Medical necessity test key to avoiding audit problems
Medical necessity test key to avoiding audit problems
Providers need to know standards more than ever
It is becoming increasingly important to a physician’s financial health to know whether the patient, the provider, or the government is liable for payment of a service labeled as medically unnecessary by Medicare or one of its local carriers.
As part of its crackdown on fraud and abuse in the Medicare program, the Health Care Financing Administration and local carriers are devoting more energy to determining if providers are following established guidelines about the medical necessity of the services they bill for including the required documentation.
Indeed, a recent audit of Medicare claims found 30% were incorrect, resulting in HCFA wrongly overpaying some $23 billion in inappropriate bills. Of these, lack of proper documentation from providers accounted for about one-half of the erroneous claims paid.
Medicare’s policy says it only pays for those services and procedures it has determined to be medically "reasonable and necessary" for diagnostic, treatment, and therapeutic purposes. HCFA, Congress, and local Medicare carriers all play a role in deciding which services are covered, as well as when and under what conditions they are covered. The particulars are normally contained in HCFA’s Medicare Coverage Issues Manual or the Medicare Carriers Manual.
According to the Medicare Coverage Manual, if a provider knows or should have known a specific service was not covered by Medicare, then the provider is financially liable for the service. But, if it is determined the beneficiary knew or should have known the service received was not covered by Medicare, the beneficiary is ultimately liable.
When there’s no HCFA payment policy for specific medical services, Medicare carriers are free to develop their own local medical review policy. This allows the carrier to set its clinical criteria for "medically necessary" and "reasonable" services. It is also the carrier’s responsibility to inform the appropriate local providers of any new policy, and when it takes effect.
The bottom line: Providers are responsible and will be increasingly held accountable for knowing what services are covered and considered medically necessary and which ones are not.
To protect themselves from being stuck with unpaid claims, providers and their staff must first stay current with Medicare payment policy.
Next, practices need to know know when to ask patients to sign a liability waiver informing them Medicare will probably not pay for a certain service. Sometimes practices will need to take steps to avoid any possible confusion by letting the patient know beforehand that the patient not Medicare is responsible for paying that bill.
Currently, there are three basic categories of services for which Medicare can deny payment:
• Non-covered services that have never been paid by Medicare under any conditions. These include such services as routine check-ups and certain immunizations or drugs. Because it is clear the beneficiary is responsible for payment, no provider liability waiver is necessary.
• Services deemed not medically necessary by HCFA or local carriers. In this situation, the beneficiary should sign a waiver of liability in advance, expressly making the beneficiary responsible for payment.
Reader tip: A modifier -GA added to the end of the CPT code indicates to the carrier that the patient has signed a waiver of liability.
• Unbundled services cannot be billed to a Medicare beneficiary. For instance, if a provider gives a patient an injection and performs an evaluation and management (E/M) service on the same day, the physician cannot separately bill Medicare for the E/M and the patient for the shot.
HCFA considers the injection to be included in the E/M service payment. Billing the beneficiary separately for the shot would be classified as unbundling, and patients are not responsible for paying for unbundled services under Medicare.
When a new national payment policy is approved by HCFA, individual Medicare carriers are supposed to notify local providers of the change. Carriers are also charged with interpreting national coverage policy and applying these interpretations on a case-by-case basis to the providers they serve.
In turn, if HCFA or a local carrier has published a policy, the standard is the provider should have known about the policy before performing the service and submitting the claim. If an erroneous claim initially slips through the system and is paid, it may be red-flagged in a post-payment audit.
If there is no national policy for a specific service or medical circumstance, a Medicare carrier can form its own local medical review policy setting coverage criteria and clinical conditions under which it considers certain services reasonable and necessary.
As such, the local carrier is also responsible for informing the appropriate providers of the new policy, and when it takes effect.
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