Reasonable and Necessary

What does it mean and who decides?reasonable and necessary

Federal Medicare law states, "No payment may be made under part A or part B for any expenses incurred for items or services which ... are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member."1


Unfortunately, neither Congress nor CMS has issued a clear definition of the term "reasonable and necessary." Rather, CMS has left it up to individual intermediaries to determine the meaning on a case-by-case basis. Obviously, this approach can lead to varying interpretations and create latitude for policy implementation by different intermediaries.

Recently, members have informed the ACR Legal Office that Medicare fiscal intermediaries are requesting documentation from diagnostic radiologists showing that imaging studies are ordered by referring physicians are reasonable and necessary.

This new "requirement" from local intermediaries appears to be based on a fundamental misunderstanding of how diagnostic imaging is normally conducted in the American health-care system. The intermediaries involved seem to believe that an independent determination as to what is medically necessary and reasonable is made at each step of the imaging process. For example, after an initial examination and review of a patient's records, a referring provider makes an initial determination that a patient's persistent cough warrants medical imaging. The provider next decides that a CT, rather than a standard chest X-ray, is required to elicit the information necessary to complete an adequate diagnosis and create a treatment plan. Then, the patient is referred to an imaging facility, where intermediaries expect a physician or technologist to make a separate determination regarding whether or not the ordered study is necessary and reasonable. This simply does not occur in most cases.

The expectations by the intermediaries ignore the reality of the medical system as it exists today. Unless the imaging facility staff spot an obvious error — such as wrong-side orders or gender-specific tests ordered for patients of the opposite gender — they usually perform the study ordered. This is due, in part, to the limited amount of information that is available to an imaging facility at the time the patient arrives. When there is a disagreement as to the appropriate modality or study, the imaging facility contacts the referring provider, who may then change the order.

Ideally, a radiologist would have access to a patient's complete electronic medical record, including prior studies, medical history, an a full explanation of the referring provider's examination findings and rationale for ordering the study — and the radiologist would have time to assimilate all of this information prior to making an independent determination about whether the specific study is necessary and reasonable. In the real world, however, the radiologist seldom sees any such information prior to the study being performed. In most cases, radiologists become directly involved only after imaging is completed, when they interpret the images and complete a report. In cases in which the images are taken in one facility and then sent elsewhere to a radiologist for interpretation, either directly or via teleradiology, there is virtually no way for the radiologist to make such an independent determination.

We believe that this request for more documentation is being driven by the Health and Human Services (HHS) Office of Inspector General's (OIG) 2012 Work Plan, which is a list of projects the OIG plans to undertake "to protect the integrity of HHS programs and operations and the well-being of beneficiaries by detecting and preventing fraud, waste, and abuse; identifying opportunities to improve program economy, efficiency, and effectiveness; and holding accountable those who do not meet program requirements or who violate Federal laws." The work plan includes a project titled "Diagnostic Radiology: Excessive Payments." The project description contains the following:

We will review Medicare payments for high-cost diagnostic radiology tests to determine whether they were medically necessary and the extent to which the same diagnostic tests are ordered for a beneficiary by primary care physicians and physician specialists for the same treatment. Medicare will not pay for items or services that are not "reasonable and necessary." (Social Security Act, § 1862 (a)(1)(a).) (OAS; W-00-12-35454; various reviews; expected issue date: FY 2013; work in progress and new start)

The fiscal intermediaries focus on the issues they know the OIG will be targeting. So far, the fiscal intermediaries involved have only raised the issue of reasonable and necessary imaging during the audit process, when auditors from the intermediaries’ request documentation for specific studies billed to Medicare. However, there is no reason to expect that an intermediary might not begin requiring such documentation for all claims in the future.

Right now, when an audit leads to a study being rejected, the only consequence is that a claim may not be paid or a previously paid claim might have to be repaid to the government. In the future, the OIG or the Department of Justice could decide that failure to provide such documentation amounts to a false claim, with penalties ranging from $5,500 to $11,000 in civil penalties plus three times the amount of the claim and exclusion from all federal health-care programs. In extreme cases, criminal charges could be brought against the physician or practice submitting the alleged unnecessary or unreasonable claims.

So how can radiologists protect against these dire possibilities? Practices should work to educate their local fiscal intermediary on the realities of the medical imaging process, while seeking to reach agreement in advance regarding what documentation is acceptable. At the same time, the College is working to educate CMS on these matters. One key tool may be the use of the ACR Appropriateness Criteria®, both by referring providers and radiology practices. As more and more computerized physician order entry systems incorporate Appropriateness Criteria, the necessity and reasonableness of studies will be very difficult for any intermediary to dispute, provided such systems are properly used. The ultimate goal is for all parties to accept the validity of the Appropriateness Criteria and for CMS and its intermediaries to recognize and accept radiologists' reliance on the referring providers' use of these criteria.

1. 42 USC §1395y(a)(1)(a).

By Bill Shields, JD, LLM, CAE, and Tom Hoffman, JD, CAE

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