1. ABN Requirements, Updates and Challenges from the ALJ Ruling Preventing the “Coercion Complaint” May 16, 2014 Catherine (Kate) H. Clark, CPC, CRCE-I and Robert E. Mazer, Esquire Copyright©2014 Kohler HealthCare Consulting Inc. All rights reserved

2. Financial Liability Protections (“FLP”) Under Medicare Limitation on Liability (“LOL”) Refund Requirements (“RR”) Without Fault Provisions Except as otherwise noted, references to “MCPM” are to Medicare Claims Processing Manual, Ch. 30. 2

3. Limitation on Liability (42 U.S.C. § 1395pp) Applies to: Part A services and assigned Part B claims Principal application: Item/service not reasonable and necessary in particular instance; screening tests performed more frequently than covered Not categorical denials, such as routine physicals, most screening tests, cosmetic surgery, routine eye, dental and foot care 3

4. Limitation on Liability Medicare indemnifies beneficiary if provider “knew, or could be expected to know, that payment... could not be made,” but beneficiary did not have such knowledge. 42 U.S.C. § 1395pp(b). When beneficiary did not have such knowledge, but provider knew, or could have been expected to know, of exclusion, liability rests with provider, i.e., no payments available from Medicare or beneficiary. MCPM § 10. 4

5. Limitation on Liability No Medicare payments if beneficiary and provider “knew, or could reasonably have been expected to know, that payment could not be made….” 42 U.S.C. § 1395pp(c). When beneficiary knew or could have been reasonably expected to know items/services not covered, liability rests with beneficiary, i.e., beneficiary responsible for paying provider. MCPM § 10. 5

6. Limitation on Liability Medicare pays when both beneficiary and provider “did not know, and could not reasonably have been expected to know, that payment would not be made....” 42 U.S.C. § 1395pp(a). Medicare makes payment when neither beneficiary nor provider knew, and could not reasonably be expected to have known, items/services not covered. MCPM § 10. 6

7. Knowledge of Likely Payment Denial Beneficiary’s Knowledge – Based on written notice provided to beneficiary, or other means from which beneficiary knew, or should have known, that payment would not be made. MCPM § 40.2.1. Provider’s Knowledge – Deemed to include information in CMS or MAC notices, including manuals and bulletins, NCDs, and community standards of practice. 42 CFR § 411.406. Both – When provider furnishes ABN, provider and beneficiary knew payment would be denied. MCPM § 40.1.1. 7

8. Limitation on Liability Medicare Interpretations Payment from beneficiary cannot be requested if provider knew or should have known that Medicare would not pay “and fails to issue an ABN when required or issues a defective ABN.” MCPM § 50.7.3. Provider required to notify beneficiary in advance that item/services likely to be denied (in the form of an ABN or other acceptable written notice). MCPM § 50.2.1. Failure to furnish proper ABN does not automatically protect beneficiary who otherwise knew payment would be denied. MCPM § 40.2.4 8

9. Limitation on Liability Medicare Interpretations “NOTE: This chapter often uses the term ‘ABN’ to signify all limitation of liability notices, not just a specific ABN form such as the CMS-R-131.” MCPM § 20. “When, for a particular purpose, an approved standard form (e.g., Form CMS-R-131 …) exists, it constitutes the proper notice document. Notices not using a mandatory standard notice form may be ruled defective.” MCPM § 40.3.1. 9

10. Refund Requirements Statute (42 U.S.C. 1395m(a)(18)) Applies to: Claims for medical equipment and supplies Unassigned claims for physicians’ services Principal application: not reasonable and necessary. Statutory standard: Supplier required to refund amounts from patient unless: Before item furnished, patient informed that payment may not be made and agrees to pay; or Supplier “did not know and could not have been expected to know that payment may not be made.” Beneficiary can be held liable only if he/she signed ABN. MCPM § 10. 10

11. Without Fault No recovery of overpayment where incorrect payment recipient “without fault,” if recovery would defeat purposes of Medicare or be against equity and good conscience. 42 U.S.C. § 1395gg(c). Provider is without fault if exercised reasonable care in billing and accepting Medicare payment. MFMM Ch. 3 § 90. disclosed all material facts reasonable basis for assuming payment was correct, based on Medicare instructions, regulations and other available information. 11

