Prospects for Improved Decision Making about Medical Necessity

With the backlash against managed care, medical necessity has become the focus of increasing controversy. California's health care marketplace has provided some unique opportunities to understand the role of medical necessity in managed care decisionmaking, as the legislature and stakeholders have discovered how little consensus there is on itsmeaning, ownership, and application. Nevertheless , many decisionmakers agree that medical necessity decisions generally involve authorizing treatment for an individual patient. These differ from coverage decisions, which set organizational policies regarding the coverage of treatments for populations of patients with similar conditions. Both types of decisions require medical judgment, and thus both mix considerations of payment and clinical factors.3 Differences in coverage policies and in the application of those policies to individual decisions contribute to variation in managed care decision making.

Previous research has found considerable variation in the process and criteria used for decision making in both public and private plans. The aim of our research was to understand more precisely what type of variation exists and whether more clarity and consistency in medical necessity decision making could make a difference to consumers and providers. We sought to document differences in decision-making criteria and to explain the relationship between contractual definitions and the way decisions are made in practice. Given the lack of existing information on how medical necessity decisions are made in managed care organizations, we believed that describing "best practices" as well as unacceptable variations could play a powerful role, along with consumer choice and regulatory fiat, in improving the process. Finally, we sought to produce, with stakeholders' involvement, a model contractual definition and decision-making process based on best-practices models.