Medical necessity is an E/M service imperative


Coders often overlook medical necessity in the evaluation and management (E/M) code assignment process.

Both the 1995 and 1997 physician E/M service coding guidelines recognize seven components, six of which are used in defining levels of service. These components include:

• History
• Examination
• Medical decision-making
• Counseling
• Coordination of care
• Nature of presenting problem
• Time

The first three of these components (i.e., history, examination, and medical decision-making) are considered the key components in selecting a level of E/M service. The undisputed eighth component, not necessarily in priority order, is medical necessity.

Medical necessity is a difficult concept for most coders to grasp and apply on a consistent basis in the E/M assignment process. It is subjective when compared to the hard and fast official 1995 and 1997 CPT® coding guidelines that they must follow as part of the E/M assignment process.

The medical necessity reality

Medical necessity from a Medicare perspective is defined under Title XVIII of the Social Security Act, Section 1862 (a) (1) (a):

No payment may be made under Part A or Part B for 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.

The subjectivity of medical necessity contributes to physician indifference and lack of willingness to embrace this imperative concept not only from a ordering of services perspective but also from the physician’s clinical documentation and E/M assignment perspective.

Physicians are not excused from establishing medical necessity when providing and documenting an E/M service. Federal law requires that all expenses paid by Medicare, including those for E/M services are “medically reasonable and necessary.” As stated in section 30.6.1 of the Medicare Claims Processing Manual, Chapter 12:

Medical necessity of a service is the overarching criterion for payment in addition to the individual requirements of a CPT code. It would not be medically necessary or appropriate to bill a higher level of evaluation and management service when a lower level of service is warranted. The volume of documentation should not be the primary influence upon which a specific level of service is billed. Documentation should support the level of service reported. The service should be documented during, or as soon as practicable after it is provided in order to maintain an accurate medical record.

Consider the following points when determining medical necessity for billed E/M services:

• Medical necessity of an E/M service is generally expressed in two ways: frequency of services and intensity of service (CPT level)
• Medicare’s determination of medical necessity is separate from its determination that the E/M service was rendered as billed.
• Medicare determines medical necessity largely through the experience and judgment of clinician coders along with the limited tools provided in CPT and by CMS.
• During an audit, Medicare will deny or adjust E/M services that, in its judgment, exceed the patient’s documented needs

The basis of medical necessity

Medical necessity of an E/M service is based on the following attributes of the service:

• The number, acuity, and severity and/or duration of problems addressed through the history, physical, and medical decision-making
• The context of the encounter among all other services previously rendered for the same problem
• The complexity of documented comorbidities that clearly influenced physician work
• The physical scope encompassed by the problems (i.e., the number of physical systems affected)

Medical necessity as relates to E/M assignment is based upon:

• Volume of service, meaning how frequently the patient is seen in the office
• Intensity, meaning the level of E/M service billed for the encounter (codes 99201–99205 for new office patients and 99211–99215 for established office patients)

Coders must take into account the level of detail in clinical documentation of chief complaint, history of present illness (HPI), physical exam, and medical decision-making. Depending upon the type of history taken, extent of the physical exam performed, and the degree of decision-making required, a coder assigns a specific office E/M level. If an opportunity arises where the physician may have overlooked documentation of a past family and social history or review of systems (ROS), the coder may seek clarification and documentation of these missing elements and proceed to assign a specific E/M code.

Volume and intensity of service

Intensity of service relates to the amount of work the physician performed and documented in the record as an integral part of the patient encounter. The coder uses this information to determine the particular E/M level (codes 99201–99215).

Coders need to think about medical necessity when they review the physician documentation and not just assign an E/M level based on the physician’s documented work.

When assigning an E/M code, coders should always ask, “Was it necessary for the physician to perform and document all the work in the chart for the patient encounter and bill a specific E/M level given the nature of the patient’s presenting problem and chief complaint?”

