REPORT OF THE COUNCIL ON MEDICAL SERVICE
CMS Report 7 - A-98
Subject: Use of Advanced Beneficiary Notices for Laboratory Tests
(Resolution 123, I-97)
Presented by: Arthur R. Traugott, MD, Chair
Referred to: Reference Committee A
(Mark Ivey, Jr., MD, Chair)
1 At the 1997 Interim Meeting, the House of Delegates referred Resolution 123 and a substitute
2 resolution proposed by the Reference Committee to the Board of Trustees and, subsequently, to
3 the Council on Medical Service for study. Introduced by the Oregon delegation, Resolution 123
4 (I-97) calls for the AMA “to urge the Health Care Financing Administration (HCFA) to change its
5 policy regarding the use of Advanced Beneficiary Notices (ABNs) and allow for the routine use of
6 ABNs for all laboratory tests.” The substitute language proposed by the Reference Committee
7 calls for the AMA, “through its participation in the negotiated rulemaking process on national
8 coverage and administrative policies for clinical diagnostic laboratory tests, to seek to eliminate
9 the use of ABNs for laboratory tests.”
11 The following report describes current HCFA regulations regarding the use of ABNs, summarizes
12 relevant provisions of the Balanced Budget Act of 1997 (PL 105-33) that address national policies
13 for clinical laboratory tests, presents problems with the use of ABNs for laboratory tests, and
14 discusses potential avenues for seeking policy changes on this issue.
18 HCFA requires that an ABN be provided to patients whenever there is a question as to whether a
19 patient service will be determined by Medicare to be a covered and payable service. The ABN is a
20 means of notifying the patient prior to delivery of the service that Medicare may determine that the
21 service is not medically necessary or for some other reason not payable, and that the patient will
22 then be responsible for paying the full cost of the service.
24 Resolution 123 (I-97) called for the AMA to urge HCFA to change its ABN policy to allow for
25 routine ABN use for all laboratory tests. The sponsor’s rationale was that HCFA requires all
26 clinical laboratory test providers to document the medical necessity of each test billed, but that the
27 providers of the tests are not in a position to determine medical necessity. For this reason, doubts
28 frequently arise as to whether Medicare will pay for ordered tests. Routine ABN use would mean
29 that either the Medicare program or the patient receiving the test would pay for all clinical
30 laboratory tests ordered.
32 Testimony before the Reference Committee supported the resolution and indicated that physicians
33 perceive Medicare’s laboratory test payment policies, including use ABNs, to be extremely
34 problematic. HCFA staff testified, however, that ABNs are intended for use in exceptional
CMS Rep. 7 - A-98 -- page 2
1 circumstances, not on a routine basis, and HCFA would oppose their routine use. The Reference
2 Committee concurred with those testifying as to the high hassle factor associated with use of the
3 ABN for laboratory tests. Therefore, the Committee recommended that the AMA adopt substitute
4 language calling for elimination of the use of ABNs for laboratory tests, rather than seeking a
5 policy change to allow their routine use. The Council believes that referral of both the original and
6 substitute resolutions reflect the uncertainty within the House of Delegates about whether routine
7 use or elimination of ABNs for laboratory tests is the best course of action for the AMA.
9 RELEVANT PROVISIONS IN THE BALANCED BUDGET ACT OF 1997
11 Section 4554 of the Balanced Budget Act of 1997 requires HCFA to conduct a negotiated
12 rulemaking process on adoption of national policies for the clinical laboratory test benefit. The
13 Act further requires that Medicare use the results of the negotiated rulemaking to establish new
14 national laboratory test policies by January 1, 1999. As defined by the Act, the negotiated
15 rulemaking process will address the following:
17 beneficiary information required to be submitted with each claim or order for laboratory tests;
18 medical conditions for which a laboratory test is reasonable and necessary;
19 appropriate use of procedure codes in billing for a laboratory test;
20 medical documentation required by a Medicare contractor at the time a claim is submitted for a
21 laboratory test;
22 recordkeeping requirements in addition to any information required to be submitted with a
24 procedures for filing claims and for providing remittances by electronic media; and
25 limitations on frequency of coverage for the same tests performed on the same individual.
27 The negotiated rulemaking process was originally expected to commence in April 1998 and to last
28 about three months, with a proposed rule in July or August 1998. Although the commencement of
29 process has been delayed, the new policies are still expected to be ready for implementation in
30 1999. The AMA is seeking a formal role as a participant in the negotiations.
32 In addition to the negotiated rulemaking process, HCFA is currently preparing instructions for
33 Medicare carriers on ABNs. These instructions will more clearly state the standards for use in
34 developing an ABN and provide model ABN language. They will also standardize ABN
35 requirements across the Medicare carriers. Although national standardization and clearer
36 guidelines are a positive development, it is also possible that development of the new regulations
37 could heighten physician concerns about them. The AMA and the College of American
38 Pathologists have urged HCFA to defer issuing the new standards, therefore, until HCFA and
39 representatives of organized medicine have had an opportunity to discuss this issue thoroughly.
41 PROBLEMS WITH USE OF ABNs FOR LABORATORY TESTS
43 Annual Medicare expenditures for physician services are about $43 billion. About $2.5 billion
44 was spent on clinical laboratory tests. The line-item denial rate by Medicare for lab test claims is
45 14%, whereas it is 10% across all physician services. Medicare coverage policies on clinical
46 laboratory tests have been so muddled that physicians and laboratories frequently have no way of
47 predicting whether or not Medicare will pay for submitted claims. This lack of clarity has
48 increased the demand for use of ABNs on a routine basis, so that patients would clearly be
49 responsible for paying any claims for tests that may be rejected by Medicare.
