A letter of medical necessity (LMN) is a written statement from a licensed provider explaining why a patient needs a specific treatment, product, or service to diagnose, treat, or prevent a medical condition. Patients most often use one to show that an expense counts as medical care so that it can be paid for with a health savings account (HSA) or flexible spending account (FSA). Insurers and benefits administrators may also ask for one before approving or reimbursing an item that isn't obviously medical.
For telehealth brands, the LMN has moved from a back-office form to a front-of-funnel question. Patients paying cash want to know whether they can use pre-tax dollars, and "HSA/FSA eligible" has become a common line on landing pages. That makes the LMN part of your cash-pay model and checkout experience, not just your clinical paperwork. It also makes it a compliance topic, because the IRS has been clear that a doctor's note cannot turn a general wellness purchase into a medical expense.
This guide explains what a letter of medical necessity is, the IRS standard behind it, what a good LMN includes, where it fits in a telehealth workflow, and the mistakes that put brands and patients at risk.
This article is general information, not tax or legal advice. Patients should confirm eligibility with their plan administrator or a tax professional.
What Is a Letter of Medical Necessity?
An LMN is documentation, not a prescription and not a guarantee. It records a provider's clinical judgment that a patient needs a particular item or service because of a diagnosed condition, and it explains how that item or service treats or manages the condition.
You will see LMNs in three common situations:
- HSA and FSA spending. The patient wants to pay for an item with account funds, and the item qualifies only when used to treat a specific condition.
- Insurance coverage. A payer wants the provider's reasoning before covering a treatment, device, or service.
- Durable medical equipment and supplies. A supplier or plan needs a provider's statement that the equipment is needed for the patient's condition.
For a cash-pay telehealth brand, this is the most common situation. Your patient payment platform may accept HSA and FSA cards, but card acceptance and eligibility are two different questions. Accepting the card is a payments feature. Whether the specific purchase qualifies depends on tax rules and the patient's plan.
The IRS Standard Behind Every LMN
HSA and FSA funds can be used tax-free only for qualified medical expenses. The IRS ties that definition to "medical care" under section 213(d) of the Internal Revenue Code. In its FAQ on medical expenses related to nutrition, wellness, and general health, the IRS says medical expenses are "the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and for the purpose of affecting any part or function of the body." It adds that they must be "primarily to alleviate or prevent a physical or mental disability or illness" and do not include "expenses that are merely beneficial to general health."
That last line is the heart of the LMN question. Plenty of products sit between general health and medical care. The LMN is how a provider documents that, for this patient, the item treats a diagnosed condition and isn't just a healthy habit.
Where the Gray Zone Sits
The IRS FAQ walks through several categories that telehealth and wellness brands run into. The pattern is the same in each one: the expense can qualify only when it treats a specific condition diagnosed by a physician.
| Expense type | What the IRS says (summary) | Where an LMN fits |
|---|
| Weight-loss programs | Can qualify only if the program treats a specific disease diagnosed by a physician, such as obesity, diabetes, hypertension, or heart disease | Documents the diagnosis and why the program treats it |
| Gym or fitness memberships | Can qualify only if purchased for the sole purpose of treating a diagnosed disease or affecting a structure or function of the body, such as a prescribed physical therapy plan | Documents the condition and the prescribed use |
| Nutritional supplements | Can qualify only if recommended by a medical practitioner as treatment for a specific condition diagnosed by a physician | Documents the recommendation and the condition |
| Food and beverages | Qualifies only in narrow cases: the item does not meet normal nutritional needs, it treats an illness, and a physician substantiates the need | Rarely applies; ordinary food does not become medical |
| General wellness | Expenses that are merely beneficial to general health do not qualify | An LMN does not change this |
The takeaway for operators: an LMN supports eligibility when there is a real diagnosis and a real treatment relationship. It does not create eligibility where none exists.
What a Letter of Medical Necessity Can't Do
In March 2024, the IRS issued an alert warning taxpayers about companies misrepresenting wellness expenses as medical care (IR-2024-65). The agency said that "some companies mistakenly claim that notes from doctors based merely on self-reported health information can convert non-medical food, wellness and exercise expenses into medical expenses."
The IRS also warned about the consequences for plans. If a plan is not qualified, "all payments made to taxpayers under the plan, even reimbursements for actual medical expenses, are includible in income."
For a telehealth brand, that alert sets three clear limits:
- A letter is not a loophole. Paying a provider for a note does not make an ineligible purchase eligible.
- Self-reported answers alone are not enough. A checkbox questionnaire that auto-generates an LMN, with no real clinical evaluation, is the pattern the IRS called out.
- The plan decides. The HSA trustee, FSA administrator, or employer plan applies the rules. Your brand can't declare a product eligible for every patient.
