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Focus Medical Necessity Efforts on Three Core Elements

by | Feb 18, 2016

Last month in G2 Compliance Advisor (GCA), Compliance Perspectives highlighted the top 10 compliance issues for 2016, cited by health care counsel for clinical laboratories and pathology groups. Medical necessity was the top issue named among those surveyed. Health care attorney, Jane Pine Wood, a member at McDonald Hopkins, indicated it is the "single biggest […]

Last month in G2 Compliance Advisor (GCA), Compliance Perspectives highlighted the top 10 compliance issues for 2016, cited by health care counsel for clinical laboratories and pathology groups. Medical necessity was the top issue named among those surveyed. Health care attorney, Jane Pine Wood, a member at McDonald Hopkins, indicated it is the "single biggest issue" currently arising in audits. Other sources we spoke with also indicated that this is not just a Medicare issue. Private commercial payers are increasingly focused on medical necessity of testing as well. Wood, who counsels laboratories and pathology groups, indicates that while 10 to 15 percent error rates are not uncommon, she has been seeing error rates as high as 85-90 per cent, or even 100 per cent in some cases, in recent medical necessity audits. "We are talking about a sea change," she says. GCA spoke with Wood about why medical necessity is such a hot button issue right now for some types of testing and what all laboratories and pathology groups can do to avoid problems.

Problem areas – panels, pharmacogenetics, toxicology
Medicare requires that testing be reasonable, necessary and appropriate for purposes of evaluating, diagnosing and treating a patient's medical condition. The attorneys we spoke with indicate that medical necessity issues are particularly a problem right now for laboratories performing pharmacogenetic and toxicology testing as well as new startup operations. Wood emphasized that testing involving panels was particularly at risk for medical necessity issues. Panels are common in toxicology testing and Wood explains that when panels are used to test for multiple drugs at once, Medicare and payers are pushing back, asking if all those drugs really must be tested for each time.

She also notes that there is a disconnect between government policy and payer pricing and reimbursement practices when it comes to toxicology and pharmacogenetic testing. The opioid abuse problem has received significant attention and government funding and there is a need for drug testing to address opioid abuse, but at the same time, Medicare is cutting payment rates for that testing, she explains. In the pharmacogenetic testing area, "it appears there is a real push to deny coverage," Wood adds. The local coverage determinations for pharmacogenetic testing have very narrow ICD-10 codes and high denial rates on audits. This is contrary to government policy promoting the value of this type of testing, however. "CMS is pushing personalized medicine and preventive care and keeping patients healthy. A lot of the promise of pharmacogenetic testing was to keep patients healthy. So there's a bit of a disconnect or conflict between the public policy message and behavior CMS wants physicians to implement and then the audit and payment side of things," says Wood. That policy conflict becomes a financial reality in the form of medical necessity denials.

Mistakes to avoid
So why are pharmacogenetic and toxicology labs experiencing medical necessity issues? "None of this is new," Wood says, but many in the toxicology and pharmacogenetic testing sector may be new to laboratory billing. "There are a lot of new players in the laboratory space, particularly in the pharmacogenetics arena and they may come from science side rather than the billing side," she notes. Additionally, many start-up toxicology laboratories may have been started by individuals who have sales or other experience but have not dealt with billing for laboratory tests before. Many who are new to lab billing "truly and honestly don't understand that if there is a documentation error or lack of medical necessity on the physician's medical record, the laboratory still bears the cost. It's coming as a very nasty surprise," observes Wood.

Additionally, there are aspects unique to toxicology and pharmacogenetics that make them more susceptible to medical necessity issues.

Pain clinics and substance abuse clinics often use standing orders or set policies or protocols that stipulate patients get tested at a specific interval for drug usage. If a clinic doesn't review those standing orders and protocols to ensure there is some individual assessment for each patient and test order, the clinic can run into trouble demonstrating medical necessity. Simply having someone glancing over the standard test order to see if anything is problematic is not the same as a physician reviewing it, says Wood.

In many cases, it is also simply a problem of the ordering physician not documenting that he or she reviewed the results. Wood notes that in some pain management clinics, the physicians claim that given the volume of testing, it would take too much time to document that they looked at every test result. Physicians often feel it is sufficient to review the results and document when there is a health problem revealed by the results and document the discussion with the patient, she says. Wood addresses this concern with clients by comparing the lab test to an MRI, "because everyone can agree that Medicare won't pay for an MRI without a signed order, documentation in the record regarding the symptoms and why the MRI is needed, and the physician's review of results and discussion with patients." "Medicare and payers are saying we expect the same with this testing," she warns. But unfortunately, it's not appearing in the record in many cases for toxicology and pharmacogenetic testing.

Another mistake laboratories may make is responding to medical necessity audits or queries from payers without getting the right documentation first. Wood notes that "a lot of newer labs may just send in their test requisitions to support the test order" and they are not typically signed. Without a signed requisition, the laboratory needs to go back to the ordering physician to get a signed attestation to support the order. In addition, the laboratory should submit documentation from the physician's patient record to support the medical necessity of the testing ordered.

