If the rules of Advance Beneficiary Notices of Noncoverage (ABNs) make you a bit confused, you’re definitely not alone. In an effort to shed some light on the ins and outs of ABNs and to highlight some recent changes to ABN requirements, Medicare created this set of FAQs clarifying their use. Here’s some info to help bring you up to speed:

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What is an Advance Beneficiary Notice of Noncoverage (ABN)?

An ABN is a form practitioners use to notify a Medicare patient that Medicare might not cover the therapy services he or she is about to receive.

What is the purpose of an ABN?

ABNs allow beneficiaries (your patients) to make informed decisions about whether they would like to accept therapy services despite the possibility of having to pay for those services 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.

When should a therapist issue an ABN?

A therapist must issue an ABN in either of the following instances:

  1. Before providing items or services that the therapist believes or knows Medicare may not cover
  2. 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 neither instance can a therapist issue an ABN after the fact (i.e., after Medicare denies a claim); therapists always must complete the form and have patients sign it prior to the time of service.

How do therapists know whether Medicare considers a service medically reasonable and medically necessary?

The definition of “reasonable and necessary” varies based on both National Coverage Determinations (NCDs) and Local Coverage Determinations (LCDs). Each provider is responsible for knowing the current NCDs and LCDs governing his or her practice. Therapists can download the Medicare NCD Manual here, and they can identify the LCDs associated with their particular geographic region by using the search tool found on this page. If a therapist determines that certain services are not medically reasonable and medically necessary based on these guidelines—and issues an ABN accordingly—then he or she should add the GA modifier to the claim to indicate ABN use. Therapists will still submit claims to Medicare, noting the GA modifier, which will trigger Medicare to reject the claim. After receiving the Medicare denial, therapists can then collect out-of-pocket payment from patients.

Are there any special rules regarding the therapy cap?

Yes. 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. It is imperative to understand that therapists should not issue an ABN for every beneficiary who exceeds the therapy cap; rather, they should only do so 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 providers 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.

By attaching the KX modifier to a claim, the 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.

Can therapists issue ABNs and subsequently collect out-of-pocket payment for services provided on a maintenance basis?

No. As clarified in the Jimmo Settlement Agreement of 2013, “the Medicare program covers skilled nursing care and skilled therapy services under Medicare’s skilled nursing facility, home health, and outpatient therapy benefits when a beneficiary needs skilled care in order to maintain function or to prevent or slow decline or deterioration (provided all other coverage criteria are met).” In other words, the settlement refuted the long-standing misconception that “Medicare will only pay for rehab therapy or other skilled care if a patient shows improvement as a result of that care.” Thus, if you are providing medically necessary maintenance services, Medicare must pay for those services—even if the patient has exceeded the therapy cap. Consequently, you should not issue an ABN for those services. To learn more about the Jimmo Settlement Agreement, visit this CMS page.    

If a therapist issues an ABN, does he or she still have to complete functional limitation reporting on that patient?

Yes. Even if the therapist knows that Medicare will deny the claim and that the patient will pay for the services out-of-pocket, the therapist still must submit the claim to Medicare and therefore still must complete functional limitation reporting on the patient.

Should therapists issue ABNs on a routine basis?

No. While therapists might be tempted to issue “blanket” ABNs in order to guarantee payment no matter what, Medicare strictly prohibits providers from issuing ABNs on a regular, routine basis.

What happens if a therapist does not issue an ABN in a case that 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.

Whew! We know that’s a lot of information to digest. Still got questions? Leave ’em in the comments section below. For more information on ABNs—or to download the most up-to-date version of the form—visit this CMS webpage.

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