Denials Under the Medicare Program

Palmetto GBA may deny or reject claims for a number of reasons. Here are some of the more common reasons:
  • Local Coverage Determinations and National Coverage Determinations
  • Laws that prohibit payment
  • Palmetto GBA clinical staff members have made a decision on the claim based on medical records submitted at our request
  • Correct Coding Initiative
  • Global Surgery Package
  • Special payment rules called "consolidated billing" or "prospective payment system"
  • The provider is on special review due to incorrect billing, documentation problems, and/or potential fraud or abuse issues 
  • Special rules apply to that provider type (e.g., ambulatory surgery centers)
  • The provider or beneficiary is not eligible
  • The claim contains a billing error and is rejected
Local Coverage Determinations (LCDs)
Local Coverage Determinations (LCDs) are an educational and administrative tool to assist physicians, providers and suppliers in submitting correct claims for payment.
  • LCDs are rules for coverage that are specific to a state or jurisdiction. CMS allows Medicare Contractors to develop LCDs in certain circumstances. LCDs are generally developed to restrict coverage but may also be developed to ensure beneficiary access to care.
  • Each Medicare Contractor has one or more Contractor Medical Directors (CMDs). CMDs are responsible for developing local policies. The development process includes presenting draft versions of the policies to a group of physicians appointed by their specialty associations to advise us. This group of physicians is known as the Carrier Advisory Committee, or Contractor Advisory Committee for some contracts, and each group meets three or four times per year. CMS instructions for developing LCDs and conducting CAC meetings are located in the Program Integrity Manual (PIM), Chapter 13 (PDF, 219 KB).

CMS maintains a database of all LCDs from every Medicare Contractor. Access all contractors’ LCDs through the CMS Medicare Coverage Database.

If a service does not have a corresponding LCD, the service is subject to the definition of "medical necessity" in the Social Security Act, section 1862 (a)(1)(A). If Palmetto GBA does not have a policy, it does not necessarily mean that the service is non-covered.

LCD Reconsideration Process
If you disagree with the information contained in an LCD, you may submit information and ask that Palmetto GBA reconsider the policy through the LCD Reconsideration Process. Specifics on how this process works is available on the Palmetto GBA website. Select Reconsideration Process from the right navigation of the Medical Policies page. Some highlights:

  • Only final LCDs are included in this process
  • Beneficiaries, providers and interested parties doing business in Ohio, West Virginia and South Carolina can request changes
  • Provider must identify the specific language they want added to or deleted from the policy
  • Provider must include new evidence that affects the content or basis of the policy. The rules of evidence are very specific. Refer to our website for complete details.
  • Medicare Coverage — General Information 
Draft LCDs are available on the Palmetto GBA website. You are welcome to send comments before the policies are finalized.
National Coverage Determinations (NCDs)
When and why does CMS develop NCDs?
  • First, an item or service must be shown to have medical benefit
  • Second, it must demonstrate added value to people in Medicare
  • An item or service is medically beneficial if objective clinical evidence shows it produces a health outcome better than the natural course of illness or disease with customary medical management of symptoms
  • An item or service might add value to existing coverage if it substantially improves health outcome
  • Or, it could provide access to a medically beneficial treatment of a different type — medication instead of surgery, for example
  • Another consideration could be whether it could be substituted for an existing treatment at lower cost to the Medicare population
Details regarding NCDs and NCD development are available in the CMS Internet Only Manual, Publication 100-3, Chapter 3, Chapter 1, Part 1.
You Can Request Changes to an NCD
The existing policy for seeking reconsideration of NCDs is available on the CMS website.

Laws that Affect Payment
Since the inception of the Medicare program in 1965, Congress has passed numerous laws that affect Medicare benefits and coverage.

When laws are passed that affect Medicare, they are published in the Federal Register. CMS then instructs Medicare Contractors to make changes based on the law. Medicare Contractors are not responsible for figuring out what they need to do based on the Federal Register, though we do use it for research and informational purposes. CMS is responsible for interpreting these laws and telling contractors how the laws must be implemented. CMS provides direction for Medicare Administrative Contractor on how to implement laws in the CMS Internet Only Manual and CMS Transmittals.

