Health Information Management

Unscramble the complexities of ABNs

JustCoding News: Outpatient, March 7, 2012

Want to receive articles like this one in your inbox? Subscribe to JustCoding News: Outpatient!

Just because a physician considers a service or procedure medically necessary doesn't mean insurance carriers will pay for it. When a service or procedure is not covered, facilities must provide patients with an Advanced Beneficiary Notice of Noncoverage (ABN).

The purpose of the ABN is to notify beneficiaries that they are responsible for payment in the event that Medicare doesn't pay for certain services and procedures. Generally, when a physician orders services or procedures in excess of what the hospital believes to be medically necessary under Medicare guidelines, the hospital can provide the patient with an ABN prior to the performance of those services or procedures.

Know when limits on liability apply
A facility must provide patients with an ABN when limits on liability (LOL) apply. LOL specifically applies when a facility believes the service does not meet Medicare's definition of medically necessary for that particular patient's condition, says Judith Kares, JD, CPC, regulatory specialist for HCPro, Inc., in Danvers, MA. However, those services might be medically necessary for other patients with other conditions, she adds.

LOL also applies when a facility believes a service will be denied because the patient is undergoing a screening service outside of the normal frequency parameters, Kares says. For example, Medicare will cover a screening mammogram once a year for women over age 40. This means that if a physician orders a screening mammogram twice per year for a 45-year-old woman, Medicare will likely not pay for the service.

A lack of medical necessity occurs when the diagnosis codes on the outpatient order fail to support the CPT® codes that describe the services ordered.

One of the biggest challenges to implementing an effective ABN process is identifying Medicare's medical necessity guidelines, Kares says. The guidelines are generally based on coverage criteria included in various CMS manuals, as well as national coverage determinations (NCD) and local coverage determinations (LCD). NCDs apply to every facility nationwide, but LCDs are specific to a local Fiscal Intermediary (FI) or Medicare Administrative Contractor (MAC). LCDs can vary between FIs/MACs as well.

Consider this scenario: A physician orders a bacterial urine culture (CPT code 87086). On the order, the physician documents Oasthouse urine disease (ICD-9-CM code 270.2) as the reason for the test. According to the National Clinical Diagnostic Laboratory NCD 190.12, this diagnosis does not support medical necessity for a bacterial urine culture. Because the test will likely be denied due to a lack of medical necessity, this case is considered an LOL. The facility must provide an ABN to reserve the right to bill the patient, Kares says.

Determine when LOL does not apply
LOL does not apply when a facility expects a service to be denied for categorical or technical reasons, Kares says.

Medicare will issue a categorical denial for a service that it does not cover. Kares compares these types of denials to flowers. "Flowers might improve patient outcomes and they certainly improve patient morale, but we know Medicare is not going to pay for a lovely bouquet of flowers."

Similarly, Medicare will categorically deny routine physicals, most vaccinations, hearing aids, cosmetic surgery, and other services.

When a facility provides a service in a way that does not satisfy Medicare's conditions of coverage, Medicare will issue a technical denial. For example, Medicare does not provide coverage for most outpatient self-administered drugs, Kares says.

"When you have either categorical or technical denials, you are not required to provide an ABN, but you may," Kares says. "If you do so, you can use the same ABN form that is required when limitation on liability arises."

Append applicable modifiers
Four different modifiers indicate liability for noncovered services. Coders should append these modifiers to the CPT codes for the services for which they expect CMS to deny payment.

Coders should append modifier -GA when they expect Medicare to deny payment for an item or service, says Jacqueline Woeppel, MBA, RHIA, CCS, education coordinator at Vanderbilt University Health System in Nashville. LOL applies for these services.

To append modifier -GA, a patient must sign the ABN, and the signed ABN must be on file. If the patient does not sign the ABN, documentation in his or her record should reflect the fact that a staff member offered an ABN and the patient refused to sign it.

If the claim is denied, and the patient has not signed an ABN, the patient is not liable for the bill, Woeppel says. If CMS denies the claim and the patient does sign the ABN, he or she is responsible for the bill. This means the patient may pay it or may ask a secondary insurance company to cover it.

Modifier -GZ indicates a service does not meet Medicare policy standards for medical necessity and that no ABN is on file. In these situations, the hospital likely made an error, Kares says. The hospital should have known that LOL applies, and the patient should have signed an ABN. As a result, the hospital is responsible for the charges.

The modifier notifies Medicare that the provider does not expect Medicare will cover the service. In Transmittal R2148 and Transmittal R366PI, CMS directs payers to automatically deny line items with modifier -GZ. Presumably, if a facility bills line items with a -GZ modifier, it would have billed them as noncovered, Kares says.

Coders should report modifier -GY when they expect a denial from Medicare for statutory or categorical exclusions and technical denials.

Generally, this modifier results in a denial, so the patient's secondary insurance will pay the claim, Woeppel says. The facility should not require the patient to sign an ABN in these instances.

When coders append modifier -GY, the hospital will receive an automatic line-item denial, and the patient becomes liable for the charge either personally or through a secondary insurance.

Modifier -GX can also be used when a facility expects a denial from Medicare for statutory or categorical exclusions and technical denials. The patient is liable for the charges. Essentially, the facility knows that

it is not required to issue an ABN; however, it renders one to the patient regardless.
Different payers follow different rules, so coders should find out what non-Medicare payers expect, Woeppel says.

Editor’s note: This article was originally published in Briefings on APCs. E-mail your questions to Senior Managing Editor Michelle A. Leppert, CPC-A, at

Want to receive articles like this one in your inbox? Subscribe to JustCoding News: Outpatient!

Most Popular