial. If the appeal is filed late, the likelihood of success is significantly reduced. In order to meet appeal deadlines consistently, providers must have an appeal letter database where letters can be selected and quickly customized for any type of appeal (see www.appeallettersonline.com/index.html for help).

Most denials require at least two appeals because insurance payers do not always provide credentialed professionals for the initial review, Tipton said. They also often provide details in the first appeal response that may require further discussion. In regard to appealing denied radiology claims, she gives the following advice:

  • Get referring physicians to submit their documentation (i.e., tests ordered, detailed history, etc.) because it may be more comprehensive than the radiologist's documentation.

  • Request that the payer have someone with radiology credentials (board-certified and current on radiology clinical standards) making decisions on radiology denials.

  • Request that the payer disclose the standards being used to deny the claim and whether they are updated regularly and are valid.

For more information about MedLearn and its products and services, please visit www.medlearn.com or contact Suzanne Lappen at slappen@medlearn.com or 763/733-4250.

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