“Medical necessity will generally be presumed to exist. When the facts that come to the intermediary’s attention during the course of its normal claims review process indicate that the hospitalization may not have been medically necessary, it will fully develop the case, checking with the attending physician and the hospital, as appropriate. The intermediary will rule the stay unnecessary only when hospitalization for 3 days represents a substantial departure from normal medical practice.” (My emphasis added.)


A question often asked is how the underlined statement can be reconciled with the “medically necessary” requirement. At some facilities, “social admissions” are a normal medical practice, but some managers wonder how well a “normal medical practice” argument will hold up against recovery audit contractor (RAC) medical necessity denials.


Overview of the Issue

The application of medical necessity is a form of utilization review and a mandated standard for Medicare and Medicaid program participation. As stated in the Code of Federal Regulations (Title 42, Section 482.30(c)(1)), “the hospital must have in effect a utilization review (UR) plan that provides for review of services furnished by the institution and by members of the medical staff to patients entitled to benefits under the Medicare and Medicaid programs.”


It goes on to say that, “the UR plan must provide for review for Medicare and Medicaid patients with respect to the medical necessity.”


A hospital’s UR plan is the standard by which physicians are held accountable; the use of clinical criteria should be utilized as a guide by the Medicare providers.


Physicians also should be very familiar with the content of the above regulation, which defines reasonable and necessary provisions of care and stratifies appropriate care settings.


The Hospital Payment Monitoring Program (HPMP) Compliance Workbook (published by TMF Health Quality Institute via contract with the Centers for Medicare & Medicaid Services) is a guide for best practices. On the subject of admissions it states, “because it is not reasonable to expect that physicians can screen all admissions, continued stays, etc. for appropriateness, screening criteria must be adopted by physicians that can be used by the UM [utilization management] staff to screen admissions, length of stay, etc. The criteria used should screen both the severity of illness (condition) and the intensity of service (treatment). There are numerous commercial screening criteria available. In addition, some [quality improvement organizations] QIOs have developed their own criteria for screening medical necessity of admissions and procedures. CMS does not endorse any one type of screening criteria.”


In summary, every Medicare provider is required to have an operational structure to ensure that a front-end review process is assisting with the decision-making used for setting determination. If patients do not meet the commercial clinical criteria screen tool for medical necessity, further rationale will be required within the documentation.


Drill Down to the Details

On the topic of the MBPM guidelines cited above, as is the case with many other federal guidelines, I believe such statements and/or rules are intentionally vague. This places the obligation onto care providers to detail the intent of their actions or medical-management decisions.


In my opinion, the regulatory bodies are asking hospitals and doctors to provide information to them about the intent or plan of care and the circumstances of the conditions (medical, physical, social, patient’s history, etc.). Through clear and concise documentation, the physician is obligated to articulate the critical clinical decision-making that occurred when a setting determination was made, as he or she is defining why this was medically necessary.


A Perfect Example

Let’s put the “normal medical practice” argument to the test, using the elderly-couple scenario in my previously published RAC Monitor article (“The Three-Day Stay Predicament: Shades of Grey for Red Flags”). Imagine that you work for a critical-access hospital with no long-term care facilities or nursing homes in your vicinity. Chart documentation from social-work staff indicates that attempts (list all contacts) were made to arrange a transfer, but there were no open nursing home beds available within a 50-mile radius. Documentation in the chart indicates a “safety” concern with the discharge of this patient.


If this were your scenario, I would attempt to defend action in a RAC appeal. You have made an attempt, and documented it, to secure appropriate resources for an “at risk” patient. In such an appeal, the physician would need to elaborate on the risk factors.



  • Now imagine that no resource staff are available in your hospital’s emergency department (ED) to address social issues or assist with ordering home care, respite care or durable medical equipment (DME); plus, no coverage is available for the off shift and weekends. Documentation is lacking and the attending physician prefers to order an inpatient admission because he or she wants to manage the case and make his or her own referrals (that is, they’ll be in the next day to evaluate and write orders).

In a complex review audit, there is little to defend this as an appropriate “normal medical practice.”


The above examples represent two extreme situations, and many hospitals fall somewhere in the middle. But typically it is lack of documentation that fails to tell the whole story of the clinical rationale behind the decision.


The reality is that in six months, when the RAC demand letter arrives, no one will remember the case or the circumstances of the situation and, therefore, it will not be defendable.

About the Author

Barbara Vandergrift, RN, BSN, MA, is a senior healthcare consultant with Medical Learning, Inc. (MedLearn®) in St. Paul, Minn. MedLearn is a nationally recognized expert in healthcare compliance and reimbursement. Founded in 1991, MedLearn delivers actionable answers that equip healthcare organizations with coding, chargemaster, reimbursement management and RAC solutions.

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