by Emily H. Wein

reprinted with permission from Ober Kaler Payment Matters™, Mar 5, ’08

CMS believes that many Medicare beneficiaries are discouraged from seeking and obtaining certain services when they do not know whether the Medicare contractor will deem them reasonable and necessary, which is a prerequisite for Medicare coverage and payment. If the Medicare contractor does not consider a physician’s service to be reasonable and necessary, i.e., medically necessary, the physician or the Medicare beneficiary may be held financially responsible for the associated costs of the physician’s service.


In order to address this issue, CMS finalized a rule on February 22, 2008 originally proposed on August 30, 2005, that establishes a process for Medicare contractors to provide medical necessity determinations for certain physician services prior to the provision of such services. Under the new rule, services eligible for prior determinations are (1) the most expensive physicians’ services included in the Medicare Physician Fee Schedule (MPFS) that are performed at least 50 times a year and (2) plastic and dental surgeries that are covered by Medicare with a cost of at least $1,000. This list will be updated on an annual basis in conjunction with the MPFS and listed on each Medicare contractor’s website. In addition, CMS will update the number of eligible services through manual instructions.


CMS explained that it limited the eligible services based on the dollar amount for three reasons. First, beneficiaries are more often discouraged from obtaining the most expensive services. Second, the majority of the eligible services tend to be non-emergency services so beneficiaries have time to request prior authorizations before the service is rendered. Third, this limitation is reasonable in consideration of the administrative resources necessary to provide prior determinations.


Only individual Medicare beneficiaries and physicians may request a prior determination as permitted by the new rule. Medicare contractors must issue a prior determination within 45 days of their receipt of the request. In cases where a national coverage determination (NCD) or local coverage determination (LCD) already exists for a service that is eligible for a prior determination, and such is sufficiently specific in its description, the Medicare contractor may use the NCD or LCD as the prior determination without any further review by the contractor.


The new rule will be codified at 42 C.F.R. § 410.20 and will become effective March 24, 2008.

From Ober Kaler Payment Matters™, March 5, 2008

For more information, please contact the author or Jim Wieland, principal, Ober|Kaler at 410-347-7397 or