An Advance Beneficiary Notice of Noncoverage (ABN) is a standardized document used within the Medicare system to protect beneficiaries from unexpected costs. This notice serves as a formal communication from a healthcare provider to an individual enrolled in Original Medicare, Parts A or B, prior to rendering certain services or items. The primary function of the ABN is to clearly inform the patient that Medicare may not cover the cost of a specific service. By signing the ABN, the beneficiary acknowledges this potential non-coverage, which then transfers the financial risk from the provider to the patient if Medicare denies the claim.
Defining the Advance Beneficiary Notice
The ABN is a legally recognized form that providers must issue when they believe a service or item Medicare usually pays for will likely be denied in a specific instance. This requirement ensures transparency in the financial relationship between the patient and the provider before the care is delivered. The Centers for Medicare & Medicaid Services (CMS) mandates the use of a single, standardized form, officially known as Form CMS-R-131.
Issuers of the ABN include physicians, hospitals (for Part B services), suppliers of durable medical equipment, and independent laboratories. The notice must be delivered in advance to allow the beneficiary or their representative time to understand the information and make an informed decision about proceeding with the care. If the provider fails to issue a valid ABN when required, they forfeit the ability to bill the patient and become financially responsible for the service themselves.
The core concept behind the ABN is the transfer of liability, which shifts the financial burden from the provider to the beneficiary if Medicare issues a denial. The ABN serves as proof that the patient was forewarned of the potential cost. Without a signed ABN, the provider cannot bill the patient for the denied service. The form outlines the service in question, the provider’s reason for expecting the denial, and the estimated cost to the patient.
Circumstances Requiring Issuance
A healthcare provider issues an ABN when they have reason to believe Medicare will not cover the item or service, which generally falls into one of two categories.
Lack of Medical Necessity
The first and most common reason for a mandatory ABN is the expected lack of medical necessity for the specific patient. Medicare defines medical necessity as services that are reasonable and necessary for the diagnosis or treatment of illness or injury. A provider must issue the ABN if they believe the service, while typically covered, does not meet these criteria for the individual patient. This often arises when services exceed frequency limits set by Medicare, such as too many physical therapy sessions, or when the patient’s condition no longer warrants the skilled level of care.
Statutory Exclusions
The second circumstance involves services that are excluded from coverage by statute, meaning Medicare never covers them. These statutorily excluded services include items like cosmetic surgery, routine foot care, personal comfort items, and most dental services. Issuing an ABN for these types of services is voluntary and not legally required to shift financial liability, but CMS encourages its use as a courtesy.
When an ABN is issued for a statutorily excluded service, the form acts purely as a notification of non-coverage, and the beneficiary is typically not required to sign it. However, in cases of medical necessity denial, the ABN is mandatory, and the beneficiary’s signature is required to validate the transfer of financial liability.
Beneficiary Choices and Financial Implications
The ABN includes three distinct options for beneficiaries, each with different financial and procedural consequences. These options provide the patient control over whether to receive the service and how to handle the resulting bill. The patient must select one option, sign the form, and receive a copy before the service is provided to make the ABN valid.
Option 1: Receive Service and Appeal
This option allows the beneficiary to receive the service and requires the provider to submit a claim to Medicare for a formal coverage decision. By choosing this option, the patient agrees to pay for the service if Medicare denies the claim, but they retain the right to appeal that denial. This is the only choice that ensures the formal appeal process is initiated if the patient wishes to challenge Medicare’s determination.
Option 2: Receive Service, Waive Appeal
This option permits the beneficiary to receive the service, but they instruct the provider not to submit a claim to Medicare. By selecting this option, the patient accepts full financial responsibility immediately and waives their right to appeal Medicare’s non-coverage determination. This choice is appropriate for patients who are certain they will pay out-of-pocket and do not wish to pursue the formal claims process.
Option 3: Decline Service
The beneficiary chooses not to receive the item or service listed on the ABN. By declining the service, the beneficiary incurs no financial obligation for that specific item or procedure. This option is often selected if the patient is unwilling to risk paying the estimated cost detailed on the notice.
If a beneficiary chooses Option 1 and Medicare denies the service, the patient receives a formal denial notice, which triggers their appeal rights. The first level of appeal is a request for redetermination, where a different reviewer at the Medicare Administrative Contractor reviews the claim and the supporting medical documentation. If the denial is upheld, the patient can proceed through several subsequent levels of appeal, including reconsideration by a Qualified Independent Contractor and a hearing before an Administrative Law Judge.