DRG Coding Advisor
Navigating the abyss of medical necessity
Break the rules and you’ll pay the price
Knowing whether the patient, the provider, or the government is liable for payment of a service that Medicare or one of its local carriers says is not medically necessary is becoming increasingly important to a practice’s financial health. As part of its crackdown on fraud and abuse in the Medicare program, the Health Care Financing Administration (HCFA) and local carriers are devoting more energy to determine if providers are following established guidelines regarding the medical necessity of the services they bill for — plus required documentation.
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.
Does the beneficiary know?
According to the Medicare manual, if a provider knows or should have known that 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 he or she received was not covered by Medicare, then the beneficiary is ultimately liable. However, if neither the patient or the provider knew or "could have reasonably been expected to know" that the service was not considered medically reasonable and necessary and would not be covered by Medicare, then HCFA is ultimately responsible for paying the claim.
Bottom line: Providers are responsible — and will be increasingly held accountable — for knowing which services are covered and considered medically necessary and which are not.
To keep from being stuck with unpaid claims, providers and their staff must stay current with Medicare payment policies. Practices also need to know when to avoid any possible confusion by asking patients to sign a liability waiver stating that the patient knows Medicare will probably not pay for a certain service and the patient — not Medicare — is responsible for paying that bill.
Currently, there are three basic ways Medicare can deny payment:
1. Medicare will deny claims for non-covered services that have never been paid by Medicare under any conditions. These include such things as routine check-ups and certain immunizations or drugs. Because it is clear the beneficiary is responsible for payment in these circumstances, no provider liability waiver is necessary.
Get waiver for unnecessary services
2. Medicare will not reimburse for services deemed not medically necessary by HCFA or local carriers. In this situation, the beneficiary should sign a waiver of liability in advance, expressly accepting responsibility for payment.
Tip: The modifier -GA added to the end of the CPT code indicates to the carrier that the patient has signed a waiver of liability.
3. 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 service 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.
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