Another factor to consider is the acuity of the chief complaint and nature of the presenting problem and the associated completeness of the HPI. The HPI represents a chronological description of the development of the patient’s present illness from the first sign and/or symptom or from the previous encounter to the present.

Coders must verify the documentation of the HPI fully describes it and the nature of the presenting problem. Having said this, medical necessity of an E/M service is frequently evidenced only through the documented characteristics in specific HPI elements.

Coders should also ask:

• Does the HPI accurately and effectively portray the patient’s severity of signs and symptoms of illness that prompted the visit to the physician’s office?
• Does the HPI adequately, concisely, and effectively outline the reason for any physician requested follow-up visit (other than “Patient is seen for follow-up”)?
• Does documentation of the stability of chronic conditions describe the visit in the contextual progression of clinical disease states and physician clinical management of the patient?
• Is the patient’s need for physician service clearly recognizable by the physician’s clinical documentation in the note?

Putting medical necessity in proper perspective

Trailblazer, a Medicare Administrative Contractor for Virginia, Colorado, New Mexico, Oklahoma, and Texas, recently released an article, “Established Office Visits Medical Review Results,” which was the result of a widespread review in which it found an error rate of 91.32% in 100 records billed with codes 99211–99215.

The article summarizes some of the key elements coders must include and incorporate in the chart review and E/M code assignment. But these elements go beyond following the official E/M 1995/1997 coding guidelines. Note the following elements and reasons for their denial:

Documentation did not support Medicare’s requirements for being medically reasonable and necessary due to:

• Inappropriate billing of an E/M service when only providing a noncovered service (e.g., acupuncture)
• Absent, ambiguous or unaddressed chief complaint in the history, exam or medical decision-making
• The reason for the encounter (i.e., chief complaint) was for administration of a medication, to have labs drawn or to receive the results for labs, none of which require an E/M service
• The frequency of E/M services billed per beneficiary for CPT codes 99212–99215 exceeded documented needs for management of stable, chronic conditions and no acute problem was present
• Documentation for the encounter did not provide a complete picture of the patient E/M over time or the nature of the presenting problem

Coding was adjusted for one of the following reasons:

• The documentation did not support the level of E/M service billed
• The level of service exceeded the patient’s documented needs
• History and examination components were excessive for the patient’s presenting problem
• The HPI was absent, insufficient (e.g., no ROS or no past, family, and social history), or did not clearly define the presenting problem
• The frequency of E/M services provided, considering the beneficiary claims history, made CPT codes 99214 and 99215 inappropriate for the documented needs of the patient
• Documentation did not include the performance of a physical examination

The coder’s responsibility for medical necessity in E/M assignment

Coders play an important role in educating physicians on the necessity of documenting medical necessity that supports E/M code assignment for the work they perform. And they should provide feedback to the physicians on a lack of documented medical necessity when relevant and appropriate.

In addition, coders would best serve the business financial as well as compliance interests of the physician by applying the following principles:

• Bill an E/M service only when the service meets and the documentation sufficiently supports the medical necessity of the E/M service billed. Medicare determines “medically reasonable and necessary” separately from the work described through a CPT code. The patient’s condition, as evidenced by severity, acuity, number of problems, etc., is critical in determining medical necessity for Medicare payment for services.
• Bill the level of E/M service appropriate to treat the patient’s presenting problems. Providers must be sure the documentation of E/M services includes the patient’s clinical condition and reason for the service in enough detail for a reasonable observer to understand the patient’s need and the practitioner’s thought process. The E/M code must reflect the patient’s needs, work performed, and medical necessity. When an E/M service codes to a high level based on the documentation of key component work, the coder should not request Medicare payment when the patient’s effective management does not require the code’s work.

By adhering to these principles, physicians and coders can reduce potential financial reimbursement liabilities and allegations of over-documenting and upcoding.

Editor’s note: Krauss is a manager of clinical documentation improvement services at YPRO Corp. in Corydon, IN. E-mail him at

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