Medical coders and billers have two types of coverage determinations within Medicare, local and national. When a contractor or fiscal intermediary makes a ruling as to whether a service or item can be reimbursed, it is known as a local coverage determination (LCD). When CMS makes a decision in response to a direct request as to whether a service or item may be covered, it’s known as a national coverage determination (NCD).
LCD determination is always based on medical necessity. LCDs apply only to the area served by the contractor who made the decision. Procedural codes that are LCD-dependent are noted as such in the CPT manual. If the provider is planning on submitting a procedural code or HCPCS code that’s noted to be subject to an LCD determination, you need to verify the guidelines for the item in question prior to submission.
NCD rulings specify the Medicare coverage of specific services on a national level. All Medicare contractors are obligated to follow NCDs.
If an item or service is new, or not defined by an NCD, the local contractor is responsible for the decision for coverage. When neither an NCD or LCD exists and it’s uncertain whether a service or item will be covered, but the patient desires the treatment or item, the provider must secure an advance beneficiary notice (ABN) prior to the service if he intends to bill the patient.
Both NCDs and LCDs establish policies that are specific to an item or service. They also define the specific diagnosis (illness or injury) for which the item or service is covered. LCDs may vary from region to region.
For example, SERVICE 12345 may be covered in Region A to treat diagnosis ABC. But the same service may be covered in Region B only to treat diagnosis XYZ. So when an item or service is in question, always check beforehand. If a Medicare beneficiary receives an item or service that is not a covered benefit and has not signed an ABN, the provider usually has to absorb the cost