Medical Necessity and Denial Management

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Original story posted on: July 1, 2019

Quality work reduces the burden of the denial management process.

When my children were young, they really enjoyed the movie “The Neverending Story.” It’s about a boy who reads a magical book that tells a story of a young warrior whose task is to stop a dark force called “The Nothing” from engulfing a mystical world. I feel that this is reflective of a perpetual theme with denial management.

First, let’s discuss “medical necessity” denials which, are so often misunderstood that I find it necessary to try to explain the difference between clinical medical necessity and coding medical necessity. The two can be (but are often not) synonymous.

Clinical medical necessity is defined by Medicare as “services or items reasonable and necessary for the diagnosis or treatment of illness or injury, or to improve the functioning of a malformed body member.” In other words, medically necessary services are those that a physician, exercising prudent clinical judgment, would provide to a patient.

For example, say a relatively healthy patient is seen in the office complaining of a cough. The physician performs an evaluation and management (E&M) service and deems that the patient may have symptoms of an acute condition such as pneumonia. The physician then orders a chest X-ray (CXR) to rule out the acute condition. 

The example above for the CXR was clinically medically necessary to either rule in or establish a diagnosis or to rule out a presumed diagnosis. The diagnostic study ordered was deemed essential to diagnosing an illness and establishing treatment for the patient.

Coding medical necessity is defined by the Centers for Medicare & Medicaid Services (CMS) Manual System Pub. 100-04, Medicare Claims Processing Transmittal 178, as “the overarching criterion for payment, in addition to the individual requirements of a CPT® code.”

“It would not be medically necessary or appropriate to bill a higher level of evaluation and management service when a lower level of service is warranted,” this passage continues. “The volume of documentation should not be the primary influence upon which a specific level of service is billed. Documentation should support the level of service reported. The service should be documented during (the provision of treatment), or as soon as practicable after it is provided, in order to maintain an accurate medical record.”

The definition cited above should not be confused with clinical medical necessity. What the documentation above refers to is that the diagnosis needs to warrant the service billed, translated as a CPT code.

For example, say a patient is seen by a dermatologist for a non-painful rash of the left arm and the provider reports an E&M code, CPT® code 99204 (Office or other outpatient visit for the evaluation and management of a new patient, which requires these three key components: a comprehensive history, a comprehensive examination, and medical decision-making of moderate complexity).  

Based on Medicare’s definition of medical necessity above, the question asked would be “was CPT® code 99204 warranted?” The documentation needs to meet the level of the service reported. If the rash was present on the patient’s left arm, consistent with a diagnosis of dermatitis, and the provider prescribes over-the-counter hydrocortisone cream, is the medical decision-making (MDM) consistent with the assignment of moderate complexity? The documentation, as noted above, will not support the level of E&M reported.

If the patient presented with a fever and painful body rash with onset a day ago that spread quickly and has started to manifest as blisters with crusting, then the E&M will be extensive, and the provider will order tests and systemic medication meeting the criteria for moderate-complexity MDM.

As per Medicare’s definition, the volume of the documentation does not establish the E&M code assigned. Therefore, “it would not be medically necessary or appropriate to bill a higher level of evaluation and management service when a lower level of service is warranted,” as documented in the first example, but it would be necessary and warranted in the second dermatologic example.

Now, let’s discuss a different aspect of denials. Often, we see in provider/hospital audits conducted by the payer's correspondence denying the service, stating that the service was not documented in the chart. Here are a few examples of appeal responses:

  1. The CPT® code billed is correct and can be found in the documentation.

  2. I checked with the coder and she/he says it is correct.

  3. I checked the National Correct Coding Initiative (NCCI) edits and it says it’s ok when modifier 59 is added.

Let me try to illustrate what I believe is a straightforward example.

Say a 70-year-old female patient with a left shoulder partial thickness rotator cuff tear underwent arthroscopic rotator cuff repair, biceps tenotomy, distal clavicle excision, and glenohumeral debridement. The procedure note indicated that 30 mL of saline was injected into the glenohumeral joint, utilizing a spinal needle from the posterior portal. The arthroscope was introduced into the joint from a posterior portal and a standard diagnostic arthroscopy was performed of the glenohumeral joint and subacromial space. Arthroscopy was performed through standard posterior, anterior, and lateral portals. A biceps tenotomy was performed by placing arthroscopic scissors through the anterior portal. A shaver was used to debride the residual stump and superior labrum to stable margins. The scope was introduced into the subacromial space and the rotator cuff tear was inspected. A decision was made to proceed with the placement of Regeneten by inducted implant for rotator cuff repair because of the significant thinning of the anterior supraspinatus tendon and delamination with a small focal full-thickness tear.

The only CPT® code that we are going to take a look at is CPT® code 29823 (Arthroscopy, shoulder, surgical; debridement, extensive), which was reported in addition to the arthroscopic procedures for the repair.

Yes, it is true that the NCCI edits indicate that CPT® code 29823, which in the case above is a column 2 code, can be reported with the arthroscopy code 29827 (arthroscopic rotator cuff repair), which is a column 1 code, by adding modifier 59. However, you cannot only go by the spreadsheet. Please read the section that might be applicable to the code, which in this case is Chapter IV of the NCCI edits.

