Reasonable and Necessary

Medicare’s DMEPOS local coverage determinations (LCDs) are intended to issue specific guidance to DME providers related to coverage criteria and medical documentation requirements for Medicare covered DMEPOS items. They also serve to define the medically accepted coverage criteria used by Medicare contract auditors and those adjudicating appeals of denied claims. When Medicare contractors deny claims either on audit or during the appeals process they are mandated to cite the specific LCD criteria that caused the claim to be denied, or in the absence of an LCD, state why the product is not deemed “reasonable and necessary” for the patient.

In fact, the explicit purpose of an LCD is to describe in detail what constitutes a reasonable and necessary medical need for a specific product. In other words, LCDs can be useful, even if they are in some cases overly complex and filled with what oftentimes feels like frustrating fine print.

However, it’s important for DME providers to remember that the reasonable and necessary standard applies to all covered DMEPOS products, even in the absence of a formal LCD. Unfortunately products that lack a formal LCD are not immune to CMS audits, and if the provider receives a claim denial they shoulder the burden of proving the product was reasonable and necessary during the appeal process. In essence then, what might seem like freedom from a formal coverage determination policy can actually come back to haunt providers that provide products that lack an LCD.

Any DME business owner that offers these types of products on a consistent basis would be wise to develop an internal policy to guide their employees regarding reasonable and necessary coverage criteria. Medicare contractors have, at times, provided educational materials and other guidance regarding frequently provided products that lack an LCD. Seeking out this informational material is the first step to developing an internal coverage criteria policy.

But in some cases there is little guidance from Medicare contractors to be found. As a result the provider must have a clear understanding of the key aspects of “reasonable and necessary” that apply to DMEPOS items in order to develop their own internal criteria:

The product must be safe and effective—Meaning it has been approved by the Food and Drug Administration for the purpose it will used. Ask the manufacturer for copies of their FDA notices if you are unfamiliar with the make and model of the product.

The product is used for the appropriate duration and frequency by the patient—Meaning the prescription and/or progress notes should describe how often, under what circumstance and how long the patient should use the product.

The product meets acceptable clinical standards of medical care—In other words, are there clinical studies that provide evidence that the product is effective in treating the medical condition for which it was prescribed? Again, the manufacturer should make these available for your review.

The product is ordered for use in the appropriate setting—Meaning, the product will be used in the home environment or other eligible place of service required for the DME benefit.

The DME employs qualified staff applicable to the product—If applicable to the product, and according to state laws and/or standards of care, the patient care is supervised by an employee with the appropriate clinical training and expertise.

The product meets, but does not exceed the patient’s medical need and is at least as beneficial as medically appropriate alternatives—For instance, is there a less costly alternative product that will provide the same medical benefit to the patient and effectively treat the condition? Ask physicians to discuss why less costly products are not appropriate or have been tried and failed.

The physician or other health care provider progress notes should also document the patient diagnosis related to the product and the applicable evaluation and testing that have been done to arrive at the diagnosis.

By using these guidelines to build an internal medical necessity policy in the absence of a formal LCD, DME providers can protect themselves from unnecessary recoupments and failed audits.