E/M Weekly Tip: Medical Necessity and Reasonable/Necessary

Published 08/03/2020

Palmetto GBA determines medical necessity largely through the experience and judgment of clinicians along with limited tools provided in the CPT code book and by the Centers for Medicare & Medicaid (CMS).

CMS issues National Coverage Determinations (NCDs) that specify whether certain items, services, procedures or technologies are reasonable and necessary under §1862(a) (1) (A) of the Act. In the absence of a NCD, Medicare contractors are responsible for determining whether services are reasonable and necessary. If no local coverage determination (LCD) exists for a particular item or service, the MACs, CERT, Recovery Auditors and ZPICs shall consider an item or service to be reasonable and necessary if the item or service meets the following criteria:

  • It is safe and effective
  • It is not experimental or investigational
  • It is appropriate, including the duration and frequency in terms of whether the service or item is:
    • Furnished in accordance with accepted standards of medical practice for the diagnosis or treatment of the beneficiary's condition or to improve the function of a malformed body member
    • Furnished in a setting appropriate to the beneficiary's medical needs and condition
    • Ordered and furnished by qualified personnel
    • One that meets, but does not exceed, the beneficiary's medical need

There are several exceptions to the requirement that a service be reasonable and necessary for diagnosis or treatment of illness or injury in order to be considered for payment. The exceptions appear in the full text of §1862(a) (l) (A) of the Act.

Resource: Program Integrity Manual, Chapter 3 (PDF, 641 KB). 

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