Per Chapter 4, CMS considers the shoulder to be a single anatomic structure. With three exceptions, an NCCI procedure-to-procedure edit code pair consisting of two codes describing two shoulder arthroscopy procedures “shall not be bypassed with an NCCI-associated modifier when the two procedures are performed on the ipsilateral shoulder.” This type of edit may be bypassed with an NCCI-associated modifier only if the two procedures are performed on contralateral shoulders.

The three exceptions are described in Chapter IV, Section E (Arthroscopy), Subsection 7. Shoulder arthroscopy procedures include limited debridement (e.g., CPT® code 29822) even if the limited debridement is performed in a different area of the same shoulder than the other procedure. With three exceptions, shoulder arthroscopy procedures include extensive debridement (e.g., CPT® code 29823) even if the extensive debridement is performed in a different area of the same shoulder than the other procedure. CPT® codes 29824 (arthroscopic claviculectomy including distal articular surface), 29827 (arthroscopic rotator cuff repair), and 29828 (biceps tenodesis) may be reported separately with CPT® code 29823 if the extensive debridement is performed in a different area of the same shoulder.

Another point pertinent to the example above is the surgical approach. NCCI edits, Chapter I, lists this more expansively as “surgical approach, including identification of anatomical landmarks, incision, evaluation of the surgical field, debridement of traumatized tissue, lysis of adhesions, and isolation of structures limiting access to the surgical field such as bone, blood vessels, nerve, and muscles including stimulation for identification or monitoring.”

Therefore, even though NCCI edits indicate that CPT® code 29823 may be bypassed with modifier 59, please make sure that the criteria for utilization of the modifier is met (see definition below). Also, please read that NCCI edits indicate that the service may not be reported for the procedure done on the ipsilateral (same side) but can be reported for the contralateral (opposite) shoulder with modifier 59, noting a separate identifiable service.

Modifier 59 should only be used to identify when there is documentation to support a different session or patient encounter, different procedure or surgery, different site or organ system, separate incision or excision, separate lesion, or separate injury (or area of injury in extensive injuries) not ordinarily encountered or performed on the same day by the same physician.

In the above surgical procedure, CPT® code 29823 for the debridement would not be reported. If a surgical service is done requiring extra work to get at the clinical problem, then I would suggest modifier 22 be utilized instead, provided the documentation meets the requirements of modifier 22.

Modifier 22 CPT® guidelines cite “the substantial additional work and the reason for the additional work (i.e., increased intensity, time, technical difficulty of the procedure, the severity of patient’s condition, physician and mental effort required.” Other factors that might support modifier 22 include morbid obesity, low birth weight, converting a laparoscopic procedure to an open approach, severe scarring, or adhesions from previous trauma.

The provider should explain and identify in the documentation any additional diagnoses, pre-existing conditions, or unexpected findings or complicating factors that contributed to the extra time and effort. Let’s say the above patient had prior surgery and had adhesions, which required extra time to get to the problem, or the body habitus was that of morbid obesity, which, again, required extra time to get through the layers of adipose tissue (fat). If this is documented in the operative narrative, then modifier 22 is warranted.

I realize that adding modifier 22 will require a manual review of the claim and that the reimbursement will not be as high as if modifier 59 was used on a separate procedure. However, this eliminates the denial management process and guarantees reimbursement if the documentation to support the requirements is found in the operative note.

I would like to make a few suggestions for your current appeals process:

  1. If at all affordable, please reach out to a reputable service that handles appeals. This may actually be efficacious, because a reputable service will only appeal those services that can legitimately be appealed, and they can provide education on documentation requirements for those services that currently cannot be appealed.

  2. Do not rely on “I checked with the coder and she/he said it’s the right code.” The reason I say this is because a) the coder may be new, lacking experience; b) the coder may have learned from someone else who was making the same mistake, or c) coding staff may have the same mentality as medical staff in thinking that they are never erroneous.

  3. Make sure your team becomes familiar with the NCCI Manual. Do not solely rely on the edits spreadsheet or a CCI tool. If you have coding teams in other countries, make sure that they are not bypassing the edits with the addition of modifier 59 on the coding software tools utilized. They are probably coding on a quota, as a production/assembly line worker, and stopping to check the edit and research requires time they do not have, as this would create losses in production.

  4. If you cannot afford a separate service, at least have a separate individual handle the appeals and read denials correctly, for what may be hidden in the correspondence is precisely why the denial occurred. It is an art to write an ambiguous letter that really does not clearly indicate a denial reason.

My personal wish is for the healthcare C-suite to understand that education and greater flexibility on the front end, with emphasis on quality work, increase timely reimbursement and reduces the burden of the denial management process.

Denise M. Nash, MD, CCS, CIM

Denise Nash, MD has more than 20 years of experience in the healthcare industry. In her last position, she served as senior vice president of compliance and education for MiraMed Global Services, and as such she handled all compliance and education needs, including working with external clients. Dr. Nash has worked for the Centers for Medicare & Medicaid Services (CMS) in hospital auditing and has expertise in negotiation and implementation of risk contracting for managed care plans. Dr. Nash is a consultant on coding/compliance audits at physician practices and hospitals, and has worked for insurance plans conducting second- and third-level appeals. Her past experience also included consulting for the Office of the Inspector General of New Hampshire in its Fraud and Abuse Division. Dr. Nash is a member of both the RACmonitor and the ICD10monitor editorial boards.

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