Cosmetic or not, will this be covered?

By Faith C. M. McNicholas, RHIT, CPC, CPCD, PCS, CDC, Manager, Lead Coding and Reimbursement Strategist, February 1, 2024

Academy coding staff address important coding topics each month in DermWorld Coding Consult. Read more Derm Coding Consult articles.

Dermatologists play a crucial role in treating severe skin diseases, including the treatment of malignant neoplasms of the skin as well as other debilitating chronic skin diseases. However, the extent of certainty regarding which health insurance plans cover some of the services dermatologists perform can be a source of confusion from patient to patient.

Most importantly, adherence to coding and documentation guidelines can determine the difference between claim reimbursement and claim denial. It is crucial that the patient and dermatologist thoroughly review and understand the health insurance plan coverage limitations for the service(s) intended to be provided and how that may impact claim adjudication. Being well-informed about the coverage limitations can help you make the best decisions for your patients and avoid inadvertent claim denials after the dermatologic care has been provided.

Unfortunately, the line between cosmetic and medical services can sometimes blur, and each insurance plan may have unique rules and criteria. To avoid unexpected claims and coverage denials, encourage patients to communicate with their insurance plan provider to gain a clear understanding of coverage so that they can make informed decisions regarding their dermatologic care.

Both the dermatology practice staff and the patient should make a concerted effort to verify patient health insurance plan coverage so that the dermatology practice can appropriately report the procedure or service based on the coding and billing guidelines.

Below are a few tips to get your patients involved in ensuring that the services provided by a dermatologist do not get denied coverage.

1. Physicians and patients should carefully review the insurance policy for its dermatology-related services and procedure coverage. It is essential to understand the policy’s definitions, exclusions, and limitations related to both cosmetic and medical dermatology services including treatment for acne, vitiligo, and benign lesion excision that sometimes can be construed as cosmetic by some payers.

2. During the patient encounter before any service that may be deemed ‘not medically necessary’ is performed, the dermatologist and the patient must clearly discuss and determine whether the services they need are medically necessary. Discussion should include the financial impact, should the payer deny coverage. Such discussions with the dermatologist’s office can help patients make an informed decision on whether to proceed with the service or not.

3. For services that do not meet the medical necessity criteria, patients can consider exploring supplementary insurance policies or health care financing options to help cover the costs.

From a health insurance coverage and billing point of view, it is essential to distinguish between cosmetic and medical dermatology services, as the coverage for each type can vary significantly. Coverage of a dermatology medical procedure, treatment, or service by health insurance plans often depends upon several factors, including the medical necessity, the individual insurance plan policy(s), and the specific circumstances of the patient.

Medical necessity

As medical dermatology services typically focus on diagnosing and treating skin conditions that have a direct impact on a patient’s health, these services encompass a wide range of conditions, including skin cancer, eczema, psoriasis, acne, dermatitis, and various infections. Medical dermatology may also include the performance of diagnostic biopsies, other skin surgeries, or the management of chronic skin disorders.

Health insurance plans typically cover services and procedures that are considered medically necessary to diagnose or treat a medical condition. The good news is that health insurance plans will also provide coverage criteria policies for medical dermatology services, which include documentation and coding guidelines. This information guides dermatologists as to what is considered medically necessary and can be considered a covered service. However, the extent of coverage may vary depending on the insurance plan, and individual patient plan policy.

It is therefore important for dermatologists to ensure that the services provided meet the definition of ‘medical necessity’ as indicated by the insurance plan. To achieve this, medical record documentation must support the service provided and the coding reported to describe the service provided.

Insurance companies may have their definitions of what constitutes “medically necessary.” These definitions can vary from one payer to another, and dermatologists and patients alike need to understand the specific criteria of the insurance plan in question.

For example, treating benign skin lesions that do not pose a threat to patient health may be considered cosmetic. However, most payers may consider the treatment of benign lesions medically necessary when, as indicated in their coverage determination policy, the benign skin lesions pose a threat to the health or bodily function of the patient.

Specifically, in its local coverage policies, Medicare states, in part, that it will consider the removal of benign skin lesions as medically necessary — and not cosmetic — if one or more of the following conditions is present and clearly documented in the medical record:

1. The lesion has one or more of the following characteristics:

   1. Bleeding

   2. Intense itching

   3. Pain

2. The lesion has physical evidence of inflammation (e.g., purulence, oozing, edema, erythema).

3. The lesion obstructs an orifice or clinically restricts vision.

4. The clinical diagnosis is uncertain, particularly where malignancy is a realistic consideration based on lesional appearance (e.g., non-response to conventional treatment, or change in appearance).

5. A prior biopsy suggests or is indicative of lesion malignancy or premalignancy.

6. The lesion is in an anatomical region subject to recurrent physical trauma and there is documentation that such trauma has, in fact, occurred.

Insurance plans and policies

Different insurance plans and policies play a significant role in determining coverage for services rendered by dermatologists. Most plans have varying levels of coverage for services that are cosmetic and/or medically necessary (non-cosmetic). Some plans may cover a broader range of services, while others may have more restrictions that can include the following:

Exclusions and limitations riders

Insurance plans often have exclusions and limitations that specify what they will and will not cover. Elective or purely cosmetic procedures are commonly excluded from coverage. However, although a service/procedure may typically be deemed cosmetic, some plans may cover such service or procedure if they are associated with a medical condition, such as scar revision after excision and repair of a benign or malignant lesion.

Pre-authorization

In some cases, even procedures and/or services that can be deemed medically necessary may not be automatically covered. Some insurance plans require pre-authorization for certain procedures and services. Even if a procedure or service is medically necessary, the insurance plan may need medical record documentation from the dermatologist to justify the medical necessity of the service before granting the dermatologist authorization to proceed with the treatment. Failure to meet these requirements could result in denial of coverage.

Alternative treatments

Some insurance policies may require patients to try less expensive or alternative treatments before approving coverage for more costly options. For example, a patient may be required to try topical treatments before a more invasive dermatologic procedure. This type of policy can affect the coverage of certain dermatology services.

Coding and documentation

To ensure that dermatology procedures and services are appropriately covered, proper documentation and coding are essential. Dermatologists must use specific clear and succinct terminology in the medical record that supports specific CPT codes for the service and the nature of the procedure provided.

If a procedure is medically necessary, it is more likely to be covered if it is documented and coded correctly.

In conclusion, navigating the complexities of dermatology procedures and services covered by health insurance plans can be a challenging and daunting task for dermatology practices and patients. That is why the practice staff must be well-informed of payer guidelines and limitations before the service is provided and a claim is submitted to the insurance plan. Having this knowledge and coverage information background ahead of the patient encounter protects the practice from being left ‘holding the bag’ should there be a claim denial.

The practice should collaborate with the patient and involve them in navigating payer coverage policies to ensure appropriate reimbursement for the procedures and services provided.

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