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Coding Corner: The importance of documenting medical necessity

April 01, 2016
Area(s) of Interest: Payor Issues and Reimbursement Practice Management 

CPR’s “Coding Corner” focuses on coding, compliance and documentation issues relating specifically to physician billing. This month’s tip comes from G. John Verhovshek, the managing editor for AAPC, a training and credentialing association for the business side of health care.   


When documenting office visits, inpatient care, and other evaluation and management (E/M) services, providers should aim to demonstrate medical necessity, above all else.


Documentation rooted in medical necessity offers compliance and patient care advantages, and also drives optimal coding. Per the Medicare Claims Processing Manual, Chapter 12, Section 30.6.1:


Medical necessity of a service is 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. 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.


AMA Policy H-320.953[3] defines medical necessity as:


Health care services or products that a prudent physician would provide to a patient for the purpose of preventing, diagnosing, or treating an illness, injury, disease or its symptoms in a manner that is: (a) in accordance with generally accepted standards of medical practice; (b) clinically appropriate in terms of type, frequency, extent, site and duration; and (c) not primarily for the convenience of the patient, physician, or other health care provider.


The Center for Medicare and Medicaid Services' (CMS) Medicare Benefit Policy Manual, Chapter 16, Section 20, similarly defines medical necessity as, “services that are reasonable and necessary for the diagnosis or treatment of an illness or injury or to improve the functioning of a malformed body member and not excluded under another provision of the Medicare Program.”


How medical necessity fits with the key components of E/M service
Documentation guidelines tell us that history, exam and medical decision-making (MDM) are the key components of an E/M service. Experienced medical coders often treat MDM as the single best indicator of the overall E/M level. Generally, this is a sound strategy because:



  • MDM – unlike medical necessity – can be “scored” by determining the nature of the presenting problem, the number of treatment options, etc.



  • MDM is a reliable indicator of overall E/M level because it is not so easily “over documented” as the history or exam.


MDM does not equal medical necessity, however, and coders and providers should not assume that MDM will always point to the correct E/M level. This can cause undercoding of services, which is both a compliance failure and a missed opportunity to capture legitimate reimbursement. For example, if the history and exam are medically necessary, CPT® rules allow you to report an office visit E/M service level for an established patient based on the history and exam alone, without regard to MDM.


Note that some payers may specify medical decision-making as a “must consider” documentation element; however, this is not a requirement of the AMA or CMS national policy.


Providers can demonstrate medical necessity based on unique information captured in the documented history of present illness (HPI) for the current visit. The information should be relevant to the presenting problem(s), and should seek to expand upon each HPI element, as follows:



  • Location: e.g., back pain, nasal congestion

  • Quality: e.g., sharp or shooting pain, dry cough

  • Severity: e.g., extremely nauseated, moderate pain

  • Duration: e.g., onset two weeks ago

  • Timing: e.g., worse in the mornings, occurs constantly

  • Context: e.g., dizzy upon standing, worse after exercise

  • Associated signs/symptoms: e.g., a chief complaint of nausea may be accompanied by associated symptoms of vomiting and diarrhea

  • Modifying factors: e.g. no relief from over-the-counter meds, improves with rest


Only the performing provider may document the HPI. Copying the nurse’s notes or patient responses in a questionnaire does not count.


Finally, it bears repeating that documentation quality matters more than quantity. The medical record should be sufficient to “re-create” the circumstances of a physician/patient encounter (legibility matters). If it’s important to the patient’s case, it should be in writing. The documentation should offer a clear picture of, “here’s what was found, here’s what was done, and here’s why.” 

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