12. What is an ABN? Advanced Beneficiary Notice of Non-Coverage An ABN is a prescribed form providers and suppliers must use to notify a Medicare patient that Medicare might not cover the items or services he or she is about to receive. An Advance Beneficiary Notice (ABN), also known as a waiver of liability. It’s a Medicare form found at: http://www.cms.gov/Outreach-and- Education/Medicare-Learning-Network- MLN/MLNProducts/downloads/abn_booklet_icn00626 6.pdf 12

13. What is the purpose of an ABN? ABNs allow beneficiaries (your patients) to make informed decisions about whether they would like to accept items or services despite the possibility of having to pay out-of-pocket. A signed ABN form serves as proof that a patient knew prior to accepting such services that he or she might have to pay out-of-pocket for them. 13

14. ABN Use Providers are not required to give an ABN for services or items explicitly excluded from the Medicare coverage (items that are never covered by Medicare even if medically necessary such as hearing aids). ABNs only apply if the “Original Medicare,” not for a Medicare private health plan (HMO, PPO or PFFS). A “never covered” service or item does not require an ABN to have the patient responsible. Use of ABN is voluntary. 14

15. ABN Use There is an option on the ABN to check whether or not the patient wants claim to be submitted to Medicare for the service. If it was checked “no”, then the claim submission is not required. If an ABN is signed, Medicare is billed and Medicare denies coverage. The patient can always appeal. 15

16. How can an ABN be considered invalid? A patient might not be liable for the charges if the ABN is invalid for the following reasons: It is illegible or the font is small (less than 12 point) or hard to read. The provider did not use the official CMS ABN form. The provider overuses ABNs (issues them with no reason to believe claims may be denied.) The ABN does not list the actual service rendered. The form is more than one year old. The form is signed after the date of service. The form is given to someone that cannot understand it. The form is given to someone in an emergency. The form is given after initiation of service or patient preparation (i.e., placement in the MRI machine). 16

17. Appeals The patient can always appeal an ABN if they think it is not valid Recent Administrative Law Judge (ALJ) case has the industry concerned. 17

18. How does the provider or supplier know whether Medicare considers a service medically necessary? First “medical reasonable and medically necessary” needs to be defined and coverage issues. The definition of “reasonable and necessary” varies based on both National Coverage Determinations (NCDs) and Local Coverage Determinations (LCDs). Each provider or supplier is responsible for knowing the current NCDs and LCDs governing these services. They can download the Medicare NCD Manual here http://www.cms.gov/Regulations-and- Guidance/Guidance/Manuals/Internet-Only-Manuals- IOMs.html http://www.cms.gov/Regulations-and- Guidance/Guidance/Manuals/Internet-Only-Manuals- IOMs.html Can identify the LCDs associated with their particular geographic region by using the search tool found on http://www.cms.gov/medicare-coverage-database/ http://www.cms.gov/medicare-coverage-database/ 18

19. Use of Modifiers Determine that certain services are not medically reasonable and medically necessary based on these guidelines—and issues an ABN accordingly—then add the GA modifier to the claim to indicate ABN use. Submit claims to Medicare, noting the GA modifier, which will trigger Medicare to reject the claim. After receiving the Medicare denial, provider or supplier can then collect out-of-pocket payment from patients. ________________________________________________________ GA – Not medically necessary (ABN on file) GY – Statutory exclusion (ABN provided) – often used to get secondary payer coverage GX – “Notice of Liability Issued, Voluntary Under Payer Policy” GZ – Not medically necessary (ABN not on file) 19

20. Physical Therapy Use of ABNs When should a therapist issue and ABN? An ABN must be issued in either of the following instances: Before providing items or services that the provider or supplier believes or knows Medicare may not cover Before providing items or services that Medicare usually covers but may not consider medically reasonable and medically necessary for this particular patient in this particular case In either instance it must always complete the form and have patient sign it prior to the time of service. 20

