CMS Pub. 100-04, ch. 1, § 60.1.1

With any service delivered, providers must decide which one of the following three

conditions apply in order both to properly inform Medicare beneficiaries of their potential

liability for payment, and later to bill for this payment. The concepts used in making

these decisions are displayed in the following table

TABLE 1:

MEDICARE

SCENARIO

Payment

‘CONDITION 1’

Payment

‘CONDITION 2’

Payment

‘CONDITION 3’

DESCRIPTION Items and services

being billed are

statutorily

excluded from

Original Medicare

coverage, meaning

it is not defined as

a specific

Medicare benefit

defined in the Act;

Items and services

being billed are either

a reduction or

termination of

Medicare coverage, or

are otherwise

expected to be denied,

leaving financial

liability for a

beneficiary or

Items or service is

presumed to be a

Medicare benefit

and can be paid.

therefore, it is

never paid.

provider (see

applicable reasons in

60.1 above).

NOTIFICATION

(Prior to billing)

Liability notices

are voluntary (i.e.,

ABN); for

statutory

exclusions, there

are no required

Medicare notices.

Liability notices are

required (i.e.,

expedited

determination notice,

ABN).

Liability notices,

mandatory or

voluntary, are

never used in

advance of such

billing.

BILLING Items and services

may be billed as

non-covered on

Medicare claims.

Billing of such items

and services can vary,

and can depend on the

ability to segregate its

covered and non-covered portions (if

both exist).

Items and services

are billed as

covered.

LIABILITY

(displayed on

MSNs or

remittances)

Always denied in

Medicare claims

processing;

beneficiaries are

liable for these

denials unless

providers code

their claims to

transfer liability to

themselves.

For any services that

are not paid by

Medicare itself,

properly notified

beneficiaries are

usually liable for

resulting denials.

If Medicare doesn’t

pay itself as

expected, the

specific reason for

rejection or denial

will determine

liability according

to established

Medicare policy.

NOTE: Only one of these conditions can apply to a given item or service, or to a given

line of a claim.

To the extent possible in billing Medicare, providers should split claims so that one of

these three conditions holds true for all items and services billed on a single claim.

Consequently, no more than one type of beneficiary notice on liability would apply to a

single claim. This approach should improve understanding of potential liability for all

parties and speed processing of the majority of claims.

EXCEPTION: Cases may occur where multiple conditions apply and multiple notices

may be necessary:

(A) Claims paid under the outpatient prospective payment system

(OPPS); the OPPS requires all services provided on the same day to

be billed on the same claim (see §170 of Chapter 4 of this manual),

with few exceptions as already given in OPPS instructions (i.e.,

claims using any of the following 3 condition codes: 21, 20, which

are also discussed below in this chapter, and G0);

Or:

(B) Claims using certain claim coding:

• occurrence span codes on inpatient claims,

• modifiers used to differentiate multiple conditions that apply to

different lines on the same claim.

These issues are discussed further in subsequent sections of this chapter. More

information on each payment condition listed in the table above follows in this section.

Payment Condition 1. There is no required notice if beneficiaries elect to receive

services that are excluded from Medicare by statute. This is understood as:

• not being part of a Medicare benefit, or

• not covered for another reason that a provider can define, but that would not relate

to potential denials under §§1879 or 1862 (a) of the Act (listed above in 60.1).

If written notification of potential liability for statutory exclusions is desired to aid

beneficiaries, even though not required by Medicare, the ABN may be used for such

voluntary notification purposes. Explanation of this use can be found at the Centers for

Medicare and Medicaid Services (CMS) Web site:

• www.cms.hhs.gov/medicare/bni/; and

• Chapter 30 of this manual, Financial Liability Protections.

Any other situations in which a patient is informed a service is not covered should also be

documented in patient records, making clear the specific reason a beneficiary was told a

service would be billed as non-covered.

Payment Condition 2. Providers must supply a liability notice if payment for services

delivered to a Medicare beneficiary are to be reduced or terminated following delivery of

the same or similar covered services, and those services are thought not to be covered at

all specifically for one of the reasons listed under §1862 (a) of the Act. Delivery of such

notices can permit a shift of liability under §1879. Providers must give these notices to

beneficiaries before services are delivered for which the beneficiary may be liable.

Failure to provide such notices when required means a provider will not be able to shift

liability to a beneficiary. As a result, the liability must be assumed by the provider.

When a mandatory notice is given, patient records should be documented.

Aside from liability requirements of the Act, applicable Conditions of Participation

(COPs) MAY also require a provider to inform a beneficiary of payment liability. This

must be done BEFORE delivering services not covered by Medicare, IF the provider

intends to charge the beneficiary for such services. This is the case with the COPs

applicable to home health agencies. In addition to what may be required by the COPs,

providers are advised to respect Medicare beneficiaries’ right to information as described

in Medicare publications targeted to beneficiaries (e.g. “Medicare and You”).

Required Notices for Condition 2. Over time, there have been different types of

liability notices, used in different settings for specific types of services:

(1) Notices of Noncoverage have been given to eligible inpatients receiving, or

those previously eligible for, non-hospice services covered under Medicare

Part A (types of bill (TOB) 11x, 18x, 21x, and 41x) when services at issue no

longer met coverage guidelines; for example, when exceeding the number of

covered days allowed in a spell of illness for a specific Medicare benefit.

a. In hospitals, these notices have been known as Hospital Issued Notice

of Non-coverage (HINNs) or hospital notices of non-coverage (in the

past this hospital use was the exclusive use of the term ‘notice of non-coverage), and

b. In Skilled Nursing Facilities (SNFs), they may have been known as

Sarrassat notices, denial letters or the specific notice called

“SNFABN.”

Current CMS policy on these benefits, and claims seeking payment for them, can

also be found at:

TABLE 2:

BENEFIT INTERNET ON-LINE MANUAL

Inpatient Hospital 100-02, Benefit Policy, Chapter 1,

“ 100-04, Claims Processing, Chapter 3;

SNF. (Part A Paid) 100-02, Benefit Policy, Chapter 8,

“ 100-04, Claims Processing, Chapter 6.

• Overall, for these and other Original Medicare benefits, see Chapter 30 of this

manual, 100-04, for information on financial liability notices.

• All Medicare manual instructions are accessible at the following Web site:

www.cms.hhs.gov/manuals/

(2) ABNs, when:

(a) Overall medical necessity of a recognized Medicare benefit is in doubt,

under §1879 and §1862 (a) of the Act, or

(b) Items and services that were previously covered are to be reduced in

payment or terminated, creating financial liability, or

(c) The setting is a hospital or SNF, but their inpatient specific forms are

not applicable: ABNs are used for certain outpatient services or services

covered under Part B delivered in a SNF or hospital; also, HH not under a

plan of care, or

(d) CORF, or

(e) Hospice services, which alone among services discussed here, are paid

under Part A.

NOTE: ABNs can refer to a specific notice format but here is used as a

general term including notices used for other benefits such as HHABNs,

which are used exclusively for home health.

Another form of notice, known as an expedited determination notice, can be

simultaneously delivered with Medicare liability notices like ABNs, since both types of

notices can be involved in terminations of services. Expedited determination notices are

primarily intended to convey information about impending discharge, or termination of

services, not liability, which is the focus of notices like ABNs.

Expedited determination notices apply to the following Medicare providers:

• Inpatient Hospital,

• Skilled Nursing Facilities (SNFs),

• Hospices,

• Home Health Agencies, and

• Comprehensive Outpatient Rehabilitation Facilities (CORFs).

These providers are required to give a specific type of notice when all services they are

providing, or Medicare payment for those services, terminate. These notices are

described at the following locations:

• www.cms.hhs.gov/medicare/bni/; and

• 2005 Transmittal R594CP, which will be placed in Chapter 30 of

this manual, Financial Liability Protections, and in the interim is

found at:

o http://www.cms.hhs.gov/Transmittals/ .

Payment Condition 3. This condition occurs when providers are billing for what they

believe to be covered services as covered services. There are no notice requirements for

this condition, and non-covered charges are not involved when submitting such claims,

though denials may result from processing.

Billing follows notification, so providers should remember that in all payment conditions

the notices described above would be delivered to the beneficiary before a claim is

submitted to Medicare.

The following table summarizes and supplements the information in this subsection:

TABLE 3:

CONDITION Type of Provider/Type of Bill Liability Notice

Payment

[Liability]

Condition 1, No

Medicare notice

required and

liability expected

All providers when service

known not to be covered by

Medicare

Voluntary notice ONLY,

provider expects to receive no

Medicare payment.

Payment

[Liability]

Condition 2,

Medicare notice

IS required and

liability expected

Inpatient only, Part A paid

(TOBs: 11x, 18x, 21x, 41x)

Notice of Non-Coverage or

comparable form required.

Payment

[Liability]

Condition 2,

Medicare notice

IS required and

liability expected

Home Health (HH) services

under a HH plan of care and

paid through the HH

prospective payment system

(PPS) only (TOBs 32x and

33X)

HHABNs (Form CMS-R-296)

required.

Payment

[Liability]

Condition 2,

Medicare notice

IS required and

liability expected

All providers and services IF,

• Hospice

• Part B paid services not

previously listed above

for Condition 2;

includes laboratories or

providers billing lab

tests only (revenue

codes 30x, 31x and

92x)

ABN (Form CMS-R-131)

required.

Payment

[Liability]

Condition 3, No

Medicare notice

required and no

liability expected

All providers No notice requirement,

provider expects to receive

payment from Medicare.

Providers must decide which payment condition and notice requirement is appropriate to

the billing situation in each case. Based on this decision, providers will then apply

certain billing instructions are that described in the remainder of this section.