Warning: Medical Decision-Making and Medical Necessity: Not One and the Same

Original story posted on: January 31, 2018

Bad advice tends to circulate regarding how to select the correct E&M codes.  

At a recent oncology conference in California, the speaker before me erroneously declared that the level of medical decision-making always controls the selection of code for any evaluation and management (E&M) service. She confidently asserted that for an established patient, regardless of the level of history and exam, if the medical decision-making is “low,” a 99213 is the highest-level code that can be billed. 

This misguided consultant is not alone in believing that medical decision-making serves as a coding edict. Some people seem to conflate “medical decision-making” with “medical necessity.” The only similarity between the two is the presence of the word “medical.”

Medical necessity is the idea that insurance won’t pay for a service a patient doesn’t need. That’s a very basic and reasonable principle in insurance. Medical decision-making is an attempt to create a formula to quantify the amount of effort a medical professional expends on evaluating a patient. The methodology for evaluating medical decision-making is contained both in the CPT® book and in the Centers for Medicare & Medicaid Services (CMS) E&M documentation guidelines. The consultant at the conference put up one slide featuring a common E&M scoring tool. The instructions in her slide noted that the user should choose the code based on the highest two of the three components. Despite the fact that her own slide undercut her argument, she clung to it like a reporter holding a railing during a live shot of a hurricane landfall. 

It’s certainly true that for certain code categories, such as new patient, hospital observation, and initial hospital care, the lowest of the three of the key components determines the proper code. But the CPT book is very clear that for established patients, subsequent hospital care, subsequent nursing facility care, and a few other categories, you choose the code based on two of the three components. After her presentation, I showed the consultant the language in the CPT assistant. She remained undeterred. She’s not alone. 

After discussing this on Monitor Monday this past Monday, a listener sent us a note regarding a policy that Highmark has adopted requiring physicians to use medical decision-making as a key component. She asked: “can they do that?” (Note: following the discussion of the policy on Monitor Monday, the listener was told that that policy is being rescinded. While I applaud Highmark’s decision to reverse course, the question is still relevant because other payers may attempt to adopt a similar policy.) 

The answer depends upon two key facts: first, do you have a contract with the payer? If you do not, the payer lacks the authority to invent baseless rules and shove them down your throat. Absent a contract, an insurer cannot require you to comply with a term that is contrary to industry norms, and this policy is explicitly in conflict with the CPT Manual, perhaps the most widely accepted standard in healthcare. 

If you do have a contract, the question is whether the contract permits the insurer to adopt a new policy, and what notice it must give you. Typically, insurance contracts give the plan wide latitude to make changes, though good contracts permit you to object to the change or terminate the contract. If the contract grants authority to the plan to make unilateral changes, you may be out of luck. This highlights the need to understand insurers’ contracts and policies, including the ability to terminate a contract or object to a new policy. 

There are several core lessons here. First, don’t believe everything you hear from “experts” at a conference, on a webinar, or anyplace else. This consultant is clearly wrong and seems unable to recognize it. Second, read your payer contracts. Finally, when you find a payer taking an unusual position, talk to them.

We all make mistakes, and some insurers will acknowledge and correct them. In addition, please share such a policy with us by sending it Chuck Buck at cbuck@medlearnmedia.com or me at dglaser@fredlaw.com.

David M. Glaser, Esq.

David M. Glaser, Esq., is a shareholder in Fredrikson & Byron’s Health Law Group. David helps clinics, hospitals, and other healthcare entities negotiate the maze of healthcare regulations, providing advice about risk management, reimbursement, and business planning issues. He has considerable experience in healthcare regulation and litigation, including compliance, criminal and civil fraud investigations, and reimbursement disputes. David’s goal is to explain the government’s enforcement position and to analyze whether the law supports this position. David is a popular panelist on Monitor Mondays and a member of the RACmonitor editorial board.


This email address is being protected from spambots. You need JavaScript enabled to view it.

Related Articles

  • Explosive OIG Report Raises Red Flags for Providers, CDI Professionals
    The report underscores federal authorities’ recent assertions that coding errors are generating ample unwarranted reimbursement. EDITOR’S NOTE: This article was originally published by ICD10monitor on March 2, 2021 and is being republished in light of continuing interest in the subject.…
  • Death of the Inpatient-Only List is NOT the Death of Medical Necessity
    The Medicare IPO list was doomed years ago. For readers of and listeners to RACmonitor and Monitor Mondays, overthinking things is what we do. It’s the only explanation for our hand-wringing over the death of the Medicare inpatient-only (IPO) list. …
  • Philip Esformes Has Sentence Commuted
    I have written four previous articles on Philip Esformes, who was sentenced to 20 years in federal prison for a truly infamous scheme to defraud Medicare out of millions of dollars. He bribed doctors and other providers of care to…