21. What are the ABN “no-no’s”? “Blanket ABNs” An ABN for every patient An ABN for every service 21

22. Physical Therapy: Special rules regarding therapy cap The American Taxpayer Relief Act (ATRA) of 2012 includes a significant change in policy regarding the use of ABNs once patients exceed the therapy cap. Effective January 3, 2013, providers must issue a valid ABN to collect out-of-pocket payment from Medicare beneficiaries for services above the therapy cap that Medicare deems not reasonable and necessary. Therapists should not issue an ABN for every beneficiary who exceeds the therapy cap; only when they believe the services in question do not meet Medicare’s definition of “reasonable or necessary.” This is a significant change from pre-2013 rules, which did not require therapists to issue ABNs for beneficiaries to be held liable for denied charges above the therapy cap. Now, if a therapist decides to issue an ABN to a patient who exceeds the therapy cap, the therapist will not attach the KX modifier to that claim. If there is no KX modifier on the claim and the therapy cap has been exceeded, the claim will be denied. The patient can then be charged for the visits. 22

23. Physical Therapy: What does the KX modifier mean? Therapist attests that he or she believes the services are reasonable and necessary. Once a therapist uses the KX modifier, he or she cannot retroactively issue an ABN. In the event that Medicare denies a claim that includes the KX modifier, the therapist—not the patient—is responsible for the cost of services. 23

24. Physical Therapy: After and ABN – is the functional limitations reporting required: Even if the therapist knows that Medicare will deny the claim and the patient will pay for the services out- of-pocket, the therapist still must submit the claim to Medicare. Must complete functional limitation reporting on the patient. 24

25. Physical Therapy: No ABN, but meets the established criteria If a therapist does not issue an ABN as Medicare requires, the therapist cannot bill the Medicare beneficiary for the services in question. If Medicare ends up denying the claim, the therapist would then be responsible for the cost of the services. 25

26. DME POS Special Considerations ABNs in the context of the DMEPOS competitive bidding program. Federal regulations clearly state that implementation of the competitive bidding program “does not preclude the use of an advanced beneficiary notice.” CMS guidance provides a framework for issuing ABNs under competitive bidding. Questions related to whether ABN usage may or may not be appropriate need to be addressed. They generally fit into the following categories: 1.Upgrade ABNs for items having different HCPCS codes 2.Upgrade ABNs for items within a common HCPCS code 3.ABN usage and competitive bidding’s non-discrimination provision 4.ABN usage for non-contract suppliers within a competitive bidding area 26

27. DME POS Upgrades CMS defines an upgrade as “an item with features that go beyond what is medically necessary,” including features that are “more extensive and/or more expensive” than what Medicare has determined to be reasonable and necessary for the patient. Although this definition has limits, the broad language used by CMS seemingly allows suppliers to issue ABNs for nearly any excess component that may be added to a medically necessary DMEPOS item. In a December 2010 CMS competitive bidding program fact sheet, which stated that “when a [contract or non-contract] DMEPOS supplier expects that a DMEPOS item does [not] or may not meet Medicare’s reasonable and necessary rules, it is the responsibility of the supplier to notify the beneficiary in writing via an ABN.” - See more at: http://homecaremag.com/medicare- reimbursement/abcs-proper-abn-usage#sthash.74R2beKO.dpuf 27

28. Special Conditions: Home Care Home Health Advanced Beneficiaries Notice (HHABN), from CMS-R-196 is replaced by ABN See MLN-Matters Number MM8404 and CR Transmittals R2782CP Also called Limitation of Liability (LOL) Not to be used in Medicare Managed Care 28

29. Home Care 29

30. Home Care 30

31. Home Care Limitations The HHA must issue a beneficiary an ABN prior to delivering care that is usually covered by Medicare, but in this particular instance, the item or service may not be or is not covered by Medicare because: The care is not medically reasonable and necessary; The beneficiary is not confined to his/her home (is not considered homebound); The beneficiary does not need skilled nursing care on an intermittent basis; or The beneficiary is receiving custodial care only. Note: HHA still subject to Therapy Limitations 31

32. OIG’s Review Of Appropriate ABN Use and Application Report issued on May 3, 2013 by the OIG evaluated how the modifiers were handled in contractor adjustment process (http://oig.hhs.gov/oei/reports/oei-02-10-00160.pdf) Previously reviewed in 2009 Clear indication from OIG that MACs and CMS not being careful and that CMS needs to address these issues 32