To access the Federal Register, go to

Medical Review Denials
The Medical Review (clinical) staff at Palmetto GBA is responsible for making clinical decisions on claims. Whenever medical documentation must be reviewed in order to decide how a claim should be handled, that claim and documentation are reviewed by clinicians.

National Correct Coding Initiative
The CMS developed the National Correct Coding Initiative (NCCI) to promote national correct coding methodologies and to control improper coding leading to inappropriate payment in Part B claims. The CMS developed its coding policies based on coding conventions defined in the American Medical Association's CPT Manual, national and local policies and edits, coding guidelines developed by national societies, analysis of standard medical and surgical practices, and a review of current coding practices. The CMS annually updates the National Correct Coding Initiative Coding Policy Manual for Medicare Services (Coding Policy Manual).

The purpose of the NCCI Procedure-to-Procedure (PTP) edits is to prevent improper payment when incorrect code combinations are reported. The NCCI contains one table of edits for physicians/practitioners and one table of edits for outpatient hospital services. The Column One/Column Two Correct Coding Edits table and the Mutually Exclusive Edits table have been combined into one table and include PTP code pairs that should not be reported together for a number of reasons explained in the Coding Policy Manual.
How can physicians and providers obtain lists of the NCCI edits?
The NCCI edits are posted on the CMS website.

How do you use the NCCI list?
The NCCI edits are posted as a spreadsheet that will allow users to sort by procedure code and by effective date.

  • A "Find" feature will allow users to look for a specific code
  • The edit files are indexed by procedure code ranges for easy navigation
  • The CMS Web page also includes links to documents that explain the edits: the NCCI Policy Manual for Part B MACs, CMS Internet Only Manual and the NCCI Q&A page

Do the edits ever change?
Yes, the CCI edit list is updated quarterly.

Medically Unlikely Edits (MUEs)
The CMS developed Medically Unlikely Edits (MUEs) to reduce the paid claims error rate for Part B claims. An MUE for a HCPCS/CPT code is the maximum units of service that a provider would report under most circumstances for a single beneficiary on a single date of service. All HCPCS/CPT codes do not have an MUE.

MUE was implemented January 1, 2007 and is utilized by all MACs to adjudicate claims.

The CMS Medically Unlikely Edits Webpage includes a links to the MUE Frequently Asked Questions and Answers (FAQ), MUE files, and the publication announcement letter which explain most aspects of the MUE program.

Although CMS publishes most MUE values on its website, other MUE values are confidential and are for CMS and CMS Contractors' use only. The latter group of MUE values should not be released since CMS does not publish them.

Inquiries about the MUE program other than those related to MUE values for specific HCPCS/CPT codes should be sent to the following email address:

Key Points

  • The MUEs that will be implemented are based on anatomic considerations. CMS will allow and require an appeals process for those claims or line items that are denied as a result of an MUE edit.
  • The appeals process will be allowed for claims that are denied as a result of an MUE edit. Instead, providers should resubmit corrected claims.
  • Excess charges due to units of service greater than the MUE may not be billed to the beneficiary (this is a provider liability), and this provision can neither be waived nor subject to an Advance Beneficiary Notice (ABN)

Global Surgery Package
The national definition of the global surgery package ensures payment is made for the same services across all MAC jurisdictions. In addition to the global policy, uniform payment policies and claims processing requirements have been established for other surgical issues such as additional surgeons and multiple procedures.
Classifications of the Global Surgery Package
There are three types of global surgery based on the number of post-operative days.

Zero Post-operative Days: "Starred" Procedures Including Some Endoscopies

  • No pre-operative period
  • Visit on day of procedure is generally not payable as a separate service

Other Minor Procedures

  • No pre-operative period
  • Visit on day of the procedure is generally not payable as a separate service
  • Total global period is either one or 11 days. Count the day of the surgery and the appropriate number of days (either zero or 10) following the day of surgery.

Major Procedures

  • One day preoperative included
  • Day of procedure is generally not payable as a separate service
  • Total global period is 92 days. Count one day before the day of the surgery, the day of surgery and the 90 days immediately following the day of surgery.

