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Commercial Medical Necessity Edits are Your Key to Fewer Denials

July 27, 2022
Jennifer Bishop

Vice President, Product Content

Kristy Manrique

Director Medical Necessity

Mikki Fazzio, RHIT, CCS

Content Integrity Consultant, Principal

Article Summary


Healthcare organizations risk losing more than $200 billion annually to denied claims. Of this loss, medical necessity denials account for $2.5 billion. In response, providers need a mid-revenue management solution that includes healthcare claims management, such as medical necessity edits (MNEs), and ensures claims fall within acceptable standards. Accounting for MNEs for a broad range of commercial insurances in addition to Medicare and state Medicaid MNEs, the Vitalware® by Health Catalyst medical necessity tool offers a comprehensive, timely, and accurate solution to help organizations avoid lost compensation and revenue delays.

healthcare claims management

According to a February 2022 report, out of $3 trillion in total claims submitted by healthcare organizations, insurers denied $262 billion. More than half of those denials came from commercial health plans, with gaps in healthcare claims management (medical necessity) responsible for 2% of denied claims. All told, medical necessity denials cost health systems $2.5 billion yearly.

Healthcare.gov defines “medical necessity” (also known as “medically necessary”) as “health care services or supplies needed to diagnose or treat an illness, injury, condition, disease or its symptoms and that meet accepted standards of medicine.” If health systems bill for care that doesn’t fall within medical necessity criteria, they risk claim denials and a time-intensive appeals process—in other words, significant roadblocks to getting paid for the services rendered.

But what exactly are “accepted standards?” And how can providers confidently know they’re billing for qualifying services or supplies without manually pouring through billing manuals for every commercial health plan? With today’s medical necessity edits (MNEs) exceeding 20 million, healthcare organizations can’t manually navigate the regulatory environment for each claim.

Accounting for MNEs for a broad range of commercial insurances in addition to Medicare and state Medicaid MNEs (for states with published information), the Vitalware® by Health Catalyst medical necessity solution offers a comprehensive, timely, and accurate solution to ease the complexity of claims management. Health systems can thus capture the benefits of billing within medical necessity criteria and avoid lost compensation and revenue delays.

The Top Three Ways a Healthcare Claims Management Solution Benefits Providers

Billing within medical necessity standards via a healthcare claims management solution, helps healthcare organizations secure the following revenue cycle benefits:

  1. More revenue—Increases revenue and instance of full payment by decreasing denials. If organizations don’t have medical necessity insight upfront, they risk performing a non-qualifying service and being denied payment.
  2. Fewer accounts receivable (AR) days—Reduces delays in submitting the claim due to inefficient medical necessity processes reduces the occurrence of rebilling or appealing a claim and aids in timely reimbursement.
  3. Decreased resources spent on the appeals process—Health systems spend less time and money on writing appeal letters, submitting additional documentation, and managing the lengthy process of tracking a claim through an appeals process. 

Getting the Most Out of Healthcare Claims Management

The Vitalware solution features the following key differentiators to help health systems fully leverage the above healthcare claims management benefits:

  • Breadth and depth: Vitalware offers one of the most comprehensive medical necessity tools with the capability to handle today’s complex edits and process complex code combinations. A proprietary edit engine processes complex edits (logic loops) that look past the simple code relationship to show that either additional diagnoses, Healthcare Common Procedure Coding System (HCPCS) codes, or an Advance Beneficiary Notice of Noncoverage (ABN) are needed. Edits include age, gender, and frequency requirements when specified.
  • Accessibility: Pertinent messaging appears upfront, so users don’t have to manually dig through policy (e.g., an unlisted code).
  • Accuracy: Vitalware delivers more accurate pass/fail results, including messaging derived from the policies. This means less time spent on research and more accurate reimbursement.
  • Timeliness: Frequent automatic updates and no manual updates—including weekly Medicare updates and monthly commercial updates—make Vitalware the timeliest medical necessity solution.

Remove Roadblocks to Payment with Healthcare Claims Management

Healthcare organizations can significantly increase the likelihood of receiving payment for services rendered when they bill for care and supplies that Medicare and commercial insurers accept as medically necessary. However, with countless illnesses, injuries, and conditions to track, providers need a healthcare claims management solution like Vitalware’s, that’s built into their revenue cycle process and automatically ensures billing falls within acceptable standards.

Additional Reading

Would you like to learn more about this topic? Here are some articles we suggest:

Changes to ICD-10-PCS Codes: CMS Updates Effective October 2022

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