Regulatory Perspectives: Anatomy of a Medical Policy

Health insurance is a contract between a third party payer (insurer) and an individual to help cover medical and surgical expenses. The insured party pays a premium to the health insurer for this benefit. The rights and obligations of the insured and insurer—besides coverage and paid benefits—are detailed in benefit plan documents. Medical policies help interpret health coverage benefit plans and serve as guidelines for determining the medical services, procedures, devices, and drugs eligible for coverage.   

Medical policies also provide additional clarification in determining benefit coverage. They are referenced by multiple entities, including but not limited to insured parties, providers, facilities providing healthcare services, and health insurer employees. Many policies are publicly available on health insurers’ web sites, although some companies only allow access to contracted entities.

Medical Policy Development
Medical policy development involves creating new policies and reviewing existing ones to reflect evolving medical technology. Policies are also updated or created based on changes to federal or local Medicare policies, legally mandated coverage requirements, and amendments to medical codes. The scheduled review of existing policies is plan-specific, but generally occurs at least every one to two years, unless new information has emerged requiring an earlier analysis. Policies with outdated care standards are usually retired or archived.

Policy development and revision depends on appropriately identifying and evaluating multiple sources, including: 

• Federal and/or local contractor Medicare policies
• U.S. Food and Drug Administration (FDA); Premarket Approval Application; Premarket Notification or 510(k); New Drug Application
• Nationally recognized professional organizations’ opinions, evidenced-based consensus statements, or clinical practice guidelines
• Manufacturer’s instructions for use
• Peer-reviewed, published medical journals
• Expert consultant opinion

Technology Assessments
Technology assessments use research methodology and evaluation to ensure a consistent approach in new technology evaluation. The process includes identifying, reviewing, and evaluating data about medical products and services (laboratory tests, diagnostic procedures, preventive interventions, and treatments) to assess their safety, effect on health outcomes, and appropriate use.

The following criteria are used to weigh available evidence for a new technology:1

• The technology must have final approval from the appropriate regulatory agency.
• Drugs and biological products require FDA approval.
• Devices and diagnostics need FDA consent for specific indications and methods of use.
• The scientific evidence must support conclusions about the technology’s effect on health outcomes.
• Quality of the evidence, along with well-designed and well-conducted investigations published in peer-reviewed journals, is considered when evaluating scientific evidence.
• The technology must improve net health outcome.
• The technology’s beneficial effects must outweigh possible harmful effects on health outcomes.
• The innovation must be as beneficial as any established alternative.
• The technology should improve the net health outcome as much as, or more than, established options.
• The improvement must be attainable outside investigative settings.
• The service must be available and an accepted practice by professional providers in a specific treatment area.

Components Of A Medical Policy
As noted previously, medical policy development and maintenance involves creating new policies and reviewing existing ones to better represent changing technology. Although medical policies are plan-specific, many include these components in their templates: Description Section, Position Statement, Guidelines, Coding, References, Revision History, and Related Documents.

Description Section
A medical policy often includes a background section that provides a description of the disease and available treatment options. The information included in the background section is intended “for [the beneficiary’s] general knowledge and is not to be taken as policy coverage criteria.”2 The payer lays a foundation to support the coverage position for the service, procedure, device, or drug presented in the medical policy by explaining the current standard of care. When available, practice guidelines and position statements from professional medical organizations are often incorporated into the background section. Lastly, a vital component in understanding the payer’s coverage decision is the literature review—a synthetic review and summary of the facts and questions about the central topic in the medical policy. The identified strengths and weakness included in the literature review inform the coverage position(s).

Position Statement
The coverage of a service, procedure, device, or drug presented in the medical policy is determined by the position statement. Therefore, coverage eligibility is contingent upon the service being categorized as medically necessary/not necessary, experimental/investigational, or a benefit exclusion. Third-party payers often define position statement categories. For example, Anthem defines “medically necessary” services as “procedures, treatments, supplies, devices, equipment, facilities or drugs that a medical practitioner, exercising prudent clinical judgment, would provide to a covered individual to help prevent, evaluate, diagnose, or treat an illness, injury, or disease and its symptoms.3

Anthem defines “Investigational” as “the procedure, treatment, supply, device, equipment, facility or drug does not meet the Company Technology Evaluation Criteria.”4 Benefit contract exclusions are typically outlined in the payer’s benefit booklet. The primary purpose of the limitations and exclusions is to protect against duplicate or unnecessary services that could unfairly offset healthcare coverage costs. Importantly, medically necessary services are generally considered covered services, whereas not medically necessary, experimental/investigational, or benefit exclusion services are not covered. Furthermore, the position statement may determine who must pay for non-covered services. Supplementary information for coverage (criteria parameters, documentation requirements, billing obligations) may accompany position statements.