Services Included in the Global Surgery Package
The following services are included in the global package if the operating surgeon performs them in any place of service during the global period:

  • Pre-op visits beginning with the day before a major surgery
  • Intra-op services that are normally a part of the surgical procedure
  • Complications following surgery. All additional medical or surgical services required of the surgeon (not resulting in a return trip to the operating room) that occur within the designated post-operative period.
  • Post-op Visits — including pain management, some supplies, dressing changes, local incisional care, removal of urinary catheters, trach tubes, etc.

Services Excluded from the Global Surgery Package
The following services may be submitted separately. In some instances, an appropriate modifier/diagnosis is required.

  • Initial consultation or evaluation codes (major surgeries)
  • Services of other physicians except in co-surgery situations
  • Visits unrelated to the diagnosis for which the surgery was performed (unless the visits occur due to complications of surgery). Refer to CPT modifiers 24 or 25.
  • Treatment outside of the normal recovery from surgery. See CPT modifier 24.
  • Diagnostic tests and procedures
  • Clearly distinct surgical procedures performed by the original surgeon during the post-op period, which are not re-operations to treat complications. Refer to CPT modifiers 58 or 79.
  • Treatment for post-operative complications that require a return trip to the operating room. Refer to CPT modifier 78.
  • If a less extensive procedure fails and a more extensive procedure is required. Refer to CPT modifier 79.
  • Selected supplies can be billed when certain procedures are performed in the physician’s office (See guidelines for list of payable supplies)
  • Immunosuppressive Therapy provided by the surgeon. Refer to CPT modifier 24. Critical care services (CPT codes 99291 and 99292) unrelated to surgery for critically injured or burned patients who require constant attention from physician. Refer to CPT modifiers 24 or 25.


Consolidated Billing (CB)
Medicare pays some services in a lump sum, usually based on the patient’s condition. Here are some examples:

  • Under Medicare Part A, for hospital inpatients, hospitals are paid based on Diagnosis-Related Groups (DRGs). Payment is based on the type of care usually required for the patient’s condition.
  • Outpatient hospital services, furnished by the outpatient facilities, are reimbursed based on the outpatient prospective payment system (OPPS). These outpatient facilities submit claims to Part A Medicare MAC, which make payment from their Part B funds (they use Part A funds for inpatient services).
  • Skilled nursing facilities (SNF) are reimbursed according to the skilled nursing facility prospective payment system (SNF PPS), sometimes known as SNF consolidated billing
  • Home health agencies are reimbursed by the RHHI (Regional Home Health Intermediary) according to the Home Health Prospective Payment System
  • Under Medicare Part B, management of dialysis for ESRD patients is based on a Monthly Capitation Payment (MCP). The MCP includes various services that the physician may or may not provide to that patient during a given month. Dialysis facilities are also paid at the composite rate, which includes some services related to dialysis.

Skilled Nursing Facility Prospective Payment System
The Balanced Budget Act of 1997 mandated SNF Consolidated Billing

What Does "Consolidated Billing" Mean?
Consolidated billing (CB) mandates that SNFs bill for the entire package of care that Part A residents receive, with certain exceptions. It also requires that SNFs be responsible for billing physical, occupational and speech therapy services for residents in a Part A or B stay.

What Is a "Part B Stay?"
A SNF resident is in a Part B stay when Part A benefits are exhausted and post-hospital or level of care requirements are not met.

Does Medical Necessity Still Apply to Ambulance Transportation Billed to the Part B MAC?

Whose Responsibility Is It to Determine if the Patient Is in a Part A or Part B Stay?
The SNF and the provider of service share the responsibility.

Where Can I Find More Information About Consolidated Billing for SNF Residents?
The CMS website includes links to coding files that identify physician services not subject to SNF CB and the professional component of services that must be submitted to Medicare Part B with CPT modifier 26 or the individual professional component code if one is assigned. There are also sample agreement letters that can be used to guide providers through the contracting process. View the sample documents.

How Does SNF Consolidated Billing Affect Physicians?

  • When physicians bill for the interpretation of diagnostic tests, the interpretations are only billable to the Part B MAC if the diagnostic test is not subject to consolidated billing. Check the CMS website to see what is included in CB and what is allowed separately. 
  • If the physician is billing for the interpretation of a diagnostic test that IS included in consolidated billing, the physician must bill the SNF
  • Other physician professional services, which are not including interpretation of diagnostic tests, are billable to the Part B MAC. Example of another physician professional service: E/M services.
  • Physicians and other providers may seek reimbursement from the SNF for the technical component of the test (e.g., CPT code 93005). Providers should enter into contractual agreements with SNFs.

