(Medicare Claims Processing Manual)

30 - Determining Liability for Disallowed Claims Under 1879  (Rev.: 4197; Issued: 01- 11-19; Effective: 04 -15-19; Implementation: 04 -15-19)  When a Medicare contractor determines that a review under the LOL provisions is appropriate under 20 of this chapter, the Medicare contractor must next determine who is liable, based on who knew, or should have known that Medicare was going to deny paymen t on the item or service.  In order to make this determination, the contractor must take the following steps:    NOTE:  If both the beneficiary and the healthcare provider or supplier are found to have knowledge, the beneficiary will be held liable.   Determine whether the beneficiary is liable.  Evidence must show that the beneficiary knew or should have known the item and/or service would not be covered.  Knowledge:  * Is established when the healthcare provider or supplier gives a valid ABN, Form CMS -R-131 or other written notice.  * May  be established when the beneficiary receives notice of a recent claim denial for the same item or service.   * The Medicare program shall not make a payment to the beneficiary.  * The beneficiary can appeal both the coverage issue, and the contractors determination of beneficiary liability for the cost of the non-covered item or service.  If the beneficiary is not found liable, then the Medicare contractor should determine if the healthcare provider or supplier is liable  Evidence must show that the healthcare provider/  supplier knew or should have known the item and/or service would not be covered.   * Had actual knowledge of the non- coverage of item and/or service in a particular case;  * Could reasonably have been expected to have such knowledge; or * The  beneficiary was shown not to have knowledge (found not liable).  * The Medicare program shall not make a payment to the healthcare provider or supplier.  * The healthcare provider or supplier can appeal both the coverage issue, and the contractors determination of healthcare provider or supplier liability for the cost of the non- covered item or service.  If the healthcare provider or supplier is not found liable, the Medicare program will accept liability.  30.1 - Beneficiarys Knowledge and  Liability                                        (Rev.: 4197; Issued: 01- 11-19; Effective: 04 -15-19; Implementation: 04 -15-19)  Beneficiary knowledge standards vary between the 1879 LOL provision and the two Refund Requirement (RR) provisions as shown in the table below.   Provision  Description  Beneficiary Knowledge  Limitation On Liability   1879(a)(2) of the Act requires that the beneficiary did not know, and could not reasonably have been expected to know, that payment would not be made* * *, for items or services that are excluded from coverage.    Knowledge based on written notice having been provided to the beneficiary.   Knowledge based on any other means from which it is determined that the beneficiary knew, or should have known, that payment would not be made.  Medical Equipment and Supplies RR   1834(a)(18)(A)(ii) of the Act [which is incorporated by reference into 1834(j)(4) and 1879(h) of the Act] requires that before the item was furnished, the patient was informed that payment under this part may not be made for that item and the patient has agreed to pay for that item, that is, for medical equipment and supplies denied on the basis of 1834(a)(17)(B), 1834(j)(1), 1834(a)(15), or 1862(a)(1) of the Act.   Knowledge must be evidenced by a signed written notice and agreement to pay personally in case of a denial.  Physician RR  1842(l)(1)(C)(ii) of the Act requires that before the service was provided, the individual was informed that payment under this part may not be made for the specific service and the individual has agreed to pay for that service, that is, for physician services that are denied because they were not reasonable and necessary under 1862(a)(1) of the Act.   Knowledge must be evidenced by a signed written notice and agreement to pay personally in case of a denial.   Knowledge is determined on a case by case basis.  In certain circumstances, being in receipt of a valid ABN or other written notice does not guarantee that the beneficiary had knowledge that an item or service would not be covered.  For instance, in a case  where a beneficiary received a valid ABN and then, upon initial determination, the claim was paid as covered, that original ABN cannot be used as evidence of knowledge for future claims relating to a similar or reasonably comparable item or service, since  the original ABN was belied by the favorable payment decision.   In reviewing a determination of liability on appeal, a beneficiarys allegation that s/he did not know, in the absence of evidence to the contrary, is acceptable evidence for LOL purposes.   30.1.1 - Other Evidence of Knowledge  (Rev.: 4197; Issued: 01- 11-19; Effective: 04 -15-19; Implementation: 04 -15-19)  While 42 CFR 411.404 provides criteria for beneficiary knowledge based on written notice , 1879(a)(2)  of the Act specifies only that knowledge  must not exist in order to apply the LOL provision.  If it is clear and obvious that a beneficiary in fact did know, prior to receiving an item or service, that Medicare payment for that item or service would be denied, the administrative presumption favorable to the beneficiary is rebutted.  For example, if the beneficiary admits that s/he had prior knowledge that payment for an item or service would be denied, no further evidence is required.   In the case in which the Medicare contractor has such evidence of prior knowledge on the beneficiarys part, the beneficiary must be held liable under the LOL provision, even if no written notice was given by the appropriate source.   30.2 - Healthcare Provider or Supplier Knowledge and Liability        (Rev.: 4197; Issued: 01- 11-19; Effective: 04 -15-19; Implementation: 04 -15-19)  In order to determine whether the healthcare provider or supplier had prior knowledge that the item and/or service furnished to the beneficiary would likely be denied or whether knowledge of the denial could have been expected, the Medicare contractors review the information they maintain and/or disseminate to a particular healthcare provider or supplier and the denials relevant facts.   If the healthcare provider or supplier cannot show that the beneficiary received proper written notice, the healthcare provider or supplier will be presumed to have knowledge (and, thereby, liability) unless s/he can prove that s/he did not know, and could not reasonably have been expected to know, that Medicare would not pay for the item and/or service.  If the healthcare provider or supplier can make such a convincing showing, the Medicare contractor will find that the healthcare provider or supplier did not have the requisite knowledge and Medicare will be liable for the payment.    30.2.1 - Evidence of Healthcare Provider or Supplier Knowledge  (Rev.: 4197; Issued: 01- 11-19; Effective: 04 -15-19; Implementation: 04 -15-19)  In accordance with regulations at 42 CFR 411.406, evidence that the healthcare provider or supplier did, in fact, know or should have known that Medicare would not pay for an item or service includes:    A Medicare contractors prior written notice to the healthcare provider or supplier of Medicare denial of payment for similar or reasonably comparable item or service.  This also includes notification of Quality Improvement Organization (QIO) screening criteria specific to the condition of the beneficiary for whom the furnished item and/or service are at issue and of medical procedures subject to preadmission review by the QIO.  Instructions for application of  the LOL provision to QIO determinations are in the QIO Manual;    Medicares general notices to the medical community of Medicare payment denial of item or service under all or certain circumstances (such notices include, but are not limited to, manual instructions, bulletins, and Medicare contractors written guidance );    Provision of the item and service being inconsistent with acceptable standards of  practice in the local medical community.    Written notification from the healthcare provider or suppliers utilization review committee informing the healthcare provider or supplier that the item and/or service was not covered;    The healthcare provider or supplier issuing a written notice of the likelihood of Medicare payment denial for an item and/or service to the beneficiary; or    The healthcare provider or supplier being previously notified by telephone and/or in writing that an item or service is not covered or that coverage has ended.   If any of the circumstances described above exists, a healthcare provider or supplier is held to have knowledge.   30.2.2 - Medical Record Evidence of Healthcare Provider or Supplier Knowledge  (Rev.: 4197; Issued: 01- 11-19; Effective: 04 -15-19; Implementation: 04 -15-19)  The healthcare provider or supplier is also accountable for information contained in the beneficiarys medical records, such as the beneficiarys medical chart, attending physicians notes, or similar records.  When the medical records clearly show that the beneficiary received only non- covered services as described in the Medicare Benefit Policy Manual, the healthcare provider or supplier will be presumed to have knowledge of non- coverage.   Examples:    A physician clearly indicated in the beneficiarys medical record that the patient no longer needed the services or the level of care provided;    The physician indicated the patient could be discharged;    The attending physician refused to certify or recertify the beneficiarys need for a particular level of care covered by Medicare because he/she determined that the patient does not require a covered level of care; or    The contractor requested additional medical evidence after a certain number of days to determine whether continued coverage is warranted.  However, the healthcare provider or supplier did not submit the evidence within the stipulated time.   30.2.3 - Acceptable Standards of Practice  (Rev.: 4197; Issued: 01- 11-19; Effective: 04 -15-19; Implementation: 04 -15-19)  When an item and/or service furnished do not meet locally acceptable standards of practice, the healthcare provider or supplier is considered to have known that Medicare payment would be denied.  Because healthcare provider and supplier licensure is premis ed on the assumption that they are knowledgeable about locally acceptable standards of practice, healthcare providers and suppliers are presumed to have knowledge about locally acceptable standards of practice for liability determinations.  No other eviden ce of knowledge of local medical standards of practice is necessary.    In order to determine what acceptable standards of practice exist within the local medical community, Medicare contractors will rely on the following:     published medical literature;1   a consensus of expert medical opinion;2 and   1 Published medical literature refers generally to scientific data or research studies that have been published in peer -reviewed medical journals or other specialty journals that are well recognized by the medical profession, such as the New England Jour nal of Medicine and the Journal of the American Medical Association. 2Consensus of expert medical opinion might include recommendations that are derived from technology assessment processes conducted by organizations such as the Blue Cross and Blue Shield Association or the American College of Physicians, or findings published by the Institute of Medicine.    consultations with their medical staff, medical associations, including local medical societies, and other health experts.   NOTE:   A healthcare provider or supplier may indicate on the claim (via Occurrence Code 32 or the applicable Healthcare Common Procedure Coding System code modifier (i.e. GA, GX, ext.) on contractor claims) that they gave the beneficiary a valid written notice before furnishing the item and/or service.  In that instance, the Medicare contractor will hold the beneficiary, not the healthcare provider or supplier liable for the denied charges.  If it is determined that the written notice was invalid, the contr actor will override the GA code, and the healthcare provider or supplier will be found liable.  30.3  The Right to Appeal  (Rev.: 4197; Issued: 01- 11-19; Effective: 04 -15-19; Implementation: 04 -15-19)  The beneficiary, healthcare provider, or supplier has the right to appeal both the issue of coverage for the claim and determination of liability.  For purposes of determining the amount in controversy for an appeal of the coverage determination, payment m ade under 1879 of the Act should be disregarded.  For more information see Chapter 29 of this manual, Appeals of Claims Decisions. 30.4 - Fraud, Abuse, Patently Unnecessary Items and Services  (Rev.: 4197; Issued: 01- 11-19; Effective: 04 -15-19; Implementation: 04 -15-19)