Understanding Medical Necessity Denials

Donna White

Donna White

By Donna White, Principal Consultant and Owner of Legacy Consulting Services and Legacy Billing Solutions in Montgomery, Alabama.

As a consultant my ultimate goal is to help everyone of my clients understand their revenue cycle and one of the most common snags I find are medical necessity denials.

Medical Necessity Denials flow downhill as it is the responsibility of a Medical Professional to accurately document their encounters with a patient. From the Provider’s documentation, it is then the responsibility of the Coder(s) to abstract specific procedure and diagnosis codes to in turn report to the insurance company.

Taking into consideration Coder(s) do have specific guidelines they must follow and they do not typically see the denials, it then falls to the Medical Biller to pin point those denials and report back to both the coder and the physician.

There are numerous ways to track and document medical necessity denials:

  • Are they specific procedure codes?
  • Is it a laboratory denial?
  • Is it truly the diagnosis code, or could it be an incorrect, invalid or mis-used procedure code?

These are all things to keep in mind while reviewing these denials. The key to identifying any type of issue is the rule of three – one rejection or denial is an eye brow raiser; two is a yellow flag; and three is red flag that needs to be brought to a superior’s attention.

For example, let’s say we identify two or three laboratory procedures denied for medical necessity.  Firstly, we are going to look into the National Correct Coding Initiative (NCCI) Policy Manual for that specific code to see if there are any specific findings for our code. If not, The Centers for Medicare and Medicaid Services (CMS) has the most outstanding documentation you will ever find in regards to almost all procedure codes. This documentation is referred to as Local Coverage Determinations or LCD’s. Our LCD’s will tell us everything we need to know: coverage limitations, documentation guidelines, revenue codes, covered diagnosis codes, non-covered diagnosis codes, etc. Once we have identified that there is a non-covered diagnosis code we have a couple options to prevent the denial for future claims, which is the whole goal: prevent new denials from occurring!


It has been my experience that providers typically know what is a medical necessity and what is not. However, they cannot be expected to be aware of payor specifics. That is what we are here for! If we think we work in a fast paced world, our world is nothing to that of a provider. So if we are going try and help our provider to learn Coverage Determinations, it may be best to ask them how they would like to receive this information: i.e. do you want bullet points, do you want to know the documentation guidelines, do you want to know the acceptable codes, or just pick one from a list, amend the records and move on.

I also strongly urge when you find this documentation to share with your Coder(s), whether it is a coding agency or on site coder. Coder(s) follow strict guidelines until they become aware of payer specific guidelines.

I hope this insight into Medical Necessity Denials has been helpful. Legacy is here to help navigate you through all of the complexities of the medical billing world. We’re here to simplify the complex!

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