Short-Term Analysis to Support Mental Health and Substance Use Disorder Parity Implementation. Medical Necessity Definitions and Criteria


Medical necessity definitions provide a broad framework for guiding the more specific standards, guidelines, or decision support protocols that these organizations use to make coverage decisions. In October 2000, the Board of the Trustees of the American Psychiatric Association (APA) endorsed the statement of the American Medical Association (AMA), which defined medical necessity as “services or products that a prudent physician would provide to a patient for the purpose of preventing, diagnosing, or treating an illness, injury, or its symptoms in a manner that is: (1) in accordance with generally accepted standards of medical practice; (2) clinically appropriate in terms of type, frequency, extent, site, and duration; and (3) not primarily for the convenience of the patient, physician, or other health care provider.”3 The medical necessity definitions used by the organizations with whom we spoke were identical or closely corresponded to this definition, but sometimes had an additional cost-related consideration (e.g., “not more costly than alternative services and at least as likely to produce equivalent therapeutic or diagnostic results…”). The NQTL regulations stimulated these organizations to undertake efforts to document and compare their behavioral health and general medical benefit definitions, but they reported that this resulted in no or little change in those definitions.

To translate the definitions into tools that can guide decisions to authorize or deny care, these organizations invariably use a committee structure, composed of both in-house and external clinical experts, to review existing guidelines, research evidence and benchmarks, and to develop specific coverage recommendations and criteria, which are updated on an annual basis, and approved at the top levels of the organization. These criteria are used by care managers in making coverage decisions as part of the UM processes (e.g., to preauthorize care, or approve care for reimbursement as part of concurrent or retrospective review.) Several organizations mentioned that, while care managers can approve care, a supervising physician must review all denials of care. Several organizations mentioned testing consistency of application of criteria among care managers. Some organizations also described use of information systems to scan for potential problem areas (e.g., high geographic or facility variation in utilization patterns for certain diagnoses or treatments, with those areas then becoming a topic for committee review.) Leaders from each organization with whom we spoke had reviewed and determined that their processes of developing medical necessity criteria were comparable to the processes used for general medical care.

Specific decision tools and algorithms used to apply medical necessity criteria on a case-by-case basis have traditionally been considered proprietary and they were not shared with us. We note, though, that these may not stay protected for long. The statute and the IFR require that the criteria used for medical necessity determinations for behavioral health benefits be provided to participants, beneficiaries, or contracting providers upon request. One organization has decided to go a step beyond the requirements -- it has begun routinely providing the relevant criteria to participants and providers when care is denied or partially denied. This industry leader said that, so far, this information about specific reasons for denial seems to be well received.

These organizations are not yet seeing appeals of medical necessity decisions specifically related to MHPAEA parity, although they are watching broader trends carefully. They have had some inquiries from providers who are under the impression that any use of NQTLs is prohibited under the IFR.

A few examples were given of services that are not covered because they are not considered medically necessary: (1) “wilderness” programs for youth -- because of no evidence of effectiveness and the lack of clinically credentialed staff; and (2) Applied Behavioral Analysis (ABA) for autism, because it is considered educational rather than medical. In addition, industry leaders mentioned limited coverage for psychological testing, because while it is clinically appropriate to rule out certain diagnoses, it is also a service that is subject to abuse. Some industry representatives suggested that these services may serve useful social functions but are not evidence-based behavioral health treatments.

One industry leader discussed the challenges of managing the quality and costs of outpatient psychotherapy, which composes the bulk of outpatient care. This respondent argued that outpatient psychotherapy does not have a parallel in medical care because: (1) existing guidelines are not specific; (2) clinician training and standards, especially for masters-level therapists, are diverse, so therapists may not have appropriate skills; and (3) there is no way to know what goes on in psychotherapy (e.g., what specific therapeutic approaches and techniques are used).

3. American Medical Association Policy Statement, H-320.953 -- Definitions of "Screening" and "Medical Necessity" (CMS Rep. 13, I-98; Modified: Res. 703, A-03).

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