Overview of the Law

Under Medicare, liability for noncovered services normally rests with the beneficiary. The law, however, relieves beneficiaries from financial liability where they did not know and did not have reason to know a service would not be covered. The ABN rules come from this premise.

Where assigned physician claims (i.e., claims submitted by and paid to a physician on behalf of the beneficiary) are denied for lack of medical necessity, Medicare will pay for the services as long as neither the beneficiary nor the physician knew the services would not be covered. However, where the physician knew or, because of published carrier policies, prior denials or otherwise, had reason to know that the services would likely not be covered and did not notify the beneficiary, Medicare will not make payment. Unless the physician has followed the ABN rules, he may not then seek payment from the beneficiary.

Similarly, when unassigned physician claims (i.e., claims submitted by the patient who then reimburses the physician) are denied for lack of medical necessity and the physician had reason to believe the services would not be covered but failed to notify the beneficiary, the physician is required to refund to the beneficiary any amounts already collected for the denied service.

These financial liability rules heavily favor beneficiaries. In fact, carriers may presume that beneficiaries did not know services would be denied unless there is evidence to the contrary. Unfortunately, carriers cannot make the same presumption with respect to physicians. So, to avoid financial liability for services denied as medically unnecessary, physicians must be able to show that beneficiaries did have knowledge of the likelihood of noncoverage. An effective ABN will serve as this evidence, allowing the physician to bill after Medicare denies.

Form Requirements

Under the current ABN rules, physicians may develop and use their own ABN forms, as long as the forms include certain notice language. The new rules, however, will now require physicians to use only the OMB approved form. In addition, while certain aspects of the approved ABN form may be customized, to be effective, it must conform to a number of technical requirements.

Among other things, ABNs must be in 10 or 12 point font. Physicians are discouraged from using fonts which are difficult to read, such as italics. While portions of the form may be customized to include a list of services to which the ABN will apply, it may not exceed one page in length. Finally, it must be clear to the beneficiary that the form is from the physician and not the government. Physicians are required to include their practice name and contact information at the top of the form.

When ABNs are Required

An ABN must be given each time a physician believes a service will not be covered if the physician wishes to bill the beneficiary directly for the service. The ABN must include the specific service(s) to which it applies and the specific reason the physician believes the service may not be covered. A statement that "Medicare may not cover this service" is insufficient for these purposes. Physicians are to use, as an example of the level of specificity they must include, the medical necessity denial statements used by the carriers as set out in the Carriers Manual.

ABNs are only necessary for services which are normally covered by Medicare, but which in a particular circumstance the physician believes will not be covered for lack of medical necessity. For example, while CT scans are generally reimbursable by Medicare, carriers may deny CT claims as medically unnecessary if the beneficiary’s symptoms and complaints do not support the use of CT versus other forms of imaging.

ABNs are not required for a physician to bill a beneficiary for services which are always excluded from Medicare coverage, such as routine physicals, screening tests and cosmetic surgery. The new ABN rules include a list services for which no ABN is required. Still, physicians must be careful in making the determination about when to use an ABN, since services could fall into one of the excluded categories under some circumstances but may be covered under others. For example, blepharoplasties may be considered medically necessary in some circumstances, though typically they are considered cosmetic surgery. Similarly, Medicare now covers some screening exams such as mammography and prostate screenings. Where a physician is unclear on whether a service may be covered, the safe approach will be to obtain an effective ABN and submit a claim for the service. If the service is then denied, the physician may bill the beneficiary or retain the amount collected at the time of service.

Last Moment and Emergency Deliveries

ABNs obtained during an emergency or when the beneficiary was so far along in the treatment process that he or she was beyond making an informed choice about whether to receive the service, will be ineffective. For example, where a patient is already hooked up to diagnostic equipment, he may not be able to make an informed choice about the procedure.

In the case of emergencies, under the Emergency Medical Treatment and Active Labor Act (EMTALA), an ABN obtained prior to a beneficiary’s receiving medical screening or stabilizing care as required by EMTALA, will never be effective. This means that where the screening and stabilizing care is denied by Medicare as medically unnecessary, physicians cannot seek payment from beneficiaries.

Signature Requirements

According to the current ABN rules, physicians are required to obtain the beneficiary’s signature agreeing to be financially responsible for the noncovered services. The new rules clarify that the beneficiary’s signature is only required on ABNs for unassigned physician claims. For assigned physician claims, no signature is required to make the ABN effective. So, if the beneficiary refuses to sign, physicians may simply annotate and sign the form to show the patient’s refusal and have a witness also sign the form, and it will be effective.

However, in order for an ABN to shift liability to the beneficiary with respect to unassigned physician claims, the beneficiary or his representative must affirmatively agree to be financially responsible for the noncovered services. If the beneficiary refuses to sign, the physician’s only option is to either not provide the services (which could raise potential negligence issues) or to provide the service at the risk of not being reimbursed by Medicare or the beneficiary.

Where an ABN must be signed to be effective and the beneficiary is unable to sign himself, physicians are required to obtain the signature of the beneficiary’s authorized representative. There are a number of considerations a physician may take into account in determining who may serve in this capacity. First priority is given to individuals who hold the legal right, for example where they have an advanced health care directive or power of attorney, to make decisions on the beneficiary’s behalf. Second, the authorized representative should have the beneficiary’s best interests at heart, so a spouse or other relative familiar with the patient’s personal values may serve in this capacity. An authorized representative may be someone to whom, prior to incapacity, the beneficiary indicated the intent that he act on the beneficiary’s behalf. Finally, a physician may look to a disinterested third party, such as a public guardianship agency, to serve as the authorized representative for signing ABNs.

The new ABN rules are extensive and quite technical, but many physicians will find them to be significantly more user-friendly than the current rules. In addition to enabling physicians to legitimately obtain payment for their services, there is another good reason for complying with the rules. Specifically, in its 2002 Work Plan, the OIG identified the use of ABNs as one of the issues it will review in 2002.

Though the Carriers Manual chapter has not yet received OMB clearance, the new model ABN forms have already been cleared for use. Physicians who wish to get a jump on the new rules may begin using the forms now. The approved forms, as well as the draft Carriers Manual chapter can be found on CMS’ website at www.hcfa.gov/medicare/bni.