Billing and Coding

Medicare and third party payers recognize medical necessity as a critical factor in determining claims payment; although each payer may define medical necessity slightly different.

According to section 1862 (a)(1)(A) of the Social Security Act, Medicare will not cover services that “are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member.” The Centers for Medicare & Medicaid Services (CMS) Internet-Only Manual (IOM), 100-4, Chapter 12, Section 30.6.1 states “medical necessity of service is the overarching criterion for payment in addition to the individual requirements of a CPT code.”

Medicare and other third party payers have been reviewing medical record documentation and subsequently reducing the level of Evaluation and Management (E/M) code that was submitted by the physician’s office, stating the level did not meet the medical necessity for the higher level of E/M code.

Below are links to articles that help illustrate medical necessity: