REPORT OF THE COUNCIL ON MEDICAL SERVICE

CMS Report 13 - I-99

Definition of Medical Necessity

Presented by:

Eugene Ogrod, MD, Chair

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At the 1999 Annual Meeting, the House of Delegates referred Resolution 724 to the Board of
Trustees for decision. Introduced by the American Academy of Neurology and the American
Academy of Physical Medicine and Rehabilitation, the resolution called for the AMA to adopt the
following definition of medical necessity:
Health care services or products that a prudent physician would provide to a patient for the
purpose of preventing, diagnosing, treating or rehabilitating an illness, injury, disease or its
associated symptoms, impairments or functional limitations in a manner that is: (1) in
accordance with generally accepted standards of medical practice; (2) clinically appropriate
in terms of type, frequency, extent, site and duration; and (3) not primarily for the
convenience of the patient, physician, or other health care provider.
In reviewing this issue, the Board sought the input of the Council on Medical Service. This report,
which is presented for the information of the House, describes the development and impact of the
current AMA definition of medical necessity; summarizes additional information received from
the sponsors of the resolution; and discusses why both the Council and the Board believe that the
current AMA definition should not be modified at this time.
DEVELOPMENT AND IMPACT OF THE AMA DEFINITION OF MEDICAL NECESSITY
Following considerable discussion at the 1998 Interim Meeting, the House of Delegates established
the following AMA definition of medical necessity (Policy H-320.953[3], AMA Policy
Compendium):
Health care services or products that a prudent physician would provide to a patient for the
purpose of preventing, diagnosing, or treating an illness, injury, disease or its symptoms in
a manner that is: (a) in accordance with generally accepted standards of medical practice;
(b) clinically appropriate in terms of type, frequency, extent, site and duration; and (c) not
primarily for the convenience of the patient, physician, or other health care provider.
The definition was adopted from a report of the Council on Medical Service (CMS Report 13, I-98)
that was prepared primarily to address the growing problem of some health plans attempting to
insert egregious definitions of medical necessity into managed care contracts. A number of these
definitions included lowest cost criteria that often would define medical necessity in the context
of the shortest, least expensive or least intense level of treatment, care or service provided. The
House also adopted several other policy recommendations to augment the AMAs comprehensive
policy base on medical review, such as advocating that determinations of medical necessity should
be based only on information that is available at the time that health care services and products are
provided (Policy H-320.953[7]).

CMS Rep. 13 - I-99 -- page 2

The current AMA definition of medical necessity has had a significant impact on public policy
debates regarding who should ultimately make medical necessity determinations. This issue,
which has continued to be one of the key factors in the ongoing congressional debate over federal
patients bill of rights legislation, moved into prominence following the AMA House of Delegates
reaching consensus on a definition of medical necessity in December 1998. As a result, the AMA
definition of medical necessity has had an equally significant effect on a number of debates over
state patients bill of rights legislation. Related policy from CMS Report 13 (I-98) has influenced
other activities in the private sector as well. For example, consistent with Policy H-320.953(6), the
American Accreditation HealthCare Commission/URAC revised its health plan standards, in April
1999, to prohibit health plans seeking accreditation from using definitions of medical necessity that
emphasize cost and resource issues above clinical effectiveness.
DISCUSSION
The definition proposed in Resolution 724 (A-99) would have modified the current AMA
definition of medical necessity (Policy H-320.953[3]) by addition and deletion to read as
follows:
Health care services or products that a prudent physician would provide to a patient for the
purpose of preventing, diagnosing, or treating or rehabilitating an illness, injury, disease or
its associated symptoms, impairments or functional limitations in a manner that is: (a) in
accordance with generally accepted standards of medical practice; (b) clinically appropriate
in terms of type, frequency, extent, site and duration; and (c) not primarily for the
convenience of the patient, physician, or other health care provider.
In considering these proposed changes, the Council invited the co-sponsors of Resolution 724
(A-99) to submit additional comments and information. In particular, the Council raised three
main concerns with the proposed changes to the definition: (1) the term rehabilitating already
appears to adequately fall under the terms preventing, diagnosing or treating; (2) the terms
impairments or functional limitations already appear to adequately fall under the terms illness,
injury, disease or its symptoms; and (3) a change in the AMAs definition of medical necessity
could have an adverse impact on pending federal and state debates on patients bill of rights
legislation.
The Council also re-reviewed the language in the 10 state laws that define medical necessity that it
previously reviewed in the development of CMS Report 13 (I-98). None of the 10 state definitions
of medical necessity specifically reference rehabilitating or impairments or functional
limitations.
In July 1999, the co-sponsors of Resolution 724 (A-99) submitted identical letters to the Council in
response to these concerns. With respect to the potential addition of the term rehabilitating, the
co-sponsors indicated that the term has its own specific meaning, and that while rehabilitation
may seem to fall under the rubric of treatment, because it does have its own very specific identity,
to not refer to it in a definition of medical necessity could carry the implication that it is not a focus
of medical necessity determinations. The co-sponsors also stated that impairments and functional
limitations still may require rehabilitation because they may persist after a disease or illness is no
longer active. As a result, not referring to rehabilitating and impairments or functional limitations
in a definition of medical necessity will provide payors with the opportunity to narrowly construe

CMS Rep. 13 - I-99 -- page 3

the meaning of medical necessity. Finally, the co-sponsors indicated that they recognized the
confusion and possible detriment of introducing a revised definition of medical necessity into the
current patients bill of rights discussion, and stated that they had no intention of approaching
legislators with an expanded definition.
While sympathetic to the additional views expressed by the co-sponsors of Resolution 724 (A-99),
the Council does not believe that a change in the AMAs definition of medical necessity is
warranted. The original goal of the Council in developing a definition was to provide a sufficient
level of detail to clarify what are the most important factors for making medical necessity
determinations. The Council believes that the current definition continues to meet this intent and
has as much relevance for a physician providing rehabilitative services as for a physician providing
any other kind of service. In particular, the Council believes that the term rehabilitating
adequately falls under the terms preventing, diagnosing or treating, and the terms impairments
or functional limitations adequately fall under the terms illness, injury, disease or its symptoms.
The Council also has significant concerns regarding the precedent that would be set with the
addition of what would be viewed by many throughout organized medicine as specialty-specific
language. Such a precedent could potentially open up the current definition of medical necessity to
ongoing requests for additional references to specific types of services. In addition, the Council
believes it should be emphasized that issues related to medical necessity determinations are often
quite different than issues related to coverage determinations. While a health care service or
product provided by a physician may be medically necessary, it may not be covered under a
specific health benefit plan.
Furthermore, while the Council appreciates the willingness of the co-sponsors to not approach
legislators with an expanded or revised definition of medical necessity during critical federal
debates over patients bill of rights legislation, a change in the AMAs definition of medical
necessity would require the AMA to do just thatadvocate for use of the revised definition.
At the time that this issue was reviewed and discussed by the Council, it did not believe that
the changes sought in Resolution 724 (A-98) merited jeopardizing the outcome of the high-level
debate that was being pursued by many members of the Federation.
CONCLUSION
At its October 1999 meeting, the Board of Trustees agreed with the Council on Medical Service
that the current AMA definition of medical necessity (Policy H-320.953[3]) remains appropriate,
and that the changes proposed in Resolution 724 (A-99) should not be implemented. The Board
also supported the development of an informational report to the House of Delegates on this issue
for the 1999 Interim Meeting.