All About ABNs

May 1, 2003

In an important development for physician practices nationwide, the Centers for Medicare and Medicaid Services (CMS) recently issued a program memorandum for intermediaries/carriers with significant implications for Medicare billing practices.

Effective December 2, 2002, PM AB-02-114 specifies the circumstances in which Advance Beneficiary Notices (ABNs) must be provided by physicians to Medicare beneficiaries prior to furnishing what are anticipated to be noncovered items and services.

Apart from prescribing many details of the ABN process, the program memorandum reiterates the potentially severe consequences of noncompliance with these technical, but important, Medicare billing criteria.

What is an ABN?

An ABN is a federally-mandated form of notice that may be likened to informed consent for Medicare reimbursement. The ABN is written notice to a Medicare beneficiary, before items or services are furnished, that the physician believes that Medicare probably will not pay for a particular service. CMS intends that the beneficiary will thus make an informed consumer decision whether or not to receive care for which he may have to pay out of pocket or through other insurance -- and thereby participate more effectively in his own treatment decisions.

Whether or not the ABN process will accomplish that goal is arguable. However, if a physician fails to inform a beneficiary that he will be "personally and fully responsible for payment," the physician cannot collect for care denied by Medicare and may further be liable for repayment under the Refund Requirement, as well as becoming subject to other federal sanctions.

When to provide an ABN

It may be easiest to understand when an ABN must be provided by considering when the form is not necessary.

In basic terms, routine physical checkups, custodial care, cosmetic surgery, routine eye care, and dental care do not require an ABN. There is no need to provide notice to the beneficiary that the service may not be covered, since it is never covered by Medicare.

An ABN is also not required when Medicare is expected to deny payment for a service which may be a program benefit but for which a coverage requirement (e.g., a qualified setting) is not met. In that situation, an ABN is not required as a precondition to collection from the covered person. Nonetheless, even though an ABN is not technically required, a physician is permitted  -- and probably should be encouraged --  to provide some notice to the beneficiary as "a prudent customer service," (in CMS' words) in order to minimize patient confusion.

In these circumstances it is necessary to modify the standard ABN forms by deleting the reference to Medicare claims submission for nonqualifying claims.

In contrast, some services do fall within a general benefit category under the Medicare statute but fail to meet the medical necessity standards, most often because they fall outside of covered frequency limitations of the Social Security Act (e.g., lab tests and preventive screening exams, such as mammograms, Pap smears, pelvic exams, and glaucoma, prostate, and colorectal cancer screening tests). Even though a physician recommends such procedures as clinically indicated, Medicare will not reimburse the charges incurred for failure to meet the law's medical necessity standard. In such circumstances the ABN must be given to the patient to permit collection and avoid potentially adverse regulatory consequences.

Logistical issues

The basic form of ABN for physicians is attached to the program memorandum as CMS-R-13-61, with both English and Spanish language examples. It provides instructions to help customize the ABN form in acceptable ways.

Among other things, it is important that the physician specify the services for which Medicare is expected not to pay, and state the reason for the expected payment denial with enough specificity to allow the patient to understand it.


The signature of the patient or his "authorized representative" is required; CMS states that "the beneficiary cannot properly refuse to sign the ABN and still demand the item or service." While CMS encourages physicians to consider not furnishing the service in question without an ABN, the agency acknowledges that health, safety, or other liability concerns may override reimbursement issues in some circumstances. If the service is provided notwithstanding the patient's refusal to sign, CMS suggests an annotation witnessed by a third person as a possibly acceptable compliance alternative.

ABNs should be hand-delivered to a patient or his authorized representative (e.g., an individual designated under a durable medical power of attorney, spouse, other relative, or friend) prior to delivery of the service for which Medicare reimbursement denial is expected. Telephone notice as an after-the-fact correction to limit physician liability is not deemed acceptable by CMS unless it is immediately followed up by written notice delivered in person. 

Delivery of ABNs is not effective in emergency situations, when the patient is under duress or in a highly confused state, or is unable to comprehend the notice due to health status or otherwise. The range of practical difficulties practitioners may encounter is extensive (e.g., treatment of senile persons or persons speaking different languages, or persons whose need for a particular screening test emerges only during the course of another examination), and careful attention to varying circumstances will be necessary.

ABNs cannot be developed in generic form or signed in blank. Routine use of ABNs is forbidden; for example, it is not sufficient for compliance purposes simply to provide ABNs because a physician "never knows whether or not Medicare will pay." Rather, the ABN should only be supplied to a patient when Medicare is expected to deny reimbursement on one of the particular bases noted above.

One exception to the prohibition on routine ABN use is for lab tests or other items or services provided on a regularly scheduled basis under a "standing order;" a single ABN may be sufficient for all tests or services contemplated by that extended course of treatment, subject to a one-year limitation. If new items or services are ordered or the treatment extends beyond one year, a new ABN must be given.

Notwithstanding the anticipated denial of reimbursement, CMS does still require submission of a "demand bill" to the proper carrier, with appropriate modifier, to complete the ABN process.

Why are ABNs important?

The new CMS clarification means that longstanding Medicare requirements regarding limitations on beneficiary liability now have real regulatory teeth. First, the ABN must be given in order to preserve practitioners' rights to collect fees for particular services rendered. Second, compliance with this technical, potentially burdensome process is also required to lessen legal exposure to significant sanctions such as refund liability, civil monetary penalties, and even Medicare program exclusion, as well as to minimize the specter of other fraud and abuse liability.

As the dust now settles, physicians and medical groups need to allocate time and resources toward developing and implementing an effective compliance strategy to address CMS' recently-articulated ABN process.

In broad-brush terms, designating appropriate personnel and resources at the physician office level to respond to this regulatory regime is a key first step. While every practice will be different in its approach, development of a workable plan will likely include training, documentation of policies, and ongoing oversight of Medicare billing practices.

A good place to start is the CMS web site to examine the new program memorandum that defines the current rules, at www.cms.hhs.gov/manuals/pm_trans/AB02168.pdf.

Other resources may also become available to assist with compliance from CMS and other professional associations as matters progress. However, compliance is unlikely to be simple or straightforward, and the risks of noncompliance may be large, notwithstanding the seemingly benign purpose of the government's "financial informed consent" mechanism.

Gerald Niederman can be reached at editor@physicianspractice.com.

This article originally appeared in the May 2003 issue of Physicians Practice.