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The rules say that plans must pay for a medical service or item if regular Medicare would pay for it in this case. 
You can find this rule at 42 Code of Federal Regulations (CFR) Section 422.101. 
 
The rules say that obstructive sleep apnea (OSA) is the collapse of the oropharyngeal walls and the obstruction 
of airflow occurring during sleep. Diagnostic tests for OSA have historically been classified into four types. 
The most comprehensive is designated Type I attended facility based polysomnography (PSG), which is 
considered the reference standard for diagnosing OSA. Attended facility based polysomnogram is a 
comprehensive diagnostic sleep test including at least electroencephalography (EEG), electro-oculography 
(EOG), electromyography (EMG), heart rate or electrocardiography (ECG), airflow, breathing/respiratory 
effort, and arterial oxygen saturation (SaO2) furnished in a sleep laboratory facility in which a technologist 
supervises the recording during sleep time and has the ability to intervene if needed. Overnight PSG is the 
conventional diagnostic test for OSA. The American Thoracic Society and the American Academy of Sleep 
Medicine have recommended supervised PSG in the sleep laboratory over 2 nights for the diagnosis of OSA 
and the initiation of continuous positive airway pressure (CPAP). 
 
Three categories of portable monitors (used both in attended and unattended settings) have been developed for 
the diagnosis of OSA. Type II monitors have a minimum of 7 channels (e.g., EEG, EOG, EMG, ECG-heart 
rate, airflow, breathing/respiratory effort, SaO2)-this type of device monitors sleep staging, so AHI can be 
calculated). Type III monitors have a minimum of 4 monitored channels including ventilation or airflow (at 
least two channels of respiratory movement or respiratory movement and airflow), heart rate or ECG, and 
oxygen saturation. Type IV devices may measure one, two, three or more parameters but do not meet all the 
criteria of a higher category device. Some monitors use an actigraphy algorithm to identify periods of sleep and 
wakefulness. 
 
Indications and Limitations of Coverage 
 
B. Nationally Covered Indications 
 
Effective for claims with dates of service on and after March 3, 2009, the Centers for Medicare & Medicaid 
Services finds that the evidence is sufficient to determine that the results of the sleep tests identified below can 
be used by a beneficiary's treating physician to diagnose OSA, that the use of such sleep testing technologies 
demonstrates improved health outcomes in Medicare beneficiaries who have OSA and receive the appropriate 
treatment, and that these tests are thus reasonable and necessary under section 1862(a)(1)(A) of the Social 
Security Act. 
 
1. Type I PSG is covered when used to aid the diagnosis of OSA in beneficiaries who have clinical signs and 
symptoms indicative of OSA if performed attended in a sleep lab facility. 
 
2. Type II or Type III sleep testing devices are covered when used to aid the diagnosis of OSA in beneficiaries 
who have clinical signs and symptoms indicative of OSA if performed unattended in or out of a sleep lab 
facility or attended in a sleep lab facility. 
 
3. Type IV sleep testing devices measuring three or more channels, one of which is airflow, are covered when 
used to aid the diagnosis of OSA in beneficiaries who have signs and symptoms indicative of OSA if 
 
 
performed unattended in or out of a sleep lab facility or attended in a sleep lab facility. 
 
4. Sleep testing devices measuring three or more channels that include actigraphy, oximetry, and peripheral 
arterial tone, are covered when used to aid the diagnosis of OSA in beneficiaries who have signs and symptoms 
indicative of OSA if performed unattended in or out of a sleep lab facility or attended in a sleep lab facility. 
 
C. Nationally Non-Covered Indications 
 
Effective for claims with dates of services on and after March 3, 2009, other diagnostic sleep tests for the 
diagnosis of OSA, other than those noted above for prescribing CPAP, are not sufficient for the coverage of 
CPAP and are not covered. 
 
You can find this information in Medicare's National Coverage Determination (NCD) for Sleep Testing for 
Obstructive Sleep Apnea (OSA) (240.4.1). 
 
If you want to read these Medicare rules, you can go to this website www.medicareappeal.com.