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Using Evidence

Policy Context


Linda Bergthold, Ph.D., Adjunct Fellow and Grant Project Director, Stanford University, Center for Health Policy, Palo Alto, CA.

This session described some of the difficulties facing healthcare policymakers who make coverage decisions. It addressed the challenge of defining the term "medical necessity," which is commonly used as a basis for decisionmaking. It also described the differences between public and private health plans and discussed how policymakers can simplify and improve the decision-review process.

A coverage decision is a policy decision about categories of health interventions provided to a population as part of the contract between plan and purchaser.

A medical-necessity decision is a clinical decision about the appropriateness of a specific treatment for a specific patient (taking a coverage intervention and applying it to a specific case).

Dr. Bergthold discussed the standard steps health plans use to make coverage decisions. Decisions are reviewed at multiple levels before final approval, and health plans can use several varieties of evidence as a basis for their decisionmaking, including:

  • Expert opinion.
  • Scientific evidence.
  • Clinical practice guidelines.
  • Disease management protocols.
  • Cost-effectiveness analyses.

She noted that although most healthcare decisions can be appealed, the decisionmaking process should be clear so that both patients and physicians understand where the decisionmaking authority rests.

Dr. Bergthold focused on the importance of defining the term "medically necessary" because it is commonly used as a basis for making coverage decisions. Most statutory definitions of medical necessity include three criteria:

  • Purpose of a medically necessary intervention.
  • Scope of the intervention.
  • Evidence supporting the intervention.

Stanford University researchers have developed a model definition of medical necessity for use in private contracts. This model definition incorporates the concept of deciding authority: "An intervention is medically necessary if, as recommended by the treating physician and determined by the health plan's medical director or physician designee, it is (all of the following):

  • Purpose of the intervention: A health intervention for the purpose of treating a medical condition.
  • Scope of the intervention: The most appropriate supply or level of service, considering potential benefits and harms to the patient.
  • Available evidence: Known to be effective in improving health outcomes.
  • Value: Cost-effective for this condition compared with alternative interventions, including no intervention."

Dr. Bergthold stressed that statutory definitions of medical necessity can be powerful tools in defining the boundaries of what treatments will be covered by public payers. She suggested that clear State and local medical-necessity statutes and regulations can help to standardize and improve local medical practices.


Bergthold LA. Medical necessity: do we need it? Health Aff 1995 Winter;14(4):180-90.

Fox HB, McManus MA, Hayden MS. An analysis of medical necessity standards in States' Medicaid managed care contracts 1995-1999. Issue Brief #1. The Medicaid Managed Care Trends Project. 2000 Jan.

Stanford University Center for Health Policy: Model contractual language for medical necessity. Developed at the workshop, Decreasing Variation in Medical Necessity Decision Making. 1999 Mar 11-13; Sacramento (CA).

Steiner CA, Powe NR, Anderson GF, et al. Technology coverage decisions by health care plans and considerations by medical directors. Med Care 1997 May;35(5):472-89.

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