Practice Economics

Efficacy, Diagnoses, Frequency Play Parts in Coverage Limitations


Under Section 1862(a)(1)(A) of the Social Security Act, the Medicare program may only pay for items and services that are “reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member,” unless there is another statutory authorization for payment (e.g. colorectal cancer screening).1 Coverage limitations include:2

  • Proven clinical efficacy. For example, Medicare deems acupuncture “experimental/investigational” in the diagnosis or treatment of illness or injury;
  • Diagnoses. As an example, vitamin B-12 injections are covered, but only for such diagnoses as pernicious anemia and dementias secondary to vitamin B-12 deficiency; and
  • Frequency/utilization parameters. For example, a screening colonoscopy (G0105) can be paid once every 24 months for beneficiaries who are at high risk for colorectal cancer; otherwise the service is limited to once every 10 years.

Beyond these factors, individual consideration might be granted. Supportive and unambiguous documentation (medical records, clinical studies, etc.) must be submitted when the clinical circumstances do not appear to support the medical necessity for the service.

Diagnoses Selection

Select the code that best represents the primary reason for the service or procedure on a given date. In the absence of a definitive diagnosis, the code may correspond to a sign or symptom. Physicians never should report a code that represents a probable, suspected, or “rule out” condition. Although facility billing might consider these unconfirmed circumstances (when necessary), physician billing prohibits this practice.

Reporting services for hospitalized patients is challenging when multiple services for the same patient are provided on the same date by the same or different physician, also known as concurrent care. Each physician manages a particular aspect while still considering the patient’s overall condition; each physician should report the corresponding diagnosis for that management. If billed correctly, each physician will have a different primary diagnosis code to justify their involvement, increasing their opportunity for payment.3

Reporting services for hospitalized patients is challenging when multiple services for the same patient are provided on the same date by the same or different physician, also known as concurrent care.

The non-primary diagnoses might also be listed on the claim if appropriately addressed in the documentation (i.e. “non-primary” conditions’ indirect role in the focused management of the primary condition). For example, a hospitalist, pulmonologist, and nephrologist manage a patient’s uncontrolled diabetes (250.02), COPD exacerbation (491.21), and CRI (585.9), respectively. Each may report subsequent hospital care (99231-99233) for medically necessary concurrent care:

  • Hospitalist: 250.02, 491.21, 585.9;
  • Pulmonologist: 491.21, 250.02, 585.9; and
  • Nephrologist: 585.9, 492.21, 250.02.

Coverage Determinations

Code comparisons can be made after diagnosis code selection. Coverage determinations identify specific conditions (i.e. ICD-9-CM codes) for which services are considered medically necessary. They also outline the frequency interval at which services can be performed, when applicable.

For example, vascular studies (e.g. CPT 93971) are indicated for the preoperative examination (ICD-9-CM V72.83) of potential harvest vein grafts prior to bypass surgery.4 This is a covered service only when the results of the study are necessary to locate suitable graft vessels. The need for bypass surgery must be determined prior to performance of the test. V72.83 is “covered” only when reported for a unilateral study, not a bilateral study (CPT 93970). Frequency parameters allow for only one preoperative scan.4

Coverage determination can occur on two levels: national and local. The Centers for Medicare & Medicaid Services (CMS) develops national coverage determinations (NCDs) through an evidence-based process, with opportunities for public participation.5 All Medicare administrative contractors must abide by NCDs without imposing further limitations or guidelines. As example, the NCD “Consultations With a Beneficiary’s Family and Associates” permits a physician to provide counseling to family members. Family counseling services are covered only when the primary purpose of such counseling is the treatment of the patient’s condition.6

Non-Medicare payors do not have to follow federal guidelines unless the member participates in a Medicare managed-care plan.

In the absence of a national coverage policy, an item or service may be covered at the discretion of the Medicare contractors based on a local coverage determination (LCD).5 LCDs vary by state, creating an inconsistent approach to medical coverage. The vascular study guidelines listed above do not apply to all contractors. For example, Trailblazer Health Enterprises’ policy does not reference preoperative exams being limited to unilateral studies.7 (A listing of Medicare Contractor LCDs can be found at

Other Considerations

Investigate “medical necessity” denials. Do not take them at face value. Billing personnel often assume that the physician reported an incorrect diagnosis code. Consider the service when trying to formulate a response to the denial. Procedures (surgical or diagnostic services) may be denied for an invalid diagnosis. After reviewing the documentation to ensure that it supports the diagnosis, the claim may be resubmitted with a corrected diagnosis code, when applicable. Denials for frequency limitations can only be appealed with documentation that explicitly identifies the need for the service beyond the contractor-stated parameters.

If the “medical necessity” denial involves a covered evaluation and management (E/M) visit, it is less likely to be diagnosis-related. More likely, when dealing with Medicare contractors, the denial is the result of a failed response to a prepayment request for documentation. Medicare typically issues a request to review documentation prior to payment for the following inpatient E/M services: 99223, 99233, 99239, and 99292.

If the documentation is not provided to the Medicare prepayment review department within the designated time frame, the claim is automatically denied with a citation of “not deemed a medical necessity.” Acknowledge this remittance remark and do not assume that the physician assigned an incorrect diagnosis code. Although this is a possibility, it is more likely due to the failed request response. Appealing these claims requires submission of documentation to the Medicare appeals department. Reimbursement is provided once supportive documentation is received.

Carol Pohlig is a billing and coding expert with the University of Pennsylvania Medical Center, Philadelphia. She is faculty for SHM’s inpatient coding course.

Frequently Asked Question

Question: Is a preoperative evaluation on a healthy patient considered medically necessary?

Answer: Preoperative evaluations are payable when performed by any physician or qualified nonphysician provider (NPP) at the request of a surgeon, for medically necessary, not routine, screening. These services are reported with the appropriate E/M code (e.g. 99223) with the preoperative exam diagnosis (V72.83).

In some instances, payors consider preoperative clearance for a healthy patient unreasonable and unnecessary, disallowing separate payment for these services. Services can be denied as being part of the required preoperative process included in the surgeon’s perioperative services. Preoperative evaluations are considered reasonable and necessary when the patient has a coexisting condition (hypertension, diabetes, emphysema, etc.) that poses a risk to perioperative management. These services are easily distinguished when additional diagnoses representing any comorbidities (e.g. 401.1, 250.00, 492.8) are present on the claim, in addition to V72.83.


  1. Social Security Administration. Exclusions from coverage and Medicare as a secondary payer. Social Security Administration website. Available at: Accessed March 1, 2012.
  2. Highmark Medicare Services. A/B Reference Manual: Chapter 6, Medical Coverage, Medical Necessity, and Medical Policy. Highmark Medicare Services website. Available at: Accessed March 1, 2012.
  3. Pohlig C. Daily care conundrums. The Hospitalist. 2008;12(12):18.
  4. Highmark Medicare Services. LCD L27506: Non-Invasive Peripheral Venous Studies. Highmark Medicare Services website. Available at: Accessed March 1, 2012.
  5. Centers for Medicare & Medicaid Services. Medicare Coverage Determination Process: Overview. Centers for Medicare & Medicaid Services website. Available at: Accessed March 1, 2012.
  6. Centers for Medicare & Medicaid Services. Medicare National Coverage Determination Manual: Chapter 1, Part 1, Section 70.1. Centers for Medicare & Medicaid Services website. Available at: Accessed March 1, 2012.
  7. Trailblazer Health Enterprises. LCD 2866: Non-Invasive Venous Studies. Trailblazer Health Enterprises website. Available at: Accessed March 1, 2012.

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