Claim Denied as Not Medically Necessary: What to Do Next

Mukesh MakwanaFounder & CEO · 8+ years hands-on in medical billing & RCM · Reviewed October 1, 2026

A claim denied as not medically necessary means the payer accepted that the service happened but decided, under its coverage rules, that it was not justified for that patient's diagnosis. On an electronic remittance it usually appears as CARC 50. It is often winnable: first check whether the problem is the coding, the documentation or the payer's policy, then correct the claim or appeal it before the deadline.

What to do in the first week

1. Read the exact reason. Note the CARC (usually 50, sometimes 11, "The diagnosis is inconsistent with the procedure.", or 167, "This (these) diagnosis(es) is (are) not covered.") and every remark code. The remark code often names the policy that was applied.
2. Find the coverage rule. For Medicare, look up the National Coverage Determination (NCD) or Local Coverage Determination (LCD) and its billing article in the Medicare Coverage Database. For other payers, find the plan's medical or clinical policy for that service.
3. Check the diagnosis codes on the claim. Many medical necessity denials are coding problems: a covered diagnosis was documented but not billed, the codes were in the wrong order, or a less specific code was used than the policy lists.
4. Check the note. Does the documentation show the criteria the policy asks for, such as symptoms, failed earlier treatment, test results or frequency limits?
5. Decide: corrected claim or appeal. If the claim was wrong and the note supports it, send a corrected claim. If the claim was right and the payer disagrees, appeal with the policy language and the records.
6. Put the deadline on a calendar the day the denial is posted.

Corrected claim or appeal?

Appeal deadlines

• Medicare Part B: a redetermination must be filed within 120 calendar days of receiving the initial determination; the next level, reconsideration by a Qualified Independent Contractor, within 180 calendar days of receiving the redetermination.
• Employer group health plans covered by ERISA: claimants must be given at least 180 days after an adverse benefit determination to appeal.
• Non-grandfathered commercial plans: once internal appeals are exhausted, an adverse decision based on medical necessity can generally go to independent external review under the federal rules in 45 CFR 147.136.
• Medicare Advantage, Medicaid and other plans: follow the plan's provider manual and your contract, which often set shorter provider windows.

Writing a medical necessity appeal that works

• Quote the payer's own policy, then show line by line where the record meets each criterion.
• Attach only the records that prove the point: the relevant notes, test results and the history of earlier treatment.
• Add a short letter from the treating provider when the case rests on clinical judgment.
• For commercial plans, ask for a peer-to-peer review with the plan's medical director when it is offered.
• Keep the tone factual. Reviewers decide on criteria, not on how strongly the letter disagrees.

The Medicare ABN and modifiers GA, GZ and GY

For Original Medicare, the Advance Beneficiary Notice of Noncoverage (ABN, form CMS-R-131) is how a practice shifts financial liability to the patient when it expects Medicare to deny a service as not reasonable and necessary. The patient has to receive it before the service. The claim then tells Medicare what happened, using HCPCS modifiers whose official descriptors are:

• GA: waiver of liability statement issued as required by payer policy, individual case.
• GZ: item or service expected to be denied as not reasonable and necessary (no ABN on file).
• GY: item or service statutorily excluded, does not meet the definition of any Medicare benefit or, for non-Medicare insurers, is not a contract benefit.

Without a valid ABN, the practice generally cannot bill the patient for a service Medicare denies as not reasonable and necessary. That makes the ABN a front-desk task, not a billing afterthought.

How common medical necessity denials are

In KFF's analysis of 2024 federal data for HealthCare.gov plans, lack of medical necessity was the stated reason for only 5% of in-network denials where a reason was reported, while administrative reasons made up 25%. They are not the most frequent denial, but they tend to be on higher-value services such as imaging, procedures and therapy courses, and they take the most work to overturn. That is why prevention pays.

How to stop medical necessity denials before they happen

• Check the payer's policy and authorization list when the service is ordered, not after the claim denies.
• Build documentation prompts around the criteria for your highest-volume services.
• Code to the highest specificity the note supports, and check diagnosis order.
• For Medicare patients, issue an ABN when you expect a denial, and append the right modifier.
• Track these denials by service and provider; a pattern usually points to one template or one policy.

How Sterling Global Solution LLC helps

We check coverage and authorization requirements at scheduling, match the documentation to the payer's criteria when we request prior authorization, and scrub the diagnosis and procedure pairing on every claim before it goes out. When a medical necessity denial still arrives, we read the policy that was applied, decide between a corrected claim and an appeal, and write the appeal with the policy criteria matched to your records inside the deadline. Our denial management services and prior authorization services are both part of the 30-Day Free Trial.

Frequently asked questions

Sources

X12, Claim Adjustment Reason Codes: descriptions for CARC 11, 50 and 167.
Centers for Medicare & Medicaid Services, FFS ABN: the Advance Beneficiary Notice of Noncoverage, form CMS-R-131.
Centers for Medicare & Medicaid Services, HCPCS Level II file, October 2026 release: descriptors for modifiers GA, GY and GZ.
Centers for Medicare & Medicaid Services, Medicare Coverage Database: NCDs, LCDs and billing articles.
Code of Federal Regulations, 42 CFR 405.942, 42 CFR 405.962, 29 CFR 2560.503-1 and 45 CFR 147.136: appeal time frames and external review.
KFF, Claims Denials and Appeals in ACA Marketplace Plans in 2024, March 24, 2026: share of denials for lack of medical necessity and administrative reasons.

This guide is general billing information, not legal advice. Plan rules and contracts vary. How we verify this guidance.

Related reading

• Denial management services. The full process for cutting denials across every reason code.
• Prior authorization services. Matching documentation to payer criteria before the visit.
• The real cost of a denied claim. Why rework costs more than the claim suggests.
• Cardiology billing. Where medical necessity rules bite hardest in imaging and testing.
• Behavioral health billing. Medical necessity and authorization in therapy and psychiatry.