Lack of Medical Necessity

One of the more common and simple forms of healthcare fraud is billing Medicare or Medicaid patients for services that are not medically necessary. In 1998, the American Medical Association published this patient-and-physician oriented definition of “medical necessity”: Healthcare 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, extend, site, and duration; and (c) not primarily . . . for the convenience of the patient, treaty physician, or other healthcare provider. As this definition illustrates, what constitutes “medical necessity” is subjective, but it remains a critical element for both the provision and payment of healthcare in the United States.

Within Medicare there are coverage categories. Federal law stipulates that Medicare coverage is limited to items and services that are “reasonable and necessary for the diagnosis or treatment of illness or injury.” 42 U.S.C. 1395y(a)(1)(A). Healthcare providers are required to assure that health services ordered for government patients are provided economically and only when, and to the extent, medically necessary. They must document the medical necessity for these services so that the government does not reimburse frivolous or unnecessary procedures. Any false claim in such documentation may violate the FCA.

Both the Fraud Enforcement and Recovery Act (2009) and the Patient Protection and Affordable Care Act (2010) enacted changes to the FCA which are relevant to this type of fraud. Specifically, these acts expanded conspiracy liability and expanded the scope of “reverse false claims” in which the retention of Medicare/Medicaid overpayments for longer than sixty days becomes actionable under the FCA.


In January of 2010 the U.S. announced that it had settled a case with FORBA Holdings, LLC, a dental management company providing services nationwide to clinics known as “Small Smiles Centers.” The $24 million settlement under the FCA was the result of FORBA allegedly providing unnecessary dental services to children. The U.S. alleged that the company performed services for “placing crowns” for children on Medicaid that were not medically necessary. Since the government will only reimburse companies under Medicaid for medically necessary procedures, submitting bids for reimbursement for these services constituted false claims and subjected the company to liability under the FCA.


Medicare Part B pays a substantial portion of the health costs incurred by enrollees, including medical device costs such as wheelchairs. The Department of Health and Human Services (“DHHS”) accused Gulfcoast Medical Supply, Inc., a wheelchair supplier, or overbilling Medicare for wheelchairs that were not medically necessary. The Medicare Act permits suppliers like Gulfcoast to issue physicians a Certificate of Medical Necessity (“CMN”). Gulfcoast contended that it had met the medical necessity requirement by obtaining this certificate. Concerned about the potential for fraud, the DHHS began requiring supplemental documentation to prove that wheelchairs were medically necessary for patients enrolled in Medicare Part B. The 11th Circuit agreed, and suppliers of medical devices may now be compelled to produce supplemental documentation to prove medical necessity.

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