Medically Necessary Testing:

Principle Health Systems uses medically necessary lab testing, but since we do not have access to our patient’s clients, we must rely on the discretion of the doctor who orders the test. Federal law has defined medical necessity in Title XVIII of the Social Security Act, section 1862 (a)(1)(a). This definition provides: Notwithstanding any other provisions of this title, no payment may be made under Part A or Part B for any expenses incurred for items or services, which are not reasonable and necessary for the diagnosis or treatment of illness or injury, or to improve the functioning of a malformed body member. Medicare carrier and fiscal intermediary Local Coverage Determinations (LCD) and National Coverage Determinations (NCD) define the medical necessity requirements. Covered diagnoses, documentation requirements, and limitations of coverage for specific services are also incorporated in the many promulgated LCDs and NCDs that serve as a roadmap for a provider’s establishment of medical necessity. A physician’s clinical judgment is the guiding principle in relation to the appropriateness of medical necessity.

Compliance with Federal Law:

Principle Health Systems reinforces compliance with federal law. The federal government has indicated the appropriate medical compliance in regard to lawful laboratory testing and practices here.

Laboratory Fee Schedules:

Principle Health Systems supports compliance with clinical laboratory fees as defined by the Centers for Medicaid Services. These laboratory fee schedules may be reviewed here.

Covered Diagnosis Codes:

Principle Health Systems offers links to covered diagnosis codes for National and Local Medicare Limited Coverage Policies to be used as guidelines in determining if tests are reimbursable by a federal payor, such as Medicare or Medicaid, based upon the patient’s symptoms or medical condition, as indicated by the appropriate ICD-10 code.

Diagnosis codes must be relevant to the patient’s symptoms or conditions, and must align with documentation in the patient’s medical records. All tests must be medically necessary are defined by law.

CPT codes provided by Principle Health Systems are for informational purposes only and are based on AMA rules and regulations. These codes are the responsibility of the billing party and Principle Health Systems cannot disclose or advise which CPT codes apply to a specific patient or diagnosis. If there are any questions or concerns regarding the proper codes, please consult a professional. Local Coverage Determinations (LCD) and National Coverage Determinations (NCD) are the only official determination if whether a test is covered by Medicare and Medicaid. Links to National and Local Coverage Determination indexes are found here and also here.


Preserving patient record confidentiality is essential to Principle Health Systems. The federal CMS guidance on HIPAA can be found here.

Additional Privacy Concerns: The privacy of all patients seeking treatment for drug abuse is protected by 42 CFR Part 2. More information on this statute is listed here.

The HITECH Act provides further safeguards in regard to the use of EHR and can be found here.

Urine Drug Testing Resources

Several industry-leading organizations have published guidelines with recommendations on the correct use of urine-drug testing in clinical facilities. The Principle Health Systems website offers links to the informative articles and case studies. Information in these publications may cover risk, frequency of UDT, and helpful advice when presented with unexpected UDT results.



Principle Health Systems acknowledges the significance of proper documentation in today’s healthcare industry. Insurance companies, as well as Medicare and Medicaid, may only cover services that are prominently defined as medical necessity, making proper documentation an essential practice in patient management. Most Local Coverage Determinations (LCDs) offer guidance on how to get reimbursement for the desired services in their area and the extent of record keeping that is required.

We have provided information outlining the minimum documentation elements needed to support correct diagnosis and medical necessity of patient’s treatment for your reference.

Required Elements of Medical Necessity Documentation1

All records must be legible and include:

  • Provider Name
  • NPI number
  • Patient Name
  • Date(s) of Service

Initial intake document including:

  • Medical History
  • Copy of patient driver’s license if patient is receiving prescription medications
  • Patient signature
  • Physical Examination
  • Mental Health Screening (if applicable)
  • Accurate Diagnosis Code
  • Treatment Plan
  • Baseline drug test
  • Copies of test requisition forms and test results in patient charts
  • Notes indicating referral to counseling or specialists
  • Up-to-date progress reports
  • Signed physician orders for all requested tests
  • List of all prescription and illicit substances being taken
  • Notes demonstrating use and review of test results in treatment of patient

1This list reflects published guidelines from several sources and does not guarantee coverage. Check with your billing expert for additional guidance.