Unnecessary care that’s not evidence-based—usually associated with excess testing, surgical procedures or over-prescribing—accounts for up to 30% of what is spent in healthcare. In recent months, enforcement actions against physicians and hospitals have gained increased attention. But unnecessary care and over-utilization is not a new story or one that’s easy to understand.
Medical necessity means something slightly different in every part of the healthcare industry. Varied definitions and interpretations are used by providers, physicians, courts, pharmacy benefits managers, government insurers, private insurers, and consumers. Perhaps the two most important are from the largest and most influential payer, Medicare, and the industry’s most important clinical authority, the American Medical Association (AMA).
The AMA defines medical necessity as: “Healthcare services or products that a prudent physician would provide to a patient for the purpose of preventing, diagnosing or treating an illness, injury, disease or its symptoms in a manner that is: (a) in accordance with generally accepted standards of medical practice; (b) clinically appropriate in terms of type, frequency, extent, site, and duration; and (c) not primarily for the economic benefit of the health plans and purchasers or for the convenience of the patient, treating physician, or other healthcare provider.” “Statement of the American Medical Association to the Institute of Medicine’s Committee on Determination of Essential Health Benefits,” American Medical Association, January 14, 2011
So based on these definitions, the application of “medical necessity” leaves lots of room for variation in how doctors and hospitals determine what’s done, and how payers (Medicare, Medicaid, employers, individuals) assess the appropriateness of their activities and costs. Therein is the conundrum about medical necessity and unnecessary care and the need for fresh thinking about the issue.
The basic facts:
Over-utilization and unnecessary care is prevalent and costly: Several reputable studies point to systemic over-utilization costing the U.S. system up to 30% more than what’s necessary (Exhibit A). The U.S. health system is the world’s most expensive, and health costs, per the Congressional Budget Office, will continue to increase at least 2-3% faster than the overall economy for the next decade. The costs associated with unnecessary care (a.k.a. medical necessity) are significant and growing. “The 2014 Long-Term Budget Outlook,” Congressional Budget Office, July 2014.
The government is cracking down on unnecessary care: Hospitals are increasingly being held accountable for the practice patterns of the physicians on their medical staff via the False Claims Act. Enforcement actions against both are on the rise and financial penalties harsh (see Exhibit B for recent cases).
Media attention is sparking public attention to unnecessary care: The Wall Street Journal calls its series, “Secrets of the System.” National broadcast and print news organizations have increased coverage of healthcare including its tendencies around medical necessity and unnecessary care. And social media is a hotbed for anecdotal assessments of “medical necessity”—some supported with objective data, most supported by personal experience, and a few judiciously studied and reported.
So if health costs are a looming problem in U.S. healthcare, and lack of consistency around the delivery of medically-necessary care is a systemic challenge that’s increasingly transparent, why isn’t more done? Most industry insiders offer these reasons:
The body of scientific evidence about what works best is expanding and changes fast. There are 20,000 medical journals. Keeping track of the latest innovations is almost impossible without using a clinical knowledge management software program that captures and filters relevant information useful to making patient diagnostic treatment decisions.
The strength of evidence about what works best and why is often weak. As more information about a patient’s signs, symptoms, risk factors and co-morbidities are factored into a treatment determination, the less likely it is that a clear “medical necessity” directive is found. Ironically, the more information (data) a clinician has about a specific patient, the less likely it is that a “medically necessary service” is dictated through a clinical algorithm or guideline.
Most consumers assume everything recommended is “medically necessary.” The majority of consumers assume that what their physician recommends is evidence-based, and few feel confident to challenge their view. Therefore, consumers want MORE not less in the majority of cases. And social media and media coverage is complicating matters as treatments-de jour become more widely known to consumers searching the latest and best treatments. The burden to stay abreast about traditional and nontraditional methods for diagnosing and treating is daunting, especially if reimbursements are cutting into time spent with patients.
Most providers necessarily err on the side of over-treatment. The majority of physicians and the institutions that credential them to practice tend to over-treat fearing liability exposure or the possibility of an inaccurate diagnosis. It’s precautionary and a business imperative (discounting it can be lucrative at the same time).
The health information technology tools that allow for real-time, accurate matching of a patient’s signs, symptoms, risk factors and co-morbidities to the latest and best evidence don’t exist or are too expensive. The integration of smart medical record systems shared by clinically-integrated networks and with their patients is still aspirational in most communities. These systems are expensive. Clinicians doubt that these systems will pay for themselves in improved efficiency (less paperwork), nor do they trust that payers will pay them more if they make the investment. And most consumers aren’t demanding them to make the investment. Instead, basic access, convenient locations and an assuring experience with doctor are of higher importance.
These views provide a defensible rationale as to why medical necessity and unnecessary care is a systemic challenge in our system, but in coming months, they may be seen more as lame excuses. The spotlight on unnecessary care and medical necessity is likely to shine brighter because:
Unnecessary care contributes significantly to the impressive profitability in many parts of the health system.
Unnecessary care can be harmful to consumers.
The data and sophisticated analytic tools upon which determinations of medical necessity and unnecessary care are increasingly available. Defaults that “my patients are different” and “we don’t have the data” will fall on deaf ears.
What does it mean?
Documentation is key. Accurate clinical documentation across sites and systems of care is table stakes.
Transparency about medical necessity and unnecessary care is assured. Data about the performance of every practitioner, hospital, and health system will be widely accessible. And the evidence supporting coverage and denial decisions by insurers, formulary design by Pharmacy Business Managers (PBMs) and benefits managers, and the justification for narrow networks will be equally available.