What is Medical Necessity and Why Do Claims Get Denied for Lack of It?

Medical necessity means that a service or procedure is appropriate, necessary, and meets accepted standards of medical practice for diagnosing or treating a patient’s condition. Insurance companies deny claims for “lack of medical necessity” when documentation doesn’t sufficiently demonstrate why the service was needed. This is one of the most common denial reasons. To avoid these denials, ensure your documentation clearly links the diagnosis to the treatment provided, demonstrates that the service meets evidence-based standards, shows that less costly or invasive alternatives were considered when appropriate, and includes adequate clinical information supporting the decision to perform the service. Proper ICD-10 coding that accurately reflects the patient’s condition is critical to demonstrating medical necessity.