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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 industry standard billing rules for end stage renal disease (ESRD) services are established by 
the Centers for Medicare and Medicaid Services (CMS) since Medicare provides coverage for all ESRD patient 
after an initial eligibility period (normally 36 months). Medicare ESRD rules (Section 20.2 in Chapter 11 of 
the Medicare Benefit Policy Manual) indicate that laboratory services related to the treatment of ESRD are the 
responsibility of the patients dialysis center, even if the tests are not directly related to dialysis. Laboratories 
and other providers who perform the ESRD-related laboratory tests should submit their claims to the dialysis 
centers. The tests are then bundled into the dialysis services. Providers may indicate that laboratory services are 
not related to ESRD treatment by appending modify AY to the laboratory services or modifier ET if the 
services are provided in an emergency manner when relationship of the laboratory test to ESRD is uncertain. A 
diagnosis of ESRD on the claim may indicate that modifier AY was not appropriate unless a non-ESRD 
diagnosis is also reported that separately supports the AY modifier. 
RESEARCH DETAIL 
Routine laboratory services related to the treatment of end stage renal disease (ESRD) are the responsibility of 
the patients dialysis center. Claims for these laboratory services should be submitted to the dialysis center. The 
claim under review includes laboratory services related to ESRD that were incorrectly submitted to the health 
plan. Modifiers AY and ET, which may be used to indicate that the laboratory tests are not related to ESRD, 
were not reported on the laboratory service. 
The Centers for Medicare and Medicaid Services (CMS) has an established policy for patients with ESRD 
indicating that the dialysis center is responsible for laboratory services related to the treatment of ESRD. 
Section 20.2 in Chapter 11 of the Medicare Benefit Policy Manual entitled "End Stage Renal Disease (ESRD)" 
states: 
"All laboratory services furnished to individuals for the treatment of ESRD are included in the ESRD PPS as 
Part B services and are not paid separately as of January 1, 2011. The laboratory services include but are not 
limited to: 
- Laboratory tests included under the composite rate as of December 31, 2010 (discussed below); and - Former 
separately billable Part B laboratory tests that were billed by ESRD facilities and independent laboratories for 
ESRD patients." Further clarification of the CMS policy is found later in Section 20.2: 
"The distinction of what is considered to be a renal dialysis laboratory test is a clinical decision determined by 
the ESRD patients ordering practitioner. If a laboratory test is ordered for the treatment of ESRD, then the 
laboratory test is not paid separately." To allow for separate reporting of laboratory tests that are not related to 
ESRD treatment, CMS instructs provider to report modifier AY as specified in Section 20.2.B of the same 
policy manual. CMS notes that "The AY modifier serves as an attestation that the item or service is medically 
necessary for the patient but is not being used for the treatment of ESRD. You can find this guidance in the - 
Centers for Medicare & Medicaid Services Medicare Processing Manual, Chapter 11 End Stage Renal Disease 
(ESRD), Section 20.2. 
 
If you want to read these Medicare rules, you can go to this website www.medicareappeal.com.