Rev Cycle Leaders: Focus on Unnecessary Medical Necessity Denials

A focus on front-end revenue cycle efficiency can help to avoid costly medical necessity denials.

Denials are at the top of mind for revenue cycle leaders, and it’s not uncommon for denials to come from one source within your front-end revenue cycle: medical necessity decision-making.

Four words often describe the efforts to prevent denials related to medical necessity: too little, too late. Mistakes are made early in the patient's hospital stay, and these mistakes lead to problems down the road.

Tiffany Ferguson, LMSW, ACM, and Marie Stinebuck, MBA, MSN, ACM, CEO and COO at Phoenix Medical Management, Inc., discussed why the best strategy to prevent these denials is a proactive approach that focuses on front-end revenue cycle processes at a recent NAHRI virtual event.

"If we get it right and we really focus on that front-end revenue cycle process for efficiency, we probably don't need to have so many work queues and corrections on that back end," Ferguson said.

A recent Change Healthcare report comparing 2020 data to 2016 data found a 23% increase in Medicare claim denials, half of which were related to front-end revenue cycle issues. And about 86% of those denials were preventable.

"The top areas that they identified as having issues were registration and eligibility data that was missing or invalid claim data," said Ferguson. These issues included authorization for pre-certifications, services not covered, and medical necessity. This reinforces the need to get things right during registration, scheduling, benefit verification, and front-end collections, she said.

"Medical necessity is required to determine whether the care provided to a patient is medically necessary, must be done in a hospital setting, and is reimbursable by the payer source," said Stinebuck.

While payer definitions of medical necessity can vary, what doesn’t change is the need to clearly spell out in the medical record why a patient needs hospital-level care.

"Documentation of medical necessity justifies the necessity of acute care through complex medical decision-making," said Stinebuck.

Physician documentation must show the acuity of the patient's condition and any comorbidities that relate to why this patient needs to be in the hospital. It should clearly show why the patient needs hospital-level care and why that care can’t be performed elsewhere.

Revenue cycle leaders should work closely with their revenue cycle directors and managers to shore-up these types of inefficiencies within their workflow. Avoiding medical necessity denials through these missteps will directly contribute to the overall health of an organization.