Documenting Medical Necessity

The connection between code linkage and medical necessity, and how it is documented in the medical record...

One of the most important aspects of getting a health insurance claim paid is documenting its medical necessity. If a service is not considered medically necessary, then health insurance won't pay for it.

It follows, then, that in order to get medical claims paid, they must be medically necessary. This medical necessity must also be clearly documented in the medical record.

Cosmetic procedures and medical necessity

For example, take rhinoplasty (nose jobs). Nose jobs are usually done as cosmetic procedures, meaning they are done because the individual wants to change the shape of their nose. This means that a cosmetic nose job is not done for any medical reason, meaning it is not medically necessary.

Because a cosmetic procedure is not considered medically necessary, medical insurance will not pay for it. The individual would have to pay for it out of their own pocket.

Another example is a rhinoplasty performed due to a nose deformity, which affects the individual's ability to breathe. Because the nose deformity is creating a medical problem, the decreased ability to breathe, then correcting the nose deformity by performing a nose job would be considered medically necessary.

This means insurance would pay for it.

Documentation of medical necessity

In the above examples, the procedure code for the rhinoplasty is the same. There are no different procedure codes to indicate whether a service was cosmetic, elective, or medically necessary. So how do the insurance companies know when to pay and when not to?

If an insurance company receives a claim for a procedure that they may suspect is not medically necessary, such as a rhinoplasty, they will request medical records. Then they will closely examine the medical records to determine whether or not the procedure was medically necessary, and decide whether or not to pay.

For example, if the doctor writes in the chart that the patient's nose is disfigured to such an extent as to affect their breathing on an everyday basis, then insurance may consider the rhinoplasty medically necessary. On the other hand, if the doctor writes that the patient requests a rhinoplasty for cosmetic reasons, then insurance won't pay for it.

If they do determine that the rhinoplasty was medically necessary then they will pay for it according to the patient's schedule of benefits. If they do not, however, then they will not cover the service and the patient will have to pay for it.

Medical necessity and everyday claims

Usually, insurance companies assume that all procedures that are performed are medically necessary, and rarely request medical records to prove that they should pay for them. Usually people go to the doctor for medical reasons, such as illnesses and routine medical examinations, rather than for elective reasons.

This means that as a biller, you will rarely have to send insurance companies copies of medical records.

The importance of documentation

This doesn't mean that you don't need to worry about documenting the visit. For most office visits, doctors typically use a problem-oriented visit form, or SOAP note, which helps them record every aspect of the visit, so that the coder can choose the correct codes, as well as to support the medical insurance claim.

If the doctor fails to write down a procedure, even it if was performed on the patient, then it is fraudulent for your office to bill for it. A good rule of thumb is:

"If it's not documented, it never happened."

Because the medical record must include everything that happened at the visit, the doctor has to write everything from the visit down in the chart. If the doctor forgets to write something down, for instance, a urinalysis that was done in the office for a patient with a urinary tract infection, then you cannot bill for the service (the urinalysis).

Remember, if it's not documented, it never happened, so if the doctor forgets to write the urinalysis down, then the insurance company will assume it never happened. What this means is that if they request records from this office visit, and you billed for a urinalysis, then they will not pay for it, because it's not written down in the chart.

Medical necessity and patient diagnosis

Another very important part of medical necessity is connecting the procedure codes to diagnosis codes that indicate that the procedure was medically necessary.

For example, if the patient came in with a fever and sore throat, and your office billed for a urinalysis, then insurance would not pay for it. This is because it is not medically necessary to perform a urinalysis on a patient who is not having any urinary symptoms or problems.

This means that not only does your doctor have to document everything that is done in the office, but also has to do them because of specific diagnoses. Usually this is not very difficult, because providers perform procedures based on the patient's diagnosis. This becomes more difficult, however, when patients come into the office with more than one diagnosis and have more than one procedure performed.

For example, if a patient has a suspected urinary tract infection, but also has a fever and sore throat, then the doctor might perform a urinalysis as well as a strep throat swab. This is where the medical coder's job comes in.

The coder must link the correct diagnosis (urinary tract infection) with the correct procedure (urinalysis), in order for the insurance to pay. If the coder does not link the procedures correctly, then insurance will deny all of the procedures for medical necessity.

Understanding medical necessity and how to document it is an important part of medical billing, because it is why an insurance company actually pays for a claim. Knowing these nuances of medical billing and coding is what makes the difference between a good medical biller or coder and someone who is just doing their job.

Also see this article on using supporting documentation to appeal denied claims.

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