Corporate Compliance

Tip: Medical necessity

Compliance Monitor, June 30, 2010

Medicare covers only those services that are reasonable and necessary for diagnosis or treatment. Medicare uses this medical necessity clause to control costs in outpatient fee-for-service settings. Medicare contractors make medical necessity rules to determine when they will pay for individual services under Medicare.

Facilities must screen for the medical necessity of services before rendering them to Medicare patients. To complete a screening, staff members registering patients must have access to National Coverage Determinations (NCD) and Local Coverage Determinations (LCD).

Use the following process to determine the medical necessity of services:

  • Verify whether the test or service has an LCD or NCD
  • If the test or service performed does not have limited coverage under an NCD or LCD, proceed and perform the test or service ordered
  • If the test or service performed has limited coverage under an NCD or LCD, review the signs, symptoms, or diagnosis provided by the physician and determine whether the test is considered medically necessary based on the physician’s documentation

This week’s tip was adapted from The Compliance Officer’s Handbook. For more information about the book or to order your copy, visit the HCMarketplace.

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