Documentation Is Key: Medically Necessary Denials May Have Nothing to Do With Patient Care

When Medicare denies a claim because it is not medically reasonable and necessary, the decision may have nothing to do with whether the test is necessary and effective in the treatment of a patient. Rather, the denial may be due to lack of appropriate documentation for Medicare. In some cases, the documentation may be present but the laboratory may not fully understand the complexities and nuances of the appeals process and lose the appeal as a consequence. Nowhere is this better illustrated than in the court documentation of a recent federal court decision of an appeal of claims denials filed by Nephropathology Associates, PLC (Little Rock, Ark.). The case, Nephropathology Assocs., PLC v. Sebelius, serves as a warning to all laboratories that incomplete documentation and not paying appropriate and serious attention to the appeals process can create insurmountable obstacles resulting in the loss of an appeal even when the laboratory is in the right. However, being right does not necessarily mean being compliant and does not ensure payment. In this case, Nephropathology received denials for special stains and electron microscopy services performed on kidney biopsies. The document does not detail the precise nature of these initial denials. Nephropathology requested a redetermination and was granted Medicare payment for some of the services, but not all. Nephropathology then appealed that decision to the next level and a qualified independent contractor issued a decision that upheld most of the denials, but that decision was based on the billing protocol in a coding manual that was not promulgated until after Nephropathology had rendered and billed for the services at issue. Nephropathology then appealed this decision to the Office of Medicare Hearings and Appeals, which administers level three of the appeals process, the administrative law judge (ALJ) hearings and decisions. During the ALJ hearing, Patrick Walker, M.D., director of Nephropathology, provided testimony that the services were reasonable and necessary. It is at this point in the appeals process where things took a turn that did not benefit the path lab. The ALJ agreed with Nephropathology that payment could not be denied based on a retroactive application of the coding manual. However, he upheld the denials of Medicare coverage for a different reason. The ALJ found that Nephropathology had not met its burden to show that the services were reasonable and necessary because in order for a laboratory service to be medically necessary, it must be ordered and used promptly by the treating physician. He cited 42 CFR 410.32(a) as the source for his determination. This section of the Code of Federal Regulations states, “All diagnostic x-ray tests, diagnostic laboratory tests, and other diagnostic tests must be ordered by the physician who is treating the beneficiary. . . . Tests not ordered by the physician who is treating the beneficiary are not reasonable and necessary.” Nephropathology then appealed to the Medicare Appeals Council (MAC), the last step in the appeals process before taking the appeal to the court. The decision of the MAC constitutes the secretary of Health and Human Services’ final decision. The MAC concluded that Nephropathology did not submit evidence that a physician had ordered the services at issue even though it had provided multiple documents that when viewed in totality and in the context of how Nephropathology believed anatomic pathology tests are ordered clearly indicated that the tests had been ordered and information had been provided that could only have come from the physician’s office. Nephropathology included in this documentation the date and time of a call to and from a physician’s office concerning a specific test and a specific patient. However, the documentation of the phone call apparently did not specifically include an order for the test. In fact, in the MAC’s opinion, Nephropathology had not submitted any specific documentation of an order for the tests that had been denied. It is important to understand that according to this court document, an agency’s interpretation of its own regulation is entitled to substantial deference, meaning that it would carry more weight than other interpretations in the eyes of the court. The court goes on to explain that this deference is warranted because Medicare is a complex and highly technical regulatory program within which the identification and classification of relevant criteria necessarily require significant expertise and entail the exercise of judgment grounded in policy concerns. Basically, unless the agency’s interpretation of its own regulations is plainly erroneous or inconsistent with the regulation, it will carry controlling weight. In the case of Medicare regulations, the interpretation of the secretary of Health and Human Services concerning what is reasonable and necessary will stand. Nephropathology used every argument that it could including that the contractor is required to contact the ordering physician to obtain the order for the test and seeking a remand to the MAC to allow it to submit documentation of physician orders for the services at issue, all to no avail. Ultimately, the court upheld the MAC decision that the tests were not medically reasonable and necessary because there was no specific order for them, and the denials were confirmed. Documenting Test Orders There were many things Nephropathology could have done differently or better as it went through the appeals process. Ultimately it did not matter if the interpretations were correct. The real solution to this problem lies at the very beginning: documentation of the original orders for the tests involved. One of the more disturbing factors in this case is that all the things laboratories thought they understood about documenting orders ultimately may no longer apply. Relying on others to maintain good documentation is risky, particularly when there is no consequence for them if the documentation is not adequate. A signed requisition may have been helpful; however, if there were no corresponding order in the physician’s office even that may not have been sufficient in this case. In the current environment where written orders are critical in determining medical necessity for laboratory tests, labs must ensure they are maintaining documentation of those orders to the best of their ability. If there is a telephone order or the laboratory telephones the physician office for information concerning the order, clear and concise documentation must be kept on the laboratory side. No longer should a laboratory rely on little notes scribbled on a requisition that include little more than the name or initials of both parties participating in the call. Documentation of such communications should be kept in separate logs or forms linked to the original requisition and include exactly what information was obtained. Laboratories must become more aggressive in enforcing their policies regarding clarity in orders for tests. The Takeaway: When tests are ordered by phone, both the referring physician and the testing facility must adequately document details of the call. The best way to ensure payment for services performed is for a lab to insist on signed, written orders from the referring physician in place of a phone call.