CMS has published a new MLN article summarizing its policy on the medical necessity for acute care hospital inpatient admissions. The article largely repeats CMS policy that appears in several different Manual sections, but is a good summary in one place of CMS’s views on medical necessity for inpatient hospital admissions. The article also takes the position that even cases that meet screening criteria such as InterQual® can be denied as not medically necessary.
MACs, RACs, and other Medicare contractors, as well as most hospitals, use screening criteria to identify cases for which medical review is necessary. The most frequently mentioned screening criteria are InterQual®, but there are others. CMS points out that just because a case is flagged by the screening criteria does not mean that the admission is not medically necessary, and that is correct. What is especially interesting, however, is that CMS also takes the position that a case that is not flagged by the screening criteria can still be denied as being medically unnecessary. This is a controversial proposition. Under longstanding Medicare policy, based on 1972 statutory amendments, a claim should not be denied for a lack of medical necessity if the provider “did not know, and could not reasonably have been expected to know, that payment would not be made for such items or services under [Medicare].” 42 U.S.C. § 1395pp(a)(2). This is referred to as “waiver of liability.” If a case meets the screening criteria for medical necessity, we believe that a good argument can be made that, at worst, the case should be paid under the “waiver of liability” provision. CMS’s silence on the matter implies that it does not believe that the “waiver of liability” necessarily applies when a case meets screening criteria and the contractor still denies the claim. Hospitals should strongly consider appealing denials of cases that meet screening criteria.