Medicare Reimbursement for Physician Services: The Current Status of Local Payment Policy

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1 Medicare Reimbursement for Physician Services: The Current Status of Local Payment Policy Bibb Allen, Jr, MD, Kathryn J. Keysor, BS Keeping up with the technical and academic advances in medicine of the past 2 decades has made studying the US government s physician reimbursement system a low priority for most physicians. However, in the current environment of declining physician reimbursement and increasing frequency of compliance audits by Medicare, it is important for all physicians to have a basic understanding of the Medicare payment process. A major component of the physician payment system occurs at the local level. Through local coverage determinations, state Medicare contractors make more than 90% of all Medicare coverage decisions. Federal law requires Medicare contractors to seek physician input into their coverage decision process through contractor advisory committees, and through these committees, physicians can have significant influence over the coverage decision process. Once local contractors have made their coverage decisions, the covered indications for a procedure or treatment are published for the provider community. At that point, it becomes the responsibility of physicians to know the covered indications for certain services, because contractors will deny claims for services that are not linked to covered indications. This review focuses on the basics of the local Medicare payment process, with emphasis on the development of local coverage decisions by contractors. This understanding will allow physicians to positively influence the local reimbursement process. Key Words: Medicare, reimbursement, local medical review, CAC, contractor medical director J Am Coll Radiol 2005;2: Copyright 2005 American College of Radiology INTRODUCTION Effective interaction with the Medicare reimbursement system requires an understanding of the local Medicare reimbursement system set up by the Centers for Medicare and Medicaid Services (CMS). Although CMS determines a national physician fee schedule each year, it gives great latitude to local Medicare contractors (Medicare carriers) to establish coverage policy in their states or regions. More than 90% of coverage policy is left to the discretion of local Medicare contractors, whereas only 10% of coverage determinations are made nationally by CMS. Even though local contractors have considerable discretion in implementing coverage policy, national laws and regulations ensure that physicians have an opportunity to provide significant input into these local coverage decisions. Physician understanding of how the local Medicare payment system functions is critical to ensure adequate coverage of physician services for the American College of Radiology, Reston, Va. Corresponding author and reprints: Kathryn J. Keysor, BS, American College of Radiology, 1891 Preston White Drive, Reston, VA 20191; kathrynk@acr.org. 896 benefit of both physicians and patients. This article describes the principal features of local Medicare reimbursement policy and provides suggestions for reporting services in a way that facilitates both the coding and claims payment processes. FROM THE FEDERAL REGISTER TO PHYSICIAN PAYMENT Each year, CMS publishes the physician fee schedule that provides the relative value units (RVUs) for medical procedures. There are 3 components to physician payment: physician work, practice expense, and professional liability insurance. CMS developed RVUs for each component, and each is multiplied by the geographic practice cost index (GPCI) factor to normalize for variation in the cost of living and practice costs in different regions of the country. The RVUs are then summed to determine the total RVU for each Current Procedural Terminology (CPT) code for a particular region of the country. The total RVU is then multiplied by the conversion factor to determine the allowed Medicare payment for a specific service. Thus, the payment formula for Medicare physician services 2005 American College of Radiology /05/$30.00 DOI /j.jacr

2 Allen, Keysor/Local Medicare Payment Policy 897 Fig. 1. Contractor map. The local Medicare contractors and their areas of jurisdiction are shown. Some contractors serve more than 1 state, while some states are served by more than 1 contractor. is as follows: payment [(RVU physician work GPCI physician work) (RVU practice expense GPCI practice expense) (RVU malpractice GPCI malpractice)] conversion factor. For calendar year 2005, the conversion factor is $ [1]. The conversion factor is the dollar amount used to convert RVUs to dollars under Medicare Part B. By law, the conversion factor is updated each year by a formula based on the sustainable growth rate, which in turn is based on 4 factors: medical inflation, growth in the number of Medicare beneficiaries, the projected increase or decrease in gross domestic product, and changes in expenditures based on new laws or regulations. The sustainable growth rate was used to set the conversion factor from 1998 to Projections for significantly negative updates to the conversion factor for 2004 and beyond have resulted in statutory