Catching E/M Risks Through Billing Patterns: The Difference Between Medical Necessity and MDM

You’ve probably noticed that physicians may experience some confusion regarding the terms “medical necessity” and “medical decision making,” when coding E/M services. It’s important that providers are able to distinguish the two terms accurately because they are not synonymous, and failure to understand the difference can lead to the incorrect coding of E/M services, cause problems in billing audit services and disrupt physician education.

Medical Necessity Coding

Medicare defines Medical Necessity as “No payment may be made under Part A or Part B for expenses incurred for items or services which are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member.”

Medical Decision Making (MDM)

Medical Decision Making refers to the process of establishing a diagnosis and/or selecting a management option for a patient’s presenting problem.

The coding differences are significant between the two terms: MDM requires practitioners to choose a level of service that best reflects the amount of effort the practitioners will put into deciding a course of treatment. Medical necessity, however, requires substantiating that the diagnosis and suggested actions were medically required for proper treatment.

Why the Difference Between Medical Necessity and MDM Matters

Correct coding requires that practitioners and coders use the same terminology and have a common understanding of the definitions. One of the largest challenges of correct coding is a common misunderstanding of coding terms by providers who are not in the habit of using billing terminology. Mistakes are often made when practitioners assume that MDM also satisfies medical necessity requirements.

If providers lack a comprehensive understanding of the differences between medical necessity and MDM, inaccurate coding of E/M services can lead to payment denials, or take-backs. Your organization can save both time and money by ensuring that all services reported to a payer are supported by medical necessity.

How to Reduce Billing Risks

You can identify potential billings risks by carefully auditing E/M follow-up visit claims, giving special attention to providers who are billing the same E/M levels for patient follow-up visits. Once you’ve identified potential problems, you can take necessary steps to adequately educate the provider of terminology definitions as they pertain to accurate coding.

For more information and steps to help you identify E/M follow-up risks, download our short eBrief for more details: