Part 3: Documentation and Medical Necessity – Getting It Right the First Time

Part 3: Documentation and Medical Necessity – Getting It Right the First Time

In durable medical equipment (DME) billing, strong documentation is the foundation of reimbursement. Even when equipment is appropriate and medically needed, claims often get denied because the documentation doesn’t meet payer requirements. For providers, understanding what “medical necessity” means and ensuring records support it is one of the most critical steps in avoiding denials.

What Does “Medical Necessity” Mean?

Medical necessity refers to the clinical justification that equipment is essential for a patient’s diagnosis, condition, or recovery. Payers require clear evidence that the device is reasonable and necessary for the treatment of illness or injury.

• Medicare defines “reasonable and necessary” services under Section 1862(a)(1)(A) of the Social Security Act.
• Local Coverage Determinations (LCDs) and National Coverage Determinations (NCDs) outline specific requirements for many DME items.
• Source: CMS – Medicare Coverage Database

Common Documentation Requirements

While exact requirements vary by payer and device, most DME claims require:

• Detailed Written Order (DWO) signed by the physician.
• Clinical Notes supporting the need for the device (diagnosis, symptoms, exam findings).
• Treatment History showing failed conservative care or prior attempts before DME use.
• Functional Limitations documented (e.g., mobility restrictions, instability, weakness).
• Provider Signatures and Dates on all documentation.
• Source: Noridian Medicare – DME Documentation Checklist

Frequent Documentation Pitfalls

1. Missing Details – Notes that list a diagnosis but don’t describe the condition in enough detail.
2. Copy-Paste Templates – Generic notes that don’t match the patient’s actual condition.
3. Unsigned or Undated Orders – Missing physician signature or date invalidates the order.
4. Mismatch Between Documentation and Code – For example, claiming a custom-fit brace with documentation that only supports an off-the-shelf product.
5. Lack of Continuity – Missing follow-up notes or evidence of failed prior treatment.

Why It Matters

Improper or incomplete documentation is one of the leading causes of claim denials and post-payment audits. For high-volume DME providers, even a small percentage of denied claims can lead to significant financial loss. In addition, audits triggered by poor documentation may result in recoupment of funds already paid.

• Source: OIG – Improper Payments for Orthotic Braces

Best Practices for Strong Documentation

• Use Checklists – Ensure all payer-required elements are captured.
• Educate Providers – Physicians and clinicians should understand exactly what must be documented.
• Integrate Documentation Templates – Tailor them for specific DME items, but avoid copy-paste shortcuts.
• Perform Pre-Claim Reviews – Verify records before claim submission to catch errors early.
• Audit Internally – Regular reviews reduce risk during external audits.

Looking Ahead

Medical necessity documentation will remain under strict scrutiny, especially as DME is prone to overutilization. The next step in this series will look at coding complexities, including the challenges of off-the-shelf versus custom-fit coding, and how small mistakes here can lead to denials or compliance issues.

👉 Next in the series: Part 4 – Coding Complexities: OTS vs Custom Fit and Modifier Traps

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