Proactive Medical Necessity Approach Helps Reduce Denials

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October 20, 2004

Organizations that have made strides in managing medical necessity denials share one key characteristic: Their priority is to prevent denials from occurring in the first place. Checking medical necessity early in the revenue cycle process is one way to get a handle on managing denials. That topic and others is addressed in a new HFMA educational supplement sponsored by 3M Health Information Systems.

Where to Check for Medical Necessity

One important consideration in setting up a program to prevent medical necessity denials is where medical necessity should be assessed. Patient registration is presently the most common place where hospitals verify necessity and generate advance beneficiary notices (ABNs) when needed.

According to a survey of 123 hospitals, published in HCPro Inc.'s Medical Records Briefing, 57 percent of hospitals stated that they check for medical necessity at registration, followed closely by 52 percent in the ancillary departments at the point-of-service. Only 17 percent reported checking medical necessity at the physician's office where the order or admit diagnosis is written. (Percentages add up to more than 100 percent because some hospitals check medical necessity in more than one location.)

One hospital that checks necessity at the point of order is Froedtert Hospital, a 440-bed academic hospital in Milwaukee. "Our approach to ABNs is very different from the approach most hospitals have taken," explains Jean Voight, coordinator of financial programs. "Even though this required significant physician and staff education, we felt that from a customer service standpoint it was the way to go."

Many hospitals, including Central Texas Medical Center, a 113-bed hospital located in San Marcos and part of Adventist Health System, check medical necessity through the scheduling department or at pre-registration. Wherever medical necessity is checked, staff should be trained to handle that function. Also, education and buy-in from the physician community is paramount for the program to be successful.

Educating Physicians and Others

Education has been a major component of the medical necessity program at Froedtert Hospital, says Voight. Because ABNs are initiated at the clinic level, the hospital has taken a two-tiered approach to education. They first meet with clinic managers and then with the physicians. Says Voight, "So far it's been enlightening for both sides -- the finance side as well as the clinical side. As we rolled out ABNs, we realized our physicians are very willing to learn about reimbursement issues. In every physician group, we have found a champion who believes this is the right thing to do."

At Central Texas Medical Center, physician education is an ongoing process, says Frances Crunk, vice president and chief financial officer. Medical necessity is handled at the time of registration. If the procedure code does not indicate a medically necessary procedure for the diagnosis of record, then the hospital works with the physician to make sure the hospital has the appropriate diagnosis or another procedure that the doctor would prefer to order for the patient.

The real solution lies in educating physicians about medical necessity and getting their buy-in. Often, this starts by using data to identify medical necessity issues by physician or department, and then explaining to physicians and staff the advantages of taking the time to ensure that the service is ordered correctly with sufficient diagnosis information to meet medical necessity requirements.

The staff actually performing the medical necessity check also needs training. Often, the people who are checking for medical necessity are not professional coders but lab technicians, lab clerks, medical assistants, or registration personnel with limited coding knowledge. For this reason, and also because of personnel turnover, there needs to be a continuing education and training program. To further support these staff, some facilities have placed professional coders at registration or the point-of-service (in ancillary departments) to make coding expertise readily available and to have someone on hand who has experience interacting with physicians on documentation issues.

Preventing Medical Necessity Denials Pays Off

Complying with federal and local rules, avoiding penalties, ensuring optimal payment, improving cash flow, and enhancing patient satisfaction are all important goals for hospitals today. A well-designed medical necessity denials prevention program, along with thorough staff education and carefully selected software, can help fulfill those goals.

SOURCE:

Medical Necessity Denials: Prevention Pays Off, an HFMA educational supplement sponsored by 3M Health Information Systems and published in the October 2004 issue of hfm.

Additional Resources

Prospective Strategy Can Help Reduce Claims Denials, February 26, 2003, HFMA Wants You to Know
HFMA Tip Sheet: Medical Claims Denial Management -- Online access to the article summary is available to HFMA members; nonmembers see "How to Get Articles." The full article can be purchased for $15 by contacting the Member Services Center at (800) 252-4362, extension 2.
Revenue Cycle: Comprehensive List of HFMA Products and Services

If you have questions or comments about HFMA Wants You to Know, contact editor Laura Noble.

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