(a) HHSC uses recognized evidence-based guidelines for inpatient hospital screening criteria. Non-physician reviewers use the guidelines as criteria for the initial approval or for the referral of inpatient reviews for medical necessity decisions. If the criteria are not met or if the non-physician reviewer has any questions concerning the appropriateness of coding or quality of care, the non-physician reviewer refers the medical record to a physician consultant under contract with HHSC for a decision. Even if the criteria are met, the physician consultant may determine that an inpatient admission was not medically necessary, and HHSC issues an admission denial. If a hospital claim is denied for lack of medical necessity or for being provided in an inappropriate setting, HHSC considers for denial physician and/or non-physician Medicaid provider claims associated with the hospital admission or service when such claims can be identified and are deemed to be the result of inappropriate admission orders. A physician consultant may determine that an inpatient admission was not medically necessary if a physician admitted a patient in observation status and the patient was discharged from the outpatient status within the Texas Medicaid Provider Procedures Manual, or any subsequent provider manuals, defined observation period.
(b) For the purposes of the TMRP, TEFRA, and facility-specific per diem methodology reviews, medical necessity means that the patient has a condition requiring treatment that can be safely provided only in the inpatient setting.

Source Note: The provisions of this §371.204 adopted to be effective June 14, 1989, 14 TexReg 2624; transferred effective September 1, 1993, as published in the Texas Register January 28, 1994, 19 TexReg 589; transferred effective September 1, 1997, as published in the Texas Register February 18, 2000, 25 TexReg 1308; amended to be effective March 30, 2003, 28 TexReg 2481; amended to be effective January 11, 2004, 29 TexReg 357; amended to be effective August 1,2006, 31TexReg 5603; amended to be effective January 1, 2014, 38 TexReg9479; amended to be effective May 1, 2016, 41 TexReg 2941