Medically necessary is a term used by insurers to describe medical treatment that is appropriate and rendered in accordance with generally accepted standards of medical practice.
Gillian I. Russell, Terminology, in FUNDAMENTALS OF HEALTH LAW 1, 25 (American Health Lawyers Association 5th ed., 2011).
Under most contracts between the Provider and Payor, the Provider is required to provide, and will only be paid for, “Medically Necessary” services. The definition of “Medically Necessary” is the subject of great scrutiny by enrollees and the general public and can call into question the Payor’s health care policies. Clearly no such provision may interfere with the discretion of the attending health care provider to furnish necessary care. The Payor, however, must be sure that it can manage the delivery of care to all of its enrollees and therefore has an interest in the determination of what is considered to be “Medically Necessary.”
Whether a particular health care service is “Medically Necessary,” and therefore warranted, requires a balance between diagnosis, medical documentation and the likelihood that medical community peers accept that the treatment is necessary for the patient. Attorneys representing Payors and those representing Providers both recognize the requirement that the contract should define “Medical Necessity” as specifically as possible without limiting the Provider’s medical obligation to render appropriate care. Excerpt from Joseph I. Zumpano & Karen E. Salas-Morales, Key Contract Definitions, in MANAGED CARE CONTRACTING HANDBOOK, at 2.1.3 (2001).
Under the Social Security Act, Medicare claims processing contractors may provide coverage only for those services that are “reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member.” 42 U.S.C. § 1395y(a)(1)(A). The Centers for Medicare & Medicaid Services (“CMS”) “has not delineated what constitutes ‘medically indicated’ and ‘necessary’ items or services furnished to Medicare patients and the specific documentation required to support medical necessity in individual cases.” United States v. Prabhu, 442 F. Supp. 2d 1008, 1032 (D. Nev. 2006) (citation omitted). See, e.g., Medicare Program; Criteria and Procedures for Making Medical Services Coverage Decisions That Relate to Health Care Technology, 54 Fed. Reg. 4302, 4304, 4308, 4312 (1989) (“current regulations are general and we have not defined the terms ‘reasonable’ and ‘necessary,’ nor have we described in regulations a process for how these terms must be applied”).
To provide guidance regarding whether a particular medical service is medically reasonable and necessary, CMS may promulgate a National Coverage Decision (“NCD”) which will grant, limit or exclude Medicare coverage for a specific medical service. See 64 Fed. Reg. 22619, 22621 (Apr. 27, 1999). If CMS elects to issue a NCD, the NCD is binding on all Medicare contractors processing Medicare claims. Id. In the absence of CMS promulgating a NCD, medical necessity decisions are made at the discretion of local Medicare contractors. See, e.g., Medicare Program; Procedures for Making National Coverage Decisions, 64 Fed. Reg. 22,619, 22,621 (1999). Contractors may also publish local medical review policies (“LMRPs”), or Local Coverage Determinations (“LCDs”), the successor to LMRPs, to provide guidance to the public and the medical community within a specified area and “explain when an item or service will be considered ‘reasonable and necessary’ and thus eligible for coverage under the Medicare statute.” 64 Fed. Reg. at 22,621.
CMS, in issuing guidance to contractors regarding the criteria they should use in making medical necessity determinations under LCDs, specified that a service shall be considered reasonable and necessary, if, among other things, it falls within accepted standards of medical practice.
Additionally, in determining the medical necessity of a service, CMS provides that the contractor should consider, among other things, the standard of practice within the community and scientific or research data.
Excerpt from Robert S. Salcido, How to Defeat the Government's Claims that the Provider's Services Lack Medical Necessity, Fraud and Compliance Forum (American Health Lawyers Association Oct. 2008).