DOI: 10.1542/peds.2013-1637; originally published online July 29, 2013; 2013;132;398Pediatrics

COMMITTEE ON CHILD HEALTH FINANCINGEssential Contractual Language for Medical Necessity in Children

  

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POLICY STATEMENT

Essential Contractual Language for Medical Necessity inChildren

abstractThe previous policy statement from the American Academy of Pediat-rics, “Model Language for Medical Necessity in Children,” was pub-lished in July 2005. Since that time, there have been new andemerging delivery and payment models. The relationship establishedbetween health care providers and health plans should promotearrangements that are beneficial to all who are affected by thesecontractual arrangements. Pediatricians play an important role inensuring that the needs of children are addressed in these emergingsystems. It is important to recognize that health care plans designedfor adults may not meet the needs of children. Language in healthcare contracts should reflect the health care needs of children andfamilies. Informed pediatricians can make a difference in the care ofchildren and influence the role of primary care physicians in the newparadigms. This policy highlights many of the important elementspediatricians should assess as providers develop a role in emergingcare models. Pediatrics 2013;132:398–401

The American Academy of Pediatrics (AAP) published the policystatement “Model Contractual Language for Medical Necessity inChildren” in July 2005.1 The chief principles articulated in thatstatement are still relevant, but given the structural shifts in thehealth care delivery system, they no longer adequately address theunique needs of children. This revised policy statement is an updateof the 2005 statement.

In light of the passage and ongoing implementation of the PatientProtection and Affordable Care Act (ACA [Pub L No. 111-148]) in 2010,contractual obligations, as expressed in health plan-provider andhealth plan-beneficiary agreements, have a new significance withrespect to the array of health care benefits made available to childrenand families. In particular, a much used term—“medical necessity”—is, in fact, generally ill defined. As stated in the previous policystatement, “The term ‘medical necessity’ is used by Medicaid andMedicare and in insurance contracts to refer to medical services thatare generally recognized as appropriate for the diagnosis, prevention,or treatment of disease and injury.” The term is found in insurancecontractual language, and, as stated in the 2005 policy statement, “…an intervention will be covered if it is an otherwise covered categoryof service, not specifically excluded, and medically necessary.” It

COMMITTEE ON CHILD HEALTH FINANCING

KEY WORDSmedical necessity, contractual language, pediatric care, children,insurance, health plans, payment

ABBREVIATIONSAAP—American Academy of PediatricsACA—Patient Protection and Affordable Care Act

This article was written by members of the American Academyof Pediatrics. It does not represent the views of the USgovernment or any US government agency.

The recommendations in this statement do not indicate anexclusive course of treatment or serve as a standard of medicalcare. Variations, taking into account individual circumstances,may be appropriate.

This document is copyrighted and is property of the AmericanAcademy of Pediatrics and its Board of Directors. All authorshave filed conflict of interest statements with the AmericanAcademy of Pediatrics. Any conflicts have been resolved througha process approved by the Board of Directors. The AmericanAcademy of Pediatrics has neither solicited nor accepted anycommercial involvement in the development of the content ofthis publication.

All policy statements from the American Academy of Pediatricsautomatically expire 5 years after publication unless reaffirmed,revised, or retired at or before that time.

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PEDIATRICS (ISSN Numbers: Print, 0031-4005; Online, 1098-4275).

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398 FROM THE AMERICAN ACADEMY OF PEDIATRICS

Organizational Principles to Guide and Define the ChildHealth Care System and/or Improve the Health of all Children

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would appear that this statementprovides a straightforward pre-sentation of medical necessity. How-ever, health insurance coverage ismoderated by a host of federal reg-ulations and statutes, state man-dates, and other rules. Provideragreements are usually written toincorporate these rules and regu-lations. As the US Department ofHealth and Human Services moves toimplement the provisions of the ACA,essential health care benefits are notguaranteed to be the same in everystate. Consequently, benefits forchildren may vary from state to stateor plan to plan and may containspecific exclusions. The AAP advo-cates for quality health care forchildren that promotes optimalgrowth and development with meas-ures intended to prevent, diagnose,detect, ameliorate, or palliate theeffects of physical, genetic, congeni-tal, mental, or behavioral conditions,injuries, or disabilities.

Individuals with health insurancecoverage, whether it be Medicaid,Medicare, or commercial insurancecoverage, may be unaware of paymentor benefit restrictions for the medicalservices they seek. In addition, ser-vices ordered by a physician might onlybe covered if conditions of medicalnecessity are met. Medical necessitymeans that a decision is needed aboutappropriateness for a specific treat-ment of a specific individual. The 2005AAP statement drew on model languagedeveloped by Stanford University2;however, more specific considerationsare needed for children because oftheir unique needs. Now, as the USDepartment of Health and HumanServices is charged with implemen-tation of the ACA, it is time to addressmedical necessity and the needs ofchildren. Although Medicare has be-come the de facto standard of healthcare benefits and directly influences

commercial health care benefit plans,it is important to realize that healthcare standards designed for adultcare often will not meet the needs ofchildren. By and large, the Medicaidprogram provides coverage for a sig-nificant number of children, and it,too, can be influenced by health carestandards designed for adults.

A definition of medical necessity forchildren must recognize that the needsof children differ from those of adults.The foundation for medical necessityfor children should be based on thecomprehensive, fully inclusive set ofservices provided by the Early andPeriodic Screening, Diagnosis, andTreatment regimen embodied in Med-icaid as well as the preventive carerecommendations in Bright Futures:Guidelines for Health Supervision ofInfants, Children, and Adolescents, asstipulated in Section 2713 of the ACA.3

The language in the Stanford state-ment considered the scope of healthproblems, evidence of effectiveness,and value of the intervention. Medicalnecessity should be guided by thesecriteria, but health plan and evenMedicare language generalizes acrosspopulations, as opposed to focusingon specific individuals or groups, in-cluding children, often in a mannerthat is blind to their particular needs.A definition of medical necessity isneeded that is more functional oroperational and specific to meet theneeds of children. Informed pedia-tricians can help advance such a defi-nition.

Variability in “Essential Health Bene-fits,” as intended by the ACA, is alsocause for concern. There are 10 cat-egories of Essential Health Benefits,including item 10—pediatric servicesincluding vision and oral care. Thestates are allowed individually todefine the benefits for each of these10 categories. Therefore, there is agreat likelihood of significant variation

in pediatric benefits throughout thenation. States are likely to use differ-ent methods of determining medicalnecessity.

Some examples may help to illustratethe unique needs of children. Onesuch example is the nuance betweenrehabilitative and habilitative ser-vices. Rehabilitative and habilitativeservices and devices are specificallyaddressed as 1 of 10 necessary cat-egories of Essential Health Benefits inthe ACA. Currently, in many instances,health care coverage is limited torehabilitative services, referring tothe need to restore a lost function.Habilitation suggests a function orskill not yet acquired or attained.More specifically, the National Asso-ciation of Insurance Commissionersdefines habilitation as “health careservices that help a person keep,learn, or improve skills and func-tioning for daily living.” With today’smedical knowledge, conditions poorlyunderstood in the past may now besubject to significant improvement,even functions that have not yetbeen acquired. Habilitation and re-habilitation services are usually pro-vided by the same professionals, theonly difference being the indicationfor therapeutic intervention. The caseis also illustrated when one consid-ers speech therapy for a child withautism or physical therapy for a childwith hypotonia—motor skills anddevelopmental milestones not yetachieved. Every newborn infant isa well of unknown potential. Theterms habilitative and rehabilitativeshould be interchangeable wherechildren are concerned. Develop-mental milestones represent stand-ards achieved by most children ina given time frame, but not all chil-dren follow the same trajectory. Aprimary focus needs to be on thepotential for functional gain—hence,habilitative services.

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Evidence of effectiveness is a corner-stone of medical necessity, yet suchdata for children may not be readilyavailable. It would be beneficial ifmedical necessity was governed bytraditional evidence grading, and if notavailable, a hierarchy or algorithm ofstandards should be applied. The AAPhas published 2 policy statements toaid decision makers in classifyingclinical recommendations and ensur-ing transparency in issuing clinicalguidelines.4,5 If patient-centered orscientific evidence for children is in-sufficient, then professional standardsof care for children must be consid-ered. The AAP, other pediatric medicalspecialty societies, and consensusexpert pediatric opinion could serveas references for defining essentialpediatric care in the context of medi-cally necessary services. Hence, thepediatric definition of medical ne-cessity should be as follows: healthcare interventions that are evi-dence based, evidence informed,or based on consensus advisoryopinion and that are recommendedby recognized health care pro-fessionals, such as the AAP, topromote optimal growth and de-velopment in a child and to pre-vent, detect, diagnose, treat,ameliorate, or palliate the effectsof physical, genetic, congenital,developmental, behavioral, or men-tal conditions, injuries, or dis-abilities.

Value is another parameter in theconsideration of medical necessity.Value is not simply a cost-benefitassumption. Value, in fact, may bea subjective consideration. The re-cipient may have an entirely differentperception of value than the provideror payer. Value implies quality (ie,access to age-appropriate care, in anappropriate setting, by appropriatepersonnel) plus desired outcomeat a reasonable cost. Pediatricians

recognize the so-called marginal effectof some services—extensive inter-ventions for limited or no essentialbenefit. However, children deserve theintent embedded in the Medicaidprovision of the Early and PeriodicScreening, Diagnosis, and Treatmentregimen, specifically treatment. Givena pediatric definition of medical ne-cessity as mentioned previously, thevalue of services might also be con-sidered. Examples in which this isparticularly true include children withautism spectrum disorders, neuro-developmental disorders, or expres-sive speech delay, conditions forwhich needs are unique and im-provement may be slow. Similarly,services that have been provided foran appropriate period of time by anappropriate provider could be dis-continued if there is no measureablebenefit. In short, services should beprovided to children, but continuity isonly ensured if there is evidence ofa significant measureable benefit. Itmay be that the only therapeuticbenefit is maintenance at a given levelof function. If this facilitates moremanageable daily living, then theservice has value. This might best beexemplified by the continuation ofoccupational or physical therapy fora child with neurologic damage if onlyto facilitate safe transfers or to min-imize the usual contractures. The goalis to achieve value for both the re-cipient and the provider. Resourcesare limited, but every child, with orwithout disability, deserves the op-portunity to declare his or her po-tential for improvement in his or herdaily life. Difficult decisions are partof medical necessity. Cost should notbe the basis for denial of services, butthe delivery of care in a setting thatdemonstrates lower cost could beacceptable if quality is not compro-mised.

Transparency in today’s health caredelivery system is essential to credi-bility. Health plans need to be clearwith respect to the evaluation anddeterminations of medical necessity.The decision pathway, authority cre-dentials of decision makers, andtimeliness in the process shouldfeature identifiable criteria orbenchmarks in rendering decisionsrelevant to medical necessity. Theexpectations of all health plans, in-cluding Medicaid and Medicare,should be clear in anticipation ofmedical necessity requirements, andsimilarly, the decision-making pro-cess should be equally transparent.Consideration might be given to therole of a family advocate or om-budsmen in protecting children andfamilies and intervening to aid insolving their problems related tomedical necessity decisions.

As health care reform advances, con-tracts between providers of care andhealth care organizations, whetherthey are medical group practices, ac-countable care organizations, orhealth plans, will define expectationsand obligations. Essential languageshould exist to address the uniqueneeds of children in the context ofmedical necessity. The right of a childto optimal growth and developmentshould be a universal expectationlimited only by the restraints ofphysical or genetic conditions. Newand emerging health care deliverymodels, including accountable careorganizations, bundled payments cov-ering hospital and physician services,disease-management models, andothers, will influence how health careservices are managed for beneficia-ries. There will also be contractualarrangements with providers of pri-mary and specialty care, and federaland/or state regulations will influencethese contractual relationships. Thistime of transition affords pediatricians

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an opportunity to affect not onlyoverall health care benefits but alsothe medical necessity decisions thataffect pediatric care. All of theseagreements should feature essentiallanguage that recognizes the uniqueneeds of children and ensures moreequitable care for all children. The AAPand its member pediatricians are theinformed advocates who can advancea better understanding of medical

necessity decisions on behalf of chil-

dren.

LEAD AUTHORThomas F. Long, MD, FAAP

COMMITTEE ON CHILD HEALTHFINANCING, 2012–2013Thomas F. Long, MD, FAAP, ChairpersonMark Helm, MD, MBA, FAAPMark L. Hudak, MD, FAAPAndrew D. Racine, MD, PhD, FAAP

Budd Shenkin, MD, FAAPIris Grace Snider, MD, FAAPPatience Haydock White, MD, MA, FAAPNorman Chip Harbaugh, MD, FAAPMolly Droge, MD, FAAP

FORMER COMMITTEE MEMBERSThomas Chiu, MD, MBA, FAAPRussell Clark Libby, MD, FAAP

STAFFEdward Zimmerman, MS

REFERENCES

1. American Academy of Pediatrics Committeeon Child Health Financing. Model contractuallanguage for medical necessity for children.Pediatrics. 2005;116(1):261–262

2. Singer S, Berthold L, Vorhaus C, et al. De-creasing Variation in Medical NecessityDecision-Making. Stanford, CA: Center forHealth Policy, Stanford University; 1999

3. Hagan J, Shaw J, Duncan P, eds. BrightFutures: Guidelines for Health Supervision ofInfants, Children, and Adolescents, 3rd ed.Elk Grove Village, IL: American Academy ofPediatrics; 2008

4. American Academy of Pediatrics SteeringCommittee on Quality Improvement andManagement. Classifying recommendations

for clinical practice guidelines. Pediatrics.2004;114(3):874–877

5. Shiffman RN, Marcuse EK, Moyer VA, et al;American Academy of Pediatrics SteeringCommittee on Quality Improvement andManagement. Toward transparent clini-cal policies. Pediatrics. 2008;121(3):643–646

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DOI: 10.1542/peds.2013-1637; originally published online July 29, 2013; 2013;132;398Pediatrics

COMMITTEE ON CHILD HEALTH FINANCINGEssential Contractual Language for Medical Necessity in Children

  

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