Guidelines
Information further explaining the medical policy and ultimate position determination for the service, procedure, device, or drug is in the guideline section. This material includes, but is not limited to, additional benefit contract language explanation, medically necessary criteria parameters, applicable federal and/or state mandates, and FDA status. Most medical policies carry a disclaimer about federal and state laws, as well as specific contract provisions/exclusions that take precedence over medical policy. 

Coding
To ensure optimal reimbursement, all healthcare services, devices, and drugs should be reported using the billing codes and modifiers that most accurately represent the services rendered unless otherwise directed by the payer. While the policy’s coding section guidelines does not guarantee reimbursement (individual policy exclusions outweigh any coverage decision) this section helps ensure proper codes are used when billing third-party payers. Provider services and surgical procedures are reported using Common Procedural Terminology (CPT) codes created by the American Medical Association.5 New technologies that do not qualify for a new permanent CPT code are often assigned “T” codes as a way of tracking procedures and collecting necessary data for permanent CPT code. Complete lists are available in the AMA/CPT book and online on the Medicare website.

Surgical procedures are performed on an outpatient or inpatient basis as determined by a physician. Each setting uses a different code set to report services for reimbursement. Ambulatory Payment Classification (APC) codes and Comprehensive Ambulatory Payment Classification (C-APC) codes combine CPT procedure services into like groupings that use similar resources in the outpatient setting and are paid an established rate. C-APC codes are “a classification for the provision of a primary service and all adjunct services provided to support the delivery of the primary service.”6 Because CMS determined the adjunct costs are relatively small for APCs, C-APC codes result in a single payment based on the cost of all individually reported claim codes. Outpatient reporting also requires that implantable devices and biologics used in procedures be coded separately using the Healthcare Common Procedure Coding System Level II Codes.7

International Classification of Diseases, Tenth Revision, Clinical Modification code set was implemented Oct. 1, 2015, and specifically impacts the diagnosis coding.8 These codes are always patient-specific and provide this information to payers when establishing codes such as the Medicare Severity, Diagnosis Related Grouping for inpatient care. These codes are groupings that represent the entire inpatient stay, including all services, costs, and devices utilized during treatment. Additionally, International Classification of Diseases, Tenth Revision, Procedural Coding System is a “procedural coding system developed for reporting hospital procedural services—hospitals that provide operating rooms, nursing services, and hospital beds for patients will report patient procedures using ICD-10-PCS.”9

References
References provide a bibliography of all sources consulted when publishing the coverage decision. Here, beneficiaries will find sources that were referenced in the decision text itself in addition to material, not specifically referenced, but utilized during the ongoing decision-making process. Sources used to support coverage positions include benefit contracts, textbooks, peer-reviewed literature, professional society positions and guidelines, FDA (NDA, PMA, 510k), Centers for Medicare & Medicaid Services National Coverage Determinations and Local Coverage Determinations, and mandates.

Revision History
Medical policies are generally reviewed for updates every one to two years, unless new information necessitates an earlier analysis. Therefore, it is necessary to track the policy version, revision and effective dates, and any changes made. Tracking policy changes is critical in determining coverage positions during appeals and lawsuits. Additionally, providers may outline a contract section and explicitly state that “[any] discrepancy between a Medical Policy and a member’s benefit plan, the benefit plan, summary plan description, or contract will govern.” 10

Conclusion
Medical policies are referenced to interpret health coverage benefit plans and help determine the medical services, procedures, devices, and drugs that may be eligible for insurance coverage. Therefore, these documents must be regularly reviewed to ensure the information is current and accurate. Consequently, an understanding of the complexities involved in developing a medical policy and a dissection of the various components can help stakeholders use the documents to the fullest extent. 

References
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