Finally, as Wood noted in our article last month, lab requisitions for panels may not always provide a means to order the tests in the panel individually. Wood flagged this as a red flag for payers who will assume bad intent from such a requisition design. Bottom line: Make sure your requisitions clearly offer the option to order the panel or to separately order each of the individual tests in that panel. Remember, the OIG's 1998 compliance program guidance for laboratories advised that laboratory requisitions should "promote the conscious ordering of tests" and ensure ordering providers make an "independent medical necessity decision with regard to each test the laboratory will bill."

Wood also reports that Novitas in particular is denying an entire panel if there is a lack of documentation for individual tests within that panel. She contends payers shouldn't be denying payment for the entire panel when documentation is lacking for some but not all of the individual tests and reports that some labs are pushing back, arguing medical necessity for tests in a panel should be individually assessed and reimbursement granted for tests that are properly supported.

Getting physician cooperation
Medical necessity isn't a big deal for just pharmacogenetics and toxicology testing, however. It's a timeless problem for laboratories. Proof that tests have been properly ordered in accord with Medicare requirements is critical for any lab to get reimbursed and thus all labs need to ensure that the medical record documents the reasons a test is medically necessary. The problem, says Wood, is that the physicians ordering the tests "don't have any skin in the game" because the lab is on the hook for the test.

The message she's been giving in sales and marketing training is "to the extent you can, remind and encourage physicians (because all you can really do is remind and encourage) to really be careful with documentation of testing." Specifically, with regard to panels, she advises that staff tell ordering physicians to ask themselves "do I need the entire panel or not?" and if the answer is yes, to be very careful to document why all the tests in the panel are needed.

Another way to educate and encourage physicians to document medical necessity is to perform internal audits to determine if physicians can provide the needed documentation. Wood suggests focusing those audits on three core elements.

Audit three core elements of medical necessity
Wood and other experts surveyed in GCA's January Compliance Perspectives article suggested labs perform their own audits and challenge ordering physicians to make sure they can produce the records needed to support medical necessity. Do this before Medicare or a payer comes knocking on the door to do their own audit. Use the audit as an opportunity to challenge, educate and remind physicians about the importance of documenting medical necessity.

Wood recommends that laboratories conduct medical necessity audits that focus on the three core elements essential to medically necessary testing.

Core element #1: Documented test order
First, consider the evidence that documents the patient's treating physician has ordered the test. Wood advises "the required documentation can vary by payer and type of test/service." For example, Medicare does not require a signed order or requisition form for clinical laboratory tests. A signed written order is required for anatomic tests. Documentation that you should have could include: a signed requisition, an electronic signature through e-mail, or signed documentation in the patient's chart, says Wood. When you do not have one of those three things, she instructs laboratories to obtain a signed attestation from the ordering physician documenting the test order. Such an attestation "may suffice in an audit, but it is not nearly as good" as the signed order. "This requirement extends to special stains—there must be a signed written order by pathologists," adds Wood.

Core element #2: Documented need for the test
The next core element is documentation that the test is medically necessary. The patient's medical record must contain information indicating why the test is necessary. For panels, as we've said, there should be documentation in the medical record that specifically supports the medical necessity of each test in the panel. "The OIG views automatic prepackaged panels as fraud and abuse," reiterates Wood.

She also cautions that simply putting a statement on your requisition forms that declares that the physician agrees that if he orders the test, it is medically necessary is not sufficient. "It's not the recitation of the sentence that's important, it's the reason why it's medically necessary," she explains.

Core element #3: Document use of test results
Finally, the third core element is documentation of the usage of the test results. "Increasingly, payers want to see documentation of review and/or use of the information by the ordering physician," explains Wood. She notes she has seen this with Medicare particularly for pharmacogenetic testing. If the record doesn't show that the ordering physician in fact reviewed the test results, there can be medical necessity issues. Essentially, Wood explains, Medicare is saying that "if you didn't need to review the test results and act on them, we don't see why it was medically necessary."

Unfortunately, as laboratories know, the ordering physician's cooperation is critical for laboratories to demonstrate medical necessity and get paid for the testing they perform. But labs also need to make sure they aren't sabotaging themselves. So make sure your lab does these four things to improve medical necessity compliance:

  1. Have sales and other lab staff remind ordering physicians of the importance of documenting medical necessity.
  1. Make sure your requisitions facilitate proper documentation of the test order and medical necessity for every test ordered.
  1. Perform your own medical necessity audits to educate your ordering physicians and test their documentation before a payer does.
  1. Don't respond to audits too hastily. Don't just submit the test requisition. Make sure you have proper authentication of the test order and its necessity—or get it from the provider if you don't—before submitting a response.

Jane Pine Wood is a Member at McDonald Hopkins. She is available at jwood@mcdonaldhopkins.com or 508-385-5227.

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