Targeted Probe and Educate (TPE) Process
Based on data analysis of claims payment, Palmetto GBA will identify areas with the greatest risk of inappropriate program payment. Refer to the Active Medical Reviews article for a list of review topics. All service-specific reviews will be phased out. 

Palmetto GBA selects providers for the TPE process based on the following:

  • Analysis of billing data indicating aberrancies that may suggest questionable billing practices; or
  • On targeted review and is transitioned to the TPE process based on error rate results; or
  • On service specific review error rate results
  • Palmetto GBA will mail a letter to those who have been selected for TPE review. The letter will outline the reason for selection, and will provide an overview of the TPE process and contact information.
  • TPE consists of up to three rounds of review with 20–40 claims sample selected (pre or post payment) for each round
  • Subsequent rounds will begin 45–56 days after individual provider education is completed. Discontinuation of review may occur if appropriate improvement and compliance is achieved during the review process.
  • An Additional Document Request (ADR) will be generated for each claim selected 
    • For pre-pay reviews, Palmetto GBA has 30 days from the date the documentation is received to review the documentation, and make a payment decision
    • For post-pay reviews, Palmetto GBA has 60 days from the date the documentation is received to review the documentation, and make a payment decision

Note: Non-response denials count as an error when calculating the error rate. Palmetto GBA recommends using eServices, our secure online web portal to submit documentation in response to medical review ADRs and when/if additional documentation is requested throughout the review process. You may refer to the eServices User Manual for instructions. If you are not already registered to use eServices, refer to "Registration" on page 17.

Prior to the conclusion of each round, the medical reviewer will call all providers with moderate to high error rate to discuss the summary of the errors found. 

At the conclusion of each round, a letter with the review results will be mailed. The letter will include the number of claims reviewed, the number of claims allowed in full, and the number of claims denied in full or in part.

When high denial rates continue after three rounds of TPE, Palmetto GBA will send a referral to CMS for additional action. 

Change Request 10429 (PDF, 242 KB)
CMS Publication 100-2, Medicare Benefit Policy Manual

In order to receive reimbursement from Medicare, both the provider and the beneficiary must meet eligibility requirements.

  • The provider must have a National Provider Identifier (NPI) from the National Plan and Provider Enumeration System (NPPES)
  • The provider must be enrolled in Medicare with Palmetto GBA
  • The provider must have a valid NPI at the time the services are rendered and be actively enrolled with Palmetto GBA
  • Some services are restricted to particular types of providers (e.g., only a clinical laboratory may be reimbursed for HCPCS code P9603, travel allowance)
  • The beneficiary must be entitled to Medicare on the date of service
  • The beneficiary must not be enrolled in a Medicare Advantage plan or Railroad Medicare, if the service is submitted to Palmetto GBA Jurisdiction M or J. Claims for Railroad Medicare beneficiaries are submitted to a different Palmetto GBA office.

Rejections/Billing Errors
Billing errors are also known as "claim submission errors" or 'rejections." Rejections are not the same as denials, although providers often use the terms interchangeably.
Rejections occur when a claim contains invalid information or is missing required information.

  • Example of invalid information: the claim contains a CPT code that specifies "inpatient hospital," but the place of service on the claim says "office"
  • Example of missing required information: the service submitted is an X-ray, but the NPI of the ordering or referring physician is missing

Important Facts About Billing Errors

  • Every claim that is rejected as a "billing error" contains remark code MA130
  • MA130 is accompanied by other remark codes. Look for the remark codes to find the specific error.
  • Many billing errors are identified automatically through the claims processing system.
  • In the vast majority of cases, the only way to resolve a billing error is to find and fix the specific error. It is also important to double-check the rest of the claim for accuracy.
  • Once you have identified and corrected the billing error, the claim must be resubmitted as a new claim. Billing errors cannot be sent in for redeterminations (appeals).
Use web tools to help identify and correct billing errors, such as the "Denial Finder," "Modifier Lookup" and specialty web articles.

Last Updated: 02/07/2018