CMS Rep. 7 - A-98 -- page 3
2 One major reason for claims denial is that the Medicare carrier determines that the test is a
3 “screening” test. Medicare carriers, physicians, and laboratories clearly have different views about
4 whether tests are screening or are necessary for proper diagnosis and treatment.
6 Similarly, Medicare may have either national or local medical review policies that restrict
7 coverage to certain conditions that the patient either does not have or is not known to have. These
8 policies may be very specific and would require the physician or laboratory to refer to lists of
9 covered conditions, diagnosis codes, frequency criteria, and other policies to try and discern the
10 likelihood that a test will be covered. This problem is especially acute for physicians whose
11 claims are submitted to multiple carriers.
13 The Council believes that these policies, in addition to being administratively complex for
14 physician offices and laboratories, are virtually impossible for patients to understand. Whereas the
15 overall use of ABNs is intended to be helpful to beneficiaries, in the uncertain environment
16 surrounding laboratory test coverage policy, use of ABNs only adds to the confusion confronting
17 patients and their physicians. The confusion is further compounded by ABN references to services
18 for which claims are denied as being “not medically necessary.” Instead, the Council believes that
19 ABNs should simply state that it is unclear whether or not Medicare covers the tests.
21 Decisions about the tests necessary to properly diagnose and treat medical conditions are a
22 fundamental element of medical training. The Council believes that the almost random decisions
23 by Medicare about whether or not to pay for such testing amounts to micromanagement of medical
24 decision-making, and is a major intrusion on the physician-patient relationship. The only effect
25 that ABNs have under these circumstances is to cause patients to doubt the information provided
26 by their physicians, with potentially very negative consequences for quality of care and outcomes.
28 In March 1998, the Council met with HCFA officials to discuss the problems in using ABNs for
29 laboratory tests and avenues for addressing them. The meeting was useful in clarifying HCFA
30 policy on the circumstances under which ABNs may be used routinely, and those where carrier
31 provision of lists of acceptable diagnosis codes may be permitted. HCFA allows “routine” use of
32 ABNs for any test for which frequency of coverage has been established by statute. For example,
33 a Medicare patient may tell her physician that it has been three years since her last Pap test. The
34 routine use of ABNs is considered appropriate in such cases because Medicare records may
35 indicate that the test was provided more recently. HCFA officials expressed surprise at the
36 pervasive influence of Medicare’s lab test policies on non-Medicare claims processing. For
37 example, a member of the Council who does not see Medicare patients had received a letter from a
38 hospital indicating that patient appointments for tests would be cancelled if Medicare
39 documentation requirements were not met. HCFA officials also underscored the importance of the
40 forthcoming negotiated rulemaking process for clarifying Medicare coverage and administrative
41 policies on lab tests, thus reducing the need for ABNs for lab tests.
45 Use of ABNs arises from a provision of Medicare law requiring that beneficiaries receive advance
46 notice of their potential financial liability for services determined not to be medically necessary.
47 The Council believes it is unlikely, therefore, that use of ABNs for laboratory tests could be
48 eliminated without legislative action. The negotiated rulemaking will provide a major opportunity
49 to establish clear Medicare coverage policies and claims processing procedures for clinical
50 laboratory tests. Accordingly, the Council believes that the AMA should first take advantage of
CMS Rep. 7 - A-98 -- page 4
1 the opportunity presented by the negotiated rulemaking and defer any consideration of potential
2 legislative strategies until after the new regulations are issued. The Council will continue to
3 monitor Medicare practices and policies on laboratory test coverage and ABNs, and will report
4 further to the House of Delegates as appropriate.
8 The Council recommends that the following be adopted in lieu of Resolution 123 (I-97), and the
9 remainder of the report be filed:
11 1. That the AMA work to ensure that the forthcoming negotiated rulemaking process on
12 Medicare coverage and administrative policies for clinical diagnostic laboratory tests
13 establishes sufficiently clear policy on coverage, coding, documentation, and payment for
14 clinical laboratory tests, so that the need to use Advanced Beneficiary Notices (ABNs) for
15 laboratory tests is sharply curtailed.
17 2. That the AMA seek a formal role as a participant in the negotiated rulemaking process on
18 Medicare coverage and administrative policies for clinical diagnostic laboratory tests.
20 3. That the AMA work with the Health Care Financing Administration (HCFA) and national
21 medical specialty societies to ensure that the nationally standardized guidelines that are
22 developed on the content and procedures for use of ABNs are clear, that the term “coverage” is
23 used in place of the term “medical necessity,” and that the guidelines are provided to
24 practicing physicians.
26 4. That, until new national policies are established following the negotiated rulemaking process
27 on clinical diagnostic laboratory tests, the AMA work for liberalization of HCFA rules on
28 frequent use of ABNs.
30 5. That the AMA reaffirm Policies H-70.955 and H-70.957 calling for the AMA to vigorously
31 advocate that HCFA prohibit Medicare carriers from routinely requiring that patient diagnosis
32 be submitted for laboratory tests that are ordered by physicians.
34 6. That the AMA urge HCFA to make lists of covered laboratory test benefits available on its
35 World Wide Web site, and employ other means of disseminating this information to