Chapter 10

Chapter 10: Medical Necessity and Key Risk Areas

Introduction to Compliance Officer Skills

• A compliance officer requires a variety of skills

  • Not necessarily required to perform billing and coding audits personally

  • Must understand risks, processes, regulations, and guidelines

  • Critical in identifying key risks in billing and reimbursement areas

Objectives of the Chapter

• Recognize documentation requirements in medical records

• Identify Medicare's definition of medical necessity and its impact on payment

• Understand Local Coverage Determinations (LCDs) and National Coverage Determinations (NCDs) for Medicare services

• Summarize details about Advanced Beneficiary Notices (ABNs)

• Understand incident-to billing and how to protect practices using it

• Describe requirements for returning overpayments

• Explain medical necessity for medical equipment and home health

• Identify high-risk areas in billing and reimbursement

• Summarize risk identification and management in compliance programs

• Regularly review the OIG Work Plan for identified risk areas

Key Concepts of Medical Necessity

• Definition as per section 1862(a)(1)(A) of the Social Security Act: Medicare will not cover services that are not reasonable and necessary for diagnosis, treatment, or improvement of functioning of a malformed body member

• Variability of definitions across payers, but core idea remains similar

• Application in claims adjudication, paramount for payment decision, particularly in evaluation and management (E/M) services

  • Medical necessity acts as an overarching criterion for payment beyond CPT code requirements

  • Documentation must support reported service level, not primarily based on volume

Common Reasons for Denied Claims

• Diagnosis must justify procedures performed and documented

• Diagnosis codes as first line of defense for medical necessity

• Additional documentation required for services with unique clinical circumstances

  • Must clearly demonstrate medical necessity of billed services

• Documentation supporting medical necessity should accompany claims for specific conditions/frequencies defined by payers

• Patients should receive ABNs for local/national coverage-determined excluded services

OIG Identified Risk Areas

High-Risk Areas in Coding and Billing

1. Billing for Unprovided Services

   • Services claimed that were not rendered as per coding requirements

   • Examples include using non-FDA-approved devices for specific tests and supervision rule violations

2. Proper Incident-to Billing

   • Defined as a method allowing services by auxiliary personnel under physician's supervision and billing under physician’s NPI

   • Key requirements involve:

     • Integral services as part of physician's professional services

     • Services commonly provided in offices or clinics

     • Services provided under direct supervision

     • Initial service performed by physician, ongoing services managed under established care plan

   • Documentation Requirements

     • Documentation must reflect services billed

   • Example of fraud involved a physician billing for services provided by nurse practitioners without proper supervision

3. Costly Claims for Medical Supplies/Services

   • Involve items or services not deemed ‘reasonable and necessary’ “as per Medicare coverage definitions”

   • Example: Services in higher-cost settings could be performed in lower-cost environments (e.g., homes)

4. Duplicate Billing

   • Occurs when billing multiple times for the same service

   • Example: charges made to both Medicare and the patient or simultaneous claims from multiple providers

   • Noteworthy Case: Baylor University alleged of improperly billed radiation treatments

5. Billing for Non-Covered Services

   • Misrepresentation of services performed using incorrect codes

   • CMS publishes a list of non-covered services accessible online

   • Examples of non-covered services:

     • Routine eyeglasses appropriately billed

     • Non-covered cosmetic surgery except for reconstructive reasons

6. Legal Misuse of Provider IDs

   • New providers may be ready to see patients without proper billing numbers, risking improper claims

7. Unbundling Practices

   • Billing for components of services that should be bundled

   • Example: Laboratories charging separately for tests administered simultaneously

8. Incorrect Use of Code Modifiers

   • Modifiers 25 and 59 under scrutiny for abuse:

     • Modifier 25 indicates significant separate E/M services on the same day

     • Modifier 59 represents distinct services provided on a single day

   • Report findings indicated 35% of claims using modifier 25 were improper

Overpayments and Credit Balances

• Process for Returning Overpayments

  • Obligations to return overpayments under different programs outlined in Medicare manuals

  • Any excess Medicare payment must be returned swiftly

  • The ACA mandates reporting within 60 days of identifying an overpayment

Conclusion and Compliance Strategies

• Implement Corrective Action Plans (CAP) following audits revealing areas for improvement

• Maintain compliance through continuous monitoring, education, and adjusting policies as necessary

• Create a risk register for tracking vulnerabilities and aid prioritization of compliance efforts

• Always ensure staff is informed and trained about compliance responsibilities and outcomes of non-compliance.