positive updates for 2004 and 2005, and an intense effort is under way to evaluate changes to the sustainable growth rate calculation to maintain more stable physician payments [2]. MEDICARE CONTRACTORS CMS does not undertake the task of administering the payment of claims for services performed for Medicare beneficiaries. This function is performed by Medicare contractors, typically private insurance carriers that contract with CMS to administer Medicare claims processing in particular states. Most states have a single contractor, but a few states (eg, New York) have more than one Medicare contractor. Furthermore, some contractors (eg, Noridian) administer Medicare in more than one state, often creating a similar set of coverage decisions for all of their states. Fig. 1 shows a map of the states and local Medicare contractors that are responsible for the administration of Medicare claims in each state. Although contractors are given significant latitude in establishing coverage policy

3 898 Journal of the American College of Radiology/ Vol. 2 No. 11 November 2005 Fig. 2. Regional office map. Territories for the 10 regional Centers for Medicare and Medicaid Services offices are shown. Regional offices are not responsible for coverage decisions but may be important in appeals or claims disputes. in their regions, they must adhere to guidelines from CMS on how to establish coverage policy and administer claims. The Coverage Issues Manual, the Medicare Program Integrity Manual, program memoranda, and other transmittals are the means by which CMS defines policy for Medicare reimbursement. In addition, there are 10 regional CMS offices. These offices assist local contractors with administrative issues. From the providers perspective, the regional offices can be useful with claims disputes or other administrative issues, but the regional offices do not set reimbursement policy [3]. Fig. 2 shows a map of the territories of the regional CMS offices. CONTRACTOR MEDICAL DIRECTORS Contractor (or carrier) medical directors (CMDs) are the principal individuals who determine local Medicare policy. Each local contractor is required by CMS to have a minimum of 1 individual designated to serve as the CMD. CMDs can serve more than 1 state, but each state must have at least 1. Responsibilities of CMDs include developing and revising policies that define the coverage of medical procedures in their jurisdictions. The CMDs are given wide latitude by CMS for establishing local policy, and CMDs from all of the states meet frequently to share data, review policies, and discuss current issues. They are the primary interface between physician providers and Medicare contractors. CMDs recognize their role of interfacing with the provider community, including their physician peers, as well as medical specialty societies and are typically available and eager to discuss issues of coverage or payment policy with providers. Other duties of CMDs include determining the need for local coverage determinations (LCDs), ensuring the correct application of LCDs in the claims adjudication process, providing clinical guidance in questionable claims review situations, interacting with other CMDs, and providing

4 Allen, Keysor/Local Medicare Payment Policy 899 input on national coverage and reimbursement policy issues [4]. GUIDELINES FOR LOCAL MEDICARE COVERAGE Title 18, 1833(e), of the Social Security Act authorizes CMS to pay for reasonable and medically necessary services on behalf of Medicare beneficiaries. The phrase reasonable and necessary is the language that allows CMS and its local contractors to deny claims for services that are not considered medically necessary by local Medicare contractors [5]. Additionally, CMS has interpreted this language to mean that services it or its contractors consider experimental are not covered as well. Each CMD and their staff members are responsible for developing local policy for the coverage of Medicare services. Historically, these local coverage decisions (LCDs) have been distributed to the medical community through documents called local medical review policies (LMRPs). Recently, CMS required that contractors use a new standard format for these LCDs. Additionally, the contractors are required to convert existing LMRPs to LCDs. This conversion process is not scheduled to be complete until the end of 2005, so at the present time, contractors typically have both LMRPs and LCDs in force. The differences between LCDs and LMRPs will be discussed later in this article, but generally, LCDs and LMRPs have a similar function, which is to inform providers about the reimbursement guidelines for a particular service and to specifically inform providers about circumstances in which a particular procedure will or will not be reimbursed. CMS and contractors state that there are many reasons that LMRPs and LCDs have been developed. These include provider education, data tracking, and correcting the aberrant utilization of particular services [6]. Perhaps the most important reason these policies were developed was to control the utilization of frequently used or high-cost services when contractors notice variances in the utilization of a particular service. In contrast to payers that use precertification