During audits, payers require documentation of medical necessity. However, private payers often have arbitrary and vague guidelines for defining and determining medical necessity, particularly when dealing with physicians or ordering clinicians. This causes frustration among providers, who often question what role private payers play in determining medical necessity. The definition of medical necessity can vary by payer—and within payer—depending on the underlying plan. Therefore, it is critical that providers read their payer contracts and policy and coverage manuals carefully. When in doubt, it is best to confirm requirements with the payer.
Explore this issue:March 2016
Regardless of the definition, medical necessity is a precondition to coverage. The criteria to establish medical necessity can be different from one setting to another because each payer has the ability to establish its own criteria. However, government and private payers generally require proof that the services were reasonable and necessary to diagnose or treat a patient’s condition. To prove this, providers should document the diagnosis for all procedures performed and all diagnostic tests ordered. In the case of repeat procedures, providers should clearly note the outcome of the previous procedure and the basis for reordering.
The best way to ensure compliance and readiness when an audit comes is to develop and implement a compliance plan well in advance of any audit. Regular and periodic training and education should be conducted regarding audit response obligations and responsibilities. An audit response plan should be implemented to ensure key deadlines are met. As always, the key to compliance is to conduct periodic self-audits or independent audits in order to proactively identify issues and mitigate their impact.
Responding to Audit Requests
All audit requests should be taken very seriously. Payers often follow what other payers are doing. Therefore, a problem audit with one payer can cause other payers to initiate their own audits. For this reason, it is critical to respond appropriately to each audit request. Auditors often check only a few billing records. If errors are found, they will then extrapolate and may penalize providers.
If a provider receives an audit request, it is important to carefully review the audit request and supply everything reasonably requested. If it is not possible to gather the requested material before the auditor’s deadline, an extension should be requested. If possible, all requested information should be submitted to the auditor at one time. This is important because if any information is missing, the case can be denied. Also, additional time often is not granted to resubmit any information that was not included earlier.