33. OIG Findings In 2011 Medicare paid nearly $744 million for Part B claims with G modifiers that procedure expected to be denied Many times modifiers are ignored in the MAC review process 33

34. Clinical Laboratory Tests Can bill beneficiary for services denied on medical necessity grounds only if lab informed patient that Medicare likely to deny payment. 66 Fed. Reg. at 58804. To receive protection against possible LOL liability, physician or laboratory must obtain signed ABN before furnishing test. MCPM Ch. 16 § 40.7. 34

35. Clinical Laboratory Tests ABN not required to bill beneficiary for “screening tests” included in NCD as “ICD-9-CM Codes Denied.” 66 Fed. Reg. at 58793. Test deemed “Research Use Only” or “Investigational Use Only” denied based on “not reasonable and necessary,” so subject to ABN requirements. MCPM § 50.3.1. ABN can be provided by lab or ordering physician; physician must furnish copy of signed ABN to billing lab. MCPM § 50.6.4. 35

36. Clinical Laboratory Tests If ABN cannot be delivered in person, can be delivered prior to testing via: Telephone (must be followed by written notice/ signature) Mail Secure fax E-mail HIPAA (and state law) requirements apply MCPM §§ 40.3.4.2, 50.7.2. 36

37. Clinical Laboratory Tests Prohibition against routine use of ABNs does not apply to: Tests always denied based on medical necessity per NCD or Research Use Only and Investigational Use Only tests. MCPM § 40.3.6.4 Charge to beneficiary not limited to Medicare fee schedule. MCPM § 50.7.3. 37

38. Clinical Laboratory Tests Labs can customize ABNs to include: Preprinted list of tests to be checked as applicable Preprinted reasons why Medicare may not pay Not for your condition Exceeds frequency limits Experimental/research use MCPM § 50.6.2 38

39. Appeal of Olympic Medical Center Facts/Background Medicare beneficiary advised by physician of need for lab tests and MRI to diagnose hearing loss Upset patient presents at hospital and is provided and signs ABN Medicare denies claim for test and beneficiary appeals; contractor affirms denial After adverse QIC reconsideration decision, hospital requests ALJ hearing 39

40. Appeal of Olympic Medical Center ALJ Issues Tests covered? If not, should Medicare pay based on LOL? ALJ Determinations Tests not covered based on NCDs Hospital not protected by LOL because it knew or reasonably should have known that tests were not covered 40

41. Appeal of Olympic Medical Center ALJ Determinations: Patient protected by LOL “Beneficiary must be notified far enough in advance … [to] make a rational, informed consumer decision without undue pressure. Last minute notification can be coercive, and a coercive notice is a defective notice. *** “Beneficiary could not have made a rational, informed consumer decision … since … presented with … ABN immediately before … services were to be performed…. ABN is invalid as it was not delivered timely. … Beneficiary did not know and could not reasonably be expected to know that … services … would not be covered.… [L]iability of … Beneficiary … waived….” ALJ Appeal No. 1-1097162747 (Dec. 9, 2013), appeal pending, Medicare Appeals Council (2014) 41

42. Clinical Laboratory Tests LOL may protect lab with no reason to know that tests not reasonable and necessary, including based on lack of documentation of test order or medical necessity in physician’s records. See, e.g., 66 Fed. Reg. 58788, 58801 (Nov. 23, 2001). Medicare contractors (MACs, CERTs, RACs, ZPICs) required to make LOL and “without fault” determinations whenever test found not reasonable and necessary. MPIM Ch. 3 § 3.6.2.3. Lab’s constructive knowledge of CMS manuals and contractor guidance may prevent reliance on LOL for claims denied based on Medicare policy. Doctors Testing Ctr., LLC v. HHS, 2014 WL 112119 (E.D. Ark. 2014). 42

43. Presenter Information Catherine (Kate) H. Clark, CPC, CRCE-I cclark@kohlerhc.com Robert E. Mazer, Esquire, Principal remazer@ober.com Ober|Kaler, A Professional Corporation 43

44. Questions and Answers 44