This is why "HSA/FSA eligible" marketing copy needs care. A safer pattern is to say that patients may be able to use HSA or FSA funds, that eligibility depends on their plan and their medical situation, and that they should check with their plan administrator.
What a Strong Letter of Medical Necessity Includes
There is no single federal LMN template, and plans may ask for their own forms. Most administrators look for the same core information. A well-written letter of medical necessity usually includes:
- Patient information: full name and date of birth, plus any plan or member ID the administrator requires.
- Provider information: name, credentials, license number and state, NPI if relevant, contact details, and signature.
- Diagnosis: the specific medical condition, often with an ICD-10 code.
- Recommended item or service: what the patient needs, described clearly enough that the administrator can match it to the purchase.
- Medical rationale: how the item or service treats, mitigates, or prevents the diagnosed condition.
- Duration: how long the treatment is expected to last, such as 6 or 12 months.
- Date: when the letter was written, since some plans only accept letters for a limited period.
A Simple LMN Structure
Here is a neutral structure providers can adapt. It is an outline of the sections, not legal language, and plans may require their own form.
Date: [Date]
Re: Letter of medical necessity for [Patient full name], DOB [date]
I am a licensed [credential] in [state], and I evaluated [Patient name] on [date of evaluation]. [Patient name] has been diagnosed with [condition and ICD-10 code].
I am recommending [item or service] as part of the treatment plan for this condition. [One to three sentences explaining how the item or service treats or manages the condition.]
I expect this treatment to be needed for [duration]. Please contact me at [phone or email] with any questions.
[Provider name, credentials, license number, NPI, signature]
The rationale section is the one that matters most. A vague line such as "this will improve the patient's health" invites a denial. A specific line that connects the item to the diagnosed condition is what administrators look for.
HSA vs. FSA: What Changes for Your Patients
HSAs and FSAs both use the same definition of medical care, but they handle proof differently. IRS Publication 969 covers both account types.
| Feature | HSA (health savings account) | FSA (health flexible spending account) |
|---|
| Who owns it | The individual account holder | Offered through an employer plan |
| What counts | Qualified medical expenses, meaning medical care as defined in section 213(d) | Medical care as defined in section 213(d) |
| Proof | The account holder keeps records showing the expense was qualified | The plan requires a written statement from an independent third party showing the expense was incurred and its amount |
| If the money is misused | Distributions not used for qualified medical expenses are taxable and face an additional 20% tax | Claims for non-qualified expenses can be denied |
| Where an LMN helps | Supports the patient's records if the expense is ever questioned | Often requested by the administrator before reimbursing a dual-purpose item |
Publication 969 also notes that over-the-counter medicine (whether or not prescribed) and menstrual care products count as medical care for health FSAs. That matters for brands that sell OTC products alongside prescription programs.
The practical point for your support team: HSA holders usually carry the burden of keeping records themselves, while FSA administrators often ask for documentation up front. Patients will ask you different questions depending on which account they have.
Where the LMN Fits in a Telehealth Workflow
When a brand decides to support LMNs, it should build them into the clinical workflow, not bolt them onto checkout. The letter is only as strong as the evaluation behind it.
Intake
The process starts with patient intake software that collects the medical history, current symptoms, and existing diagnoses a provider needs. Good intake gives the provider enough context to make a real decision. It should never promise the patient an LMN or a specific outcome before a provider has reviewed the case.
Clinical Evaluation
A licensed provider reviews the intake, asks follow-up questions, and decides whether a diagnosis and treatment plan are appropriate. Depending on the program and state rules, this can happen in a live visit or through asynchronous telehealth. Either way, the provider must hold an appropriate license in the patient's state, which is where your telehealth provider network comes in.
If the provider does not find a condition that the item treats, there is no LMN. That outcome has to be acceptable to the business. A program that issues a letter to every paying customer is the exact model the IRS warned about.
Documentation and Storage
An LMN contains a diagnosis, which makes it protected health information. Store it in your EMR alongside the visit record, limit access, and deliver it to the patient through a secure channel. The same HIPAA compliance rules that cover the rest of the chart apply here.
Payment and Support
At checkout, the patient pays with an HSA or FSA card, another method, or both, and seeks reimbursement later. Your healthcare payment system should support HSA and FSA cards, and your receipts should be clear enough for an administrator to match: date, item, amount, and the patient's name.
Support teams should have a standard answer ready. A good one explains that eligibility depends on the plan, that the provider issues an LMN only when it is clinically appropriate, and that the patient should confirm with their administrator.
Compliance Mistakes Telehealth Brands Make With LMNs
Most LMN problems come from marketing and product, not the clinical side. These are the patterns to avoid:
- Promising eligibility. Copy such as "100% HSA/FSA eligible" or "save 30% with pre-tax dollars" implies an outcome the brand cannot control. Eligibility depends on the patient's plan and medical situation.
- Selling the letter. A paid "LMN add-on" that any customer can buy, regardless of clinical need, mirrors the scheme in the IRS alert.
- Auto-generating letters from questionnaires. Self-reported answers can inform a provider's review. They cannot replace it.
- Using one template for every patient. A letter that does not name the patient's specific condition and explain how the item treats it is weak documentation.
- Treating the LMN as a prescription guarantee. An LMN documents a provider's judgment. It does not guarantee that a prescription will be issued, and patient-facing copy should say that a licensed provider decides whether treatment is appropriate.
- Skipping the plan. Brands sometimes tell patients they "qualify" without mentioning the administrator. Always point patients to their plan for the final answer.
- Ignoring compounded medication rules. If the program involves compounded medications, describe them accurately and never imply they are FDA-approved.
Flag for legal or Cutter review: this section and any patient-facing HSA/FSA copy.
How Bask Health Supports HSA/FSA-Ready Telehealth Programs
Bask Health gives telehealth brands the infrastructure to run cash-pay programs that patients can pay for in the way that works for them, while keeping clinical decisions with licensed providers.
- Flexible payments. Bask's payment processing lets patients pay with credit, debit, HSA/FSA, and more.
- Integrated provider networks. Every Bask plan includes integrated doctor networks so that brands can choose from multiple networks. Enterprise customers can also bring their own clinical network.
- Intake and clinical workflows. Brands can run synchronous and asynchronous care with customizable treatment pathways, so the evaluation behind any documentation is a real clinical step.
- Records and prescribing. EMR and e-prescribing keep visit notes, diagnoses, and prescriptions in one place.
- Security and compliance. Bask supports HIPAA and LegitScript compliance, with SOC 2 Type II controls, MFA, and audit logging. See Bask security.
- Products beyond Rx. Brands can offer prescription medications, OTC products, and medical devices in one storefront.
- Speed and scale. Brands launch in days, not months. Bask supports 250+ U.S. telehealth companies and has processed 10.5M+ orders.
If you are planning an HSA/FSA-friendly program, compare Bask plans or talk to the Bask team.
FAQ
What is a letter of medical necessity?
A letter of medical necessity is a written statement from a licensed provider explaining why a patient needs a specific item or service to treat, mitigate, or prevent a diagnosed medical condition. Patients often use it to support HSA or FSA spending or insurance coverage.
Does a letter of medical necessity make something HSA or FSA eligible?
Not on its own. An LMN supports eligibility only when the item or service is medical care for a diagnosed condition. The IRS has warned that doctor's notes based merely on self-reported information cannot turn general wellness, food, or exercise expenses into medical expenses.
Who can write a letter of medical necessity?
A licensed provider who has evaluated the patient, such as a physician, nurse practitioner, or physician assistant, depending on the plan's requirements and the provider's scope of practice. The provider should be licensed in the state where the patient receives care.
How long is a letter of medical necessity valid?
There is no single federal rule. Validity depends on the plan, and a plan may tie it to the treatment duration the provider states in the letter or ask for a new letter each plan year. Patients should check their plan's rules.
Can a telehealth provider write a letter of medical necessity?
Yes, if the provider is appropriately licensed, evaluates the patient, and determines that the item or service is medically necessary. The evaluation can happen through a live or asynchronous visit when the program and state rules allow it.
Conclusion
A letter of medical necessity is a useful tool for telehealth brands that serve cash-pay patients. It can help patients use HSA and FSA funds for qualifying treatment and reduce friction with plan administrators. But it only works when it reflects a real diagnosis and a real clinical decision.
Build the LMN into your clinical workflow, keep it in the chart, and write patient-facing copy that points to the plan for the final answer. Brands that treat the letter as documentation, not as a product, stay on the right side of the IRS and keep patient trust.
References
- Internal Revenue Service. (2026). Frequently asked questions about medical expenses related to nutrition, wellness and general health. https://www.irs.gov/individuals/frequently-asked-questions-about-medical-expenses-related-to-nutrition-wellness-and-general-health
- Internal Revenue Service. (2024). IRS alert: Beware of companies misrepresenting nutrition, wellness and general health expenses as medical care for FSAs, HSAs, HRAs and MSAs. https://www.irs.gov/newsroom/irs-alert-beware-of-companies-misrepresenting-nutrition-wellness-and-general-health-expenses-as-medical-care-for-fsas-hsas-hras-and-msas
- Internal Revenue Service. (2025). Publication 969: Health savings accounts and other tax-favored health plans. https://www.irs.gov/publications/p969