processes to establish medical necessity, the Medicare system uses a retrospective denial system whereby claims must meet the established requirements or be denied. These requirements often include, but are not limited to, the reiteration of any national coverage guideline, the frequency of examinations or treatments, and diagnoses that will be covered. Additionally, all Medicare claims are subject to the Correct Coding Initiative guidelines for coding edits. These edits are typically not published in LCDs or LMRPs, and a discussion of the Correct Coding Initiative and the editing process is beyond the scope of this article; however, coding edits can be an important source of denials when multiple services are performed on the same day by a single physician. As previously stated, the vast majority of Medicare coverage decisions are local. However, when present, CMS national coverage policy supersedes local coverage decisions. CMS publishes these national coverage decisions (NCDs) periodically on its Web site ( coverage/default.asp). If CMS develops an NCD for a particular procedure, local contractors must adhere to this policy if they elect to develop LMRPs or LCDs. Whereas LM- RPs and LCDs are binding only within a contractor s jurisdiction, NCDs are binding on all contractors and states. If an NCD exists for a certain procedure or group of procedures, Medicare contractors may also create LMRPs or LCDs for the same topic, but that policy must not contradict the NCD. For example, a contractor may develop an LCD on magnetic resonance angiography, but it may not restrict coverage for magnetic resonance angiography of the peripheral arteries of lower extremities, because the NCD states that this is a nationally covered service. On the other hand, if a contractor wishes to expand coverage to indications beyond those outlined in the NCD, generally it may do so, provided the national decision does not specifically limit those particular indications [7]. The frequency of many procedures and treatments is limited by local and national coverage decisions. For instance, screening mammography for Medicare beneficiaries is a nationally defined benefit whereby Medicare will pay for one screening mammogram per year. Local contractors frequently reiterate in LMRPs and LCDs for mammography that screening mammograms will be paid only after 11 full months have elapsed since the last examination. Similar language exists for other defined benefits, such as colonoscopy and bone mass measurement, and obviously, certain treatments such as hysterectomy have a once-per-lifetime frequency. More important, local contractors can establish frequency requirements for both diagnostic tests and treatment procedures when there are no national coverage guidelines. For instance, many LMRPs and LCDs restrict the use of carotid ultrasound to a frequency of every 6 months. Treatment procedures such as facet injections and epidural blocks have been limited on the basis of frequency in many states. The frequency of treatment with certain medications is another example of how Medicare contractors can limit the utilization of Medicare services. Another very important mechanism Medicare contractors use to limit the utilization of services is retrospective denials based on the reasons for examinations. As previously stated, the Social Security Act mandates that all care provided to Medicare beneficiaries must be reasonable and necessary. Each Medicare claim submitted to a contractor must provide both the procedure performed (CPT code) and at least one diagnosis or symptom described by the International Classification of Diseases, Ninth Revision,

5 900 Journal of the American College of Radiology/ Vol. 2 No. 11 November 2005 Clinical Modification (ICD-9-CM) coding system. To ensure that providers are aware of circumstances that contractors deem reasonable and necessary, each LMRP or LCD contains a section for the indications that support medical necessity for the examination or treatment. In this section, contractors will outline in a general way the categories of diseases or symptoms that should be present before a particular service is performed for the service to be deemed medically necessary and hence reimbursable by Medicare. Occasionally, a contractor may iterate limitations or circumstances under which a particular service will not be covered. This might include circumstances in which the contractor will determine a procedure to be experimental. Although the indications section of the policy is typically general in its scope, the most important section of an LMRP or LCD is the list of covered diagnoses. These lists use the ICD-9-CM coding system to describe the covered diagnoses or symptoms, and any other diagnosis or symptom not on this list is typically not covered and as such not reimbursed by the contractor. It is important for Medicare providers to be aware of the set of covered diagnoses for each procedure they perform. Medicare contractors are required to make this information readily available to providers through contractor publications for providers and the Internet. Section 921 of the Medicare Prescription Drug, the Improvement and Modernization Act, outlines specific requirements for Medicare contractors to implement provider customer service programs [8]. These requirements are designed to improve the accuracy and timeliness of responses to providers inquiries about local Medicare coverage. Among other requirements, contractors are obligated to have easily accessible and user-friendly Web sites as well as interactive voice response units to assist providers with basic questions [9]. A Medicare patient can be separately billed for a noncovered diagnosis only if the provider has had the patient sign an advance beneficiary notice before the examination. From a radiologist s perspective, this document serves to inform the patient that the ordering physician has specified a diagnosis that may be denied as not medically necessary by the contractor and that the radiologist may choose to bill the beneficiary directly if the Medicare contractor denies payment. In addition, the advance beneficiary notice allows the beneficiary to make an informed decision before receiving a service that may not be covered by Medicare in his or her particular situation [10]. If a noncovered Medicare service is performed without obtaining an advance beneficiary notice, there is no mechanism for the provider to be reimbursed and no recourse through an appeals process. Therefore, it is extremely important for the providers to be aware of the list of covered diagnoses for each procedure performed and equally important that the list of ICD-9-CM codes is complete so that all medically necessary services are covered. Table 1. Reasons for denial National coverage decision Experimental procedures Frequency of procedure Unlisted services CPT or ICD-9-CM mismatch Note: CPT Current Procedural Terminology; ICD-9-CM International Classification of Diseases, Ninth Revision, Clinical Modification. Table 1 summarizes the potential reasons that Medicare claims may be denied. CONTRACTOR (CARRIER) ADVISORY COMMITTEES Establishing the list of covered ICD-9-CM codes is the responsibility of the CMD. CMS requires that each contractor have provider input into the process through contractor (or carrier) advisory committees (CACs), which are established to provide advice and comment to Medicare contractors in the development of LMRPs and LCDs. The minimum composition of a CAC is mandated by CMS and includes physician representatives from each of 33 major specialties as well as two representatives for beneficiaries, including one advocate representing issues of the elderly and one representing the disabled. A CAC must also include the following: a clinical laboratory representative, a state hospital association representative, a quality improvement organization medical director, an intermediary medical director, a Medicaid medical director, and a representative of an association representing administrative practices [11]. There are designated seats on each CAC for diagnostic radiology, radiation oncology, and nuclear medicine. Some CMDs allow additional seats on their specific CACs, and in a number of states there are seats for interventional radiology as well. Representatives from industry are typically not permanent members of a CAC. The Medicare contractor for each state is required by CMS to hold at least 3 meetings of the CAC during the course of the year. In addition, during each comment cycle, an additional meeting open to the public is also required, at which representatives from industry and the general public can voice their comments and concerns about pending LMRPs and LCDs [12]. LMRP AND LCD DEVELOPMENT PROCESS Centers for Medicare and Medicaid Services requires that contractors notify providers when the development of LCDs is in progress. There is a 45-day comment period during the development process. Then there is a 45-day notification period before LCD implementation. A contractor must provide a draft LCD for review and comment

6 Allen, Keysor/Local Medicare Payment Policy 901 by the provider community 45 days before publishing the final LCD. This notification historically was made by mail or facsimile to CAC representatives. Now, all contractors provide draft LCDs on their Web sites for review by providers and the public. This allows the wider distribution of draft policies and facilitates comment among providers. At some point during the 45-day comment period, the contractor is required to have a meeting of the CAC as well as an open public meeting. The open meeting is typically before the CAC meeting and is typically not attended by the physician representatives of the CAC. When the full CAC meets, the CMD entertains discussion regarding the draft LCDs. Representatives from the CAC can submit comments at any time during the comment period but typically wait until after the CAC meeting to comment on the specific discussion that took place at the meeting. At the end of the comment period, the CMD takes the discussion of the draft LCD from the CAC meeting under advisement, reviews the written comments, and prepares the final LCD that must be distributed to all providers for the 45-day notice period before it is put into force [13]. Not all CACs function the same. In some states, CMDs allows CACs to be arbiters of LCDs. In some states, CMDs allow CAC representatives to vote on policies and ICD- 9-CM diagnosis codes. In other states, CMDs have complete autonomy for creating policies and diagnosis code sets. Once a diagnosis code set is established, the ICD-9-CM codes are incorporated into the Medicare contractor s claims-processing software. All claims for a service covered by an LCD submitted without a proper ICD-9-CM code are denied. However, the final LCD is not always the final word regarding the diagnosis code set for a particular procedure. Medicare rules allow a CMD to add ICD-9-CM diagnosis codes to the diagnosis code set without comment from the CAC. This allows appropriate codes, which were omitted from the original list, to be added without the burden of formal comment and notice periods and other administrative issues. However, if the CMD elects to remove a diagnosis code from the code set, he or she is required to bring the revised LCD back to the CAC for comment [14]. THE ROLE OF THE CAC REPRESENTATIVE Contractor medical directors rely heavily on their CACs for developing an understanding of the details of a procedure and the standard and novel indications for that procedure. Often, a CMD is not personally familiar with a new treatment or diagnostic procedure. This is particularly true for technically advanced specialties, such as diagnostic radiology, interventional radiology, nuclear medicine, and radiation oncology. These CAC representatives have a unique opportunity to provide considerable influence in shaping the LCD development process. There have been times when CAC representatives have been asked by their CMDs to draft LCDs for particular procedures. In the preparation of comments for the CMD, CAC representatives must review LCDs, which often have hundreds of ICD-9-CM codes. The duty of the CAC representative is not to ensure that each diagnosis in the code set is medically necessary but rather to identify appropriate diagnoses or symptoms that have been omitted from the list proposed by the CMD. This can be a daunting challenge. When the CAC representatives find additional diagnosis or symptom codes that should be added to the LCD, they often cite medical literature, specialty society publications, LMRPs and LCDs from other states, and claims data as compelling evidence for the inclusion of certain ICD-9-CM codes in the diagnosis set. Such documentation is typically well received by the CMD. In addition, having a consensus from the other CAC members is also important in supporting addition of ICD-9-CM codes to the diagnosis set. Policy review, identifying relevant literature, and other documentation can be difficult and time consuming for practicing physicians. As such, the value of engaged and responsible CAC representatives to practicing physicians cannot be overstated. The ACR maintains nationwide networks of radiology, radiation oncology, and nuclear medicine CACs to provide a mechanism for coordinated responses to draft LCDs and to prevent the development and spread of unfavorable reimbursement policy. LCDS LEAD TO VARIABILITY IN COVERAGE FROM STATE TO STATE The final outcome of the LCD development process is a document that leads to the denial of coverage for a procedure if certain conditions are not met. Once the local Medicare contractor publishes the LCD, it is up to the providers of the services to be familiar with it and submit claims under those rules. If the conditions in the LCD are not met, then the Medicare contractor will deny the claim. Certain reasons for denial are national in scope. When a CMS NCD exists, all contractors are required to follow that guideline for provider payment. However, the vast majority of coverage decisions are local, including the frequency of procedures and the ICD-9-CM diagnosis code set. This leads to significant variability in coverage from state to state. Initially, this variability was considered to be valuable and was used in an attempt to normalize the utilization of services across the population. For example, in states where a certain procedure has had significantly higher utilization than the national average, restrictive LCDs will result in lower utilization of the procedure. However, at the same time, the discrepancy in coverage places beneficiaries in those states having to fund their own procedures that may well be covered in a different state. This led the US Government Accounting Office

7 902 Journal of the American College of Radiology/ Vol. 2 No. 11 November 2005 (GAO) to comment that CMS should strongly consider adopting national medical review policies to provide equal access to all beneficiaries. In the proposal, the GAO suggested that local contractors and CMD positions should be consolidated and CACs consolidated or eliminated in favor of a new and improved national coverage process [15]. In response, CMS set up some demonstration projects assessing whether the consolidation of CMD positions and CACs was a tenable possibility. Once knowledge of this possibility became publicized in the medical community, there was a unified effort by organized medicine to protest the elimination of CMDs and the CACs. At the conclusion of the demonstration project, CMS found that a single CMD could serve more than 1 state; however, that CMD would travel between states rather than eliminating the individual state CACs. For example, the CMD that serves Arkansas also serves eastern Missouri. The CMS also responded to the GAO report that although they were aware of the inconsistencies in the local reimbursement process, local policies provide flexibility for Medicare contractors to address local concerns in a timely manner. They also indicated that CMS does not have adequate resources to develop national coverage policies for the large number of new procedures that are developed each year. In addition, CMS conducted a series of regional meetings with contractors and providers in 2003 to examine the CAC process and ways of improving the process. The CMS heard a clear consensus that the provider community believes that local contractors, CMDs, and CACs are invaluable to the Medicare reimbursement process and strongly urged CMS not to make any significant changes in the local reimbursement structure. As a result, CMS does not currently plan to make any substantive changes to the local reimbursement process. COMPLIANCE ISSUES Determining which ICD-9-CM code to use when filing claims is of great interest to the radiology community. Physicians and their billing companies, coders, and compliance officers are all striving to ensure that claims are accurate and reflect all of the medical information available to justify medical necessity. Federal law mandates that all requests for diagnostic examinations must include reasons for the examinations from the ordering physicians [16]. These reasons (in the form of ICD-9-CM codes) must be included on all claims. The claim forms have spaces for additional ICD- 9-CM codes. The CMS coding guidelines state that claims should be coded to the most specific diagnosis. If a screening diagnostic test is ordered in the absence of signs or symptoms, the primary diagnotic code should be a screening code, and in this case, it is certainly appropriate to code the diagnosis made on the basis of the examination as a secondary diagnosis. However, it is important to note that with a few exceptions (eg, mammography, colonoscopy), Medicare does not cover screening tests in the absence of signs or symptoms. Finally, the physician performing the examination as well as his or her assistants can obtain additional clinical information from the patient and should make an attempt to verify this information with the ordering physician. These additional diagnoses or symptoms can also be used to provide additional ICD-9-CM codes for claims submission. The CMS regulations specifically state that all of these options are acceptable under Medicare rules [17]. THE FUTURE OF LOCAL MEDICARE REIMBURSEMENT The Conversion of LMRPs to LCDs As a result of the Benefits Improvement and Protection Act of 2000 and as previously noted, newly developed local reimbursement policies are now being called LCDs [18]. Additionally, contractors must convert their existing LMRPs to LCDs by December Overall, this transition should be seamless, with the most notable changes being in the format of the policies. It is important that the current CAC structure, by which physicians have input into local Medicare policy, will be maintained and used to develop new and revised LCDs. An LCD is now defined as a decision by a fiscal intermediary or carrier whether to cover a particular service on an intermediary-wide or carrier-wide basis [19]. Local coverage determinations are binding only within the Medicare contractor s jurisdiction; however, contractors may and are often encouraged to work collaboratively with other contractors to develop similar if not identical LCDs. The current CMS administration is working toward the goal of consistent policies between Medicare contractors by using CMD work groups such as a work group designed to develop policies for new technologies and to develop consistent policies. In addition, Medicare contractors are now required to have consistent policies for all states across their jurisdictions. Although LCDs and LMRPs serve the same purpose, there are differences. An LCD consists only of information pertaining to when a procedure is considered medically reasonable and necessary (eg, indications and ICD-9-CM codes), whereas an LMRP also includes information such as coding guidelines, reasons for denial, and detailed descriptions of the procedure. Because this information is not contained in LCDs, contractors may now communicate such information to physicians through a separate publication, such as an article, which may be viewed on Medicare contractors Web sites. If there is a corresponding article for an LCD, it must be referenced within the LCD [6]. Many contractors (eg, Trailblazer, Empire, and Noridian) include links to the articles within their LCDs. In addition, LCDs, like LMRPs, may contain lists of CPT codes that indicate the services that the policy

8 Allen, Keysor/Local Medicare Payment Policy 903 Table 2. Anatomy of a local coverage decision (LCD) Title Title and database number for the LCD Contractor information Information about the contractor and jurisdiction LCD information Title, database number, and other general information about the LCD Statement regarding CMS national coverage policy Statements regarding the indications and limitations of coverage and/or medical necessity that provide the general guidelines from