DEPARTMENT OF HEALTH & HUMAN SERVICES 
Centers for Medicare & Medicaid Services 
7500 Security Boulevard, Mail Stop S2-26-12 
Baltimore, Maryland   21244-1850 
 
Center for Medicaid, CHIP, and Survey & Certification 
 
                    SMD #:11-003 
                    ACA#: 16 
      
April 22, 2011 
 
Re:  National Correct Coding Initiative: Appeals 
 
Dear State Medicaid Director: 
 
This letter clarifies earlier guidance the Centers for Medicare & Medicaid Services (CMS) 
provided in a September 1, 2010, State Medicaid Director letter regarding section 6507 of the 
Patient Protection and Affordable Care Act of 2010 (P.L. 111-148), as amended by the Health 
Care and Education Reconciliation Act of 2010 (P.L. 111-152) (together referred to as the 
Affordable Care Act).  Section 6507 of the Affordable Care Act amends section 1903(r) of the 
Social Security Act, and no later than September 1, 2010, requires CMS to:  
 
(1) Notify States of the Medicare National Correct Coding Initiative (NCCI)  
methodologies that are compatible with claims filed with Medicaid to promote 
correct coding and control improper coding leading to inappropriate payment of 
claims under Medicaid;  
(2) Notify States of the NCCI methodologies (or any successor initiative to promote 
correct coding and to control improper coding leading to inappropriate payment) that 
should be incorporated for claims filed with Medicaid for which no national correct 
coding methodology has been established for Medicare; and  
(3) Inform States as to how they must incorporate these methodologies for claims filed 
under Medicaid. 
 
The September 1, 2010, State Medicaid Director letter identifies the four components of each of 
the five NCCI methodologies.  The fourth component involves the provider/supplier appeals of 
denied payments for services based on the edits.  A number of States posted inquiries about the 
compatibility of the appeals component within each of the five NCCI methodologies.  While we 
determined initially that this component was compatible with Medicaid, a number of States 
communicated to CMS that they have no formal process in place for provider appeals of denied 
claims in their Medicaid programs because CMS had not previously established Medicaid 
appeals requirements related to denials of payment to providers.  These States indicated that 
establishing and operating a formal process specifically for NCCI denials that would parallel 
Medicares process would be a financial and operational hardship for them, particularly at this 
time. Page 2  State Medicaid Director Letter 
After consideration of these comments, we have concluded that the appeals component of the 
five NCCI methodologies is not compatible with Medicaid at this time, and therefore States are 
not obligated to implement this component.  
 
Nonetheless, we do encourage States to review their appeals procedures, and to ensure that 
providers have an adequate opportunity to alert States to potential errors associated with claims 
denials, including those generated by NCCI edits, and that providers have an avenue to resubmit 
claims or provide additional documentation to support their claims. The Medicare appeals 
process for NCCI may be instructive in this regard, and so we will continue to make information 
on that process available to States as they implement this requirement. 
 
Furthermore, as stated in the September 1, 2010, State Medicaid Director letter, States may 
deactivate some or all NCCI edits due to a conflict with State laws, regulations, administrative 
rules, payment policies, and/or the States level of operational readiness.1   In order for States to 
seek deactivation of an edit, States must have a mechanism within the existing, or otherwise 
implemented, process to distinguish NCCI edits from other claim denial edits even if States do 
not use the Medicare appeals process for NCCI as a model.   
 
We intend to continue conversations with States and providers about claims submissions, 
adjudications, and appeals to determine how best to simplify and streamline business practices 
and promote claims accuracy. 
 
Please contact Rick Friedman, Director, Division of State Systems, of my staff, at 410-786-4451, 
or by email at Richard.friedman@cms.hhs.gov if you have any questions.  We look forward to 
continuing our work together as we implement this important provision of the Affordable Care 
Act.   
 
            Sincerely, 
 
            /s/ 
 
            Cindy Mann 
             Director 
 
 
cc:             
 
CMS Regional Administrators
                                                           
1  As of April 1, 2011, lack of operational readiness will no longer be a permissible basis for 
deactivation of the edits.  Instead, the only basis for deactivation will be a conflict with State 
laws, regulations, administrative rules and/or payment policies.  Page 3  State Medicaid Director Letter 
 
CMS Regional Administrators  
 
CMS Associate Regional Administrators  
Division of Medicaid and Childrens Health  
 
Matt Salo 
Executive Director 
National Association of Medicaid Directors  
 
Alan R. Weil, J.D., M.P.P.  
Executive Director  
National Academy for State Health Policy  
 
Director of Health Legislation  
National Governors Association  
 
Rick Fenton  
Acting Director  
Health Services Division  
American Public Human Services Association  
 
Christine Evans, M.P.H.  
Director, Government Relations  
Association of State and Territorial Health Officials  
 
Debra Miller  
Director for Health Policy  
Council of State Governments  
 
Joy Wilson  
Director, Health Committee  
National Conference of State Legislatures 
 
Christine Evans, M.P.H.  
Director, Government Relations  
Association of State and Territorial Health Officials  
 
Alan R. Weil, J.D., M.P.P.  
Executive Director  
National Academy for State Health Policy