A Local Coverage Determination (LCD) is a policy document created within the Medicare system that dictates whether a specific medical service, procedure, or item is considered reimbursable for patients in a defined geographic area. These determinations provide detailed criteria that healthcare providers must meet for a claim to be paid by Medicare. An LCD functions as a set of rules that defines what constitutes “reasonable and necessary” care for certain conditions. If a service is performed, but the claim does not align with the relevant LCD, the financial responsibility for that service will likely not be covered by Medicare. The LCD’s existence profoundly influences medical coding practices and billing workflows.
The Role of Medicare Administrative Contractors
Local Coverage Determinations are created and enforced by private companies known as Medicare Administrative Contractors (MACs). The Centers for Medicare & Medicaid Services (CMS) contracts with these MACs to process Medicare claims for a specific region or “jurisdiction” in the United States. This arrangement is the source of the “Local” designation in the LCD title.
Because MACs serve distinct geographic areas, an LCD published by one contractor is only applicable within their assigned region. This means that a service covered in one state might be denied in a neighboring state served by a different MAC. MACs develop LCDs to ensure that local practice patterns and regional healthcare needs are addressed where national rules are absent or too broad. The MAC is the entity that reviews a submitted claim against its established LCD and decides on the payment.
Defining Medical Necessity Criteria
The core purpose of an LCD is to establish a clear definition of medical necessity for a particular service or item within the local jurisdiction. The determination specifies the precise clinical conditions under which the service is considered appropriate for a Medicare beneficiary. This policy document outlines which Current Procedural Terminology (CPT) or Healthcare Common Procedure Coding System (HCPCS) codes for a procedure will be covered.
Crucially, the LCD links these procedure codes to a corresponding list of acceptable International Classification of Diseases, Tenth Revision (ICD-10) diagnosis codes. These ICD-10 codes represent the specific illnesses, symptoms, or injuries that justify the use of the procedure. If a provider submits a claim for a procedure code without an associated ICD-10 diagnosis code that is explicitly listed as covered in the LCD, the claim will be rejected. For example, using a diagnosis code not listed in the LCD for a specific diagnostic test will result in a denial, even if the procedure was performed.
The LCD also includes details on frequency limits and conditions of coverage, offering specificity that national guidelines may lack. This level of detail ensures that the documentation in the patient’s medical record directly supports the billed services. Non-adherence to the diagnosis code pairings is a primary cause of claim denials.
Distinguishing LCDs from National Coverage Determinations
The Medicare coverage system operates on a hierarchy of rules, with National Coverage Determinations (NCDs) sitting above LCDs. NCDs are policies established directly by the Centers for Medicare & Medicaid Services (CMS) and apply uniformly across the entire country. If a service is explicitly covered or non-covered by an NCD, that national ruling is binding on all Medicare Administrative Contractors.
LCDs are developed by MACs to address services or items where a national policy does not exist or where the NCD is too general. The local determination fills in the regional details, providing specific coding and documentation requirements. An LCD cannot contradict an existing NCD; it must be consistent with all national coverage, payment, and coding policies.
The NCD sets the national baseline, while the LCD provides the regional framework. For a service with no NCD, the MAC has the authority to create an LCD to determine coverage for its specific jurisdiction. If an NCD exists, the MAC may still issue an LCD to clarify the circumstances of coverage or add further documentation requirements.
Practical Impact on Claims Processing
The existence of Local Coverage Determinations has a direct effect on the daily operations of healthcare providers, coders, and billers. Providers must proactively check the LCD relevant to their geographic area before rendering a service to a Medicare patient, especially for procedures with known coverage restrictions. This pre-billing verification ensures the service is likely to be reimbursed.
Compliance with the documentation requirements outlined in the LCD is equally important. A claim may be technically correct in its coding but denied if the patient’s medical record lacks the specific justification the LCD mandates. For instance, an LCD might require documentation showing a patient failed a specific prior treatment before a more complex procedure can be covered. Claims that fail to align with the LCD’s criteria are automatically flagged and often denied by the MAC’s system. This non-compliance leads to financial liability, potentially shifting the cost of the service to the patient or forcing the provider to absorb the loss.