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In Focus: Randy Wiitala discusses why providers need to document medical necessity for drugs given to patients



Join us on Friday, June 1st for “Learn How to Avoid Recovery Auditor Threats in Your Pharmacy: Building the Case for Medical Necessity”


Recent reports that Abbott Laboratories will pay $1.5 billion in fines and penalties to the Department of Justice (DOJ) to settle criminal and civil investigations related to its off-label promotion of the anti-seizure drug Depakote has once again brought the issue of medical necessity, Medicare and drugs into sharp focus.


The settlement stems from the company’s illegal marketing of Depakote for schizophrenia and agitated dementia-uses not approved as safe and effective by the Food and Drug Administration (FDA).


The message to providers of all types is loud and clear: Pay attention to federal directives or you may pay a heavy price. This is very true when it comes to the issue of proving that the drugs given to patients are “medically necessary.”


How CMS Defines Medical Necessity


The Centers for Medicare & Medicaid Services (CMS) define medical necessity as “services or items reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the function of a malformed body member.”


The problem with meeting medical necessity is misunderstanding what it means and how it affects providers and their patients. The situation is complicated further when it comes to proving medical necessity for the off-label use of drugs. As far as the government goes, if the FDA has not approved a drug to be used to treat a certain condition then it is not appropriate, and not medically necessary, for use.


Commonly, this applies to anti-cancer drugs that physicians inject as part of a chemotherapy regimen. The difficulty arises when a chemotherapeutic agent (or other injectable drug) is given for indications other than the FDA-labeled indications (that is, “unlabeled use of a drug”).


Coverage Conditions Must be Met


Unless certain specified conditions are met, Medicare will not reimburse for unlabeled use of non-self-administered drugs. The reason is simple: Such usage is considered to be investigational, and program contractors are prohibited from paying for such treatments.


On the other hand, there are exceptions when Medicare will cover FDA-approved drugs used for indications other than what is indicated on the official label. The contractor may determine that a drug’s use is medically acceptable after consulting the major drug compendia, authoritative medical literature, and/or accepted medical practice standards. In the case of unlabeled use for anti-cancer drugs, the conditions for Medicare coverage and reimbursement have been especially well outlined.


Guidelines for Documenting Medical Necessity


It is critical that providers document facts that support the medical necessity for any drug given to their patients. Documentation supporting medical necessity should be legible, maintained in the patient’s medical record, and made available to Medicare upon request. This can be achieved by keeping the following documentation criteria in mind.


Clinically based evidence. Physicians who are thinking about using an off-label anti-cancer drug, non-chemotherapeutic drug, or biological should consider the following.


  • To find a list of approved agents and their list of indications, consult one of the drug compendia approved by CMS.
  • When the unlabeled use is not listed in any of the compendia or is listed as having insufficient data or being investigational, check the clinical research that appears in peer-reviewed medical literature, which may support the use of the drug.
  • Unlabeled uses of cancer chemotherapeutic agents, non-chemotherapeutic drugs and biologicals also may be considered medically accepted if determined to be the community standard of care and to be safe and effective for the particular use.
  • If the provider decides to use a chemotherapeutic agent, non-cancer chemotherapeutic drug or biological, or combination that does not have FDA-approved labeling, the evidence (hard copy of the reference or reference citations) used to make that decision must be retained in the patient’s record. This documentation must be submitted whenever requested.
  • If a Medicare contractor policy exists for a specific drug and that policy identifies certain conditions as non-covered, those conditions remain non-covered.



Diagnosis: The diagnosis must support the need for a drug. Many times, a charge will be denied because the diagnosis does not warrant the medical need for that service.


Frequency: A drug also may be deemed as not medically necessary, and therefore denied, if it is provided in higher dosages or multiple times during an approved time period.


Demonstrate Treatment Failures with Approved Drugs: Often, Medicare policy states that a standard treatment regimen must be shown to be not effective before coverage of other drugs will be met.


For example, when the drug ofatumumab (ArzerraTM) is reported for Medicare payment, the medical record must clearly demonstrate failed treatment with fludarabine (Fludara®) and alemtuzumab (Campath®). Also when eribulin mesylate (HalavenTM) is reported for Medicare payment, the medical record must clearly demonstrate treatment of patients with metastatic breast cancer who have previously received at least two chemotherapeutic regimens for the treatment of metastatic disease. Prior therapy should have included an anthracycline and a taxane in either the adjuvant or metastatic setting.


Resources for Medical Necessity Guidelines


All providers who report services for Medicare payment must fully understand and follow all existing laws, regulations and rules for chemotherapeutic drugs and biological services and must properly submit only valid claims for them. It is important to review and understand the rules, and apply the medical-necessity provisions in the policy within the context of the rules.


Relevant Medicare manual instructions and policies regarding chemotherapeutic drug and biological services are found in the following internet-only manuals (available at http://cms.gov/Regulations-and-Guidance/Guidance/Manuals/Internet-Only-Manuals-IOMs.html).


  • Medicare Benefit Policy Manual, Chapter 15, Section 50
  • Medicare National Coverage Determinations Manual
  • Medicare Claims Processing Manual, Chapter 17, Section 40
  • Correct Coding Initiative Medicare Contractor Beneficiary and Provider Communications Manual, Chapter 5, Correct Coding Initiative


Helpful information also is provided in the following sections of the Social Security Act (Title XVIII) (available at http://www.ssa.gov/OP_Home/ssact/title18/1800.htm).


  • 1862(a)(1)(A) Medically Reasonable & Necessary
  • 1862(a)(1)(D) Investigational or Experimental
  • 1833(e) Incomplete Claim


About the Author


Randy Wiitala, BS, MT (ASCP) is a senior healthcare consultant with Medical Learning, Inc. (MedLearn), St. Paul, MN. MedLearn is a nationally recognized expert in healthcare compliance and reimbursement. Founded in 1991, MedLearn delivers actionable answers that will equip healthcare organizations with their coding, chargemaster, reimbursement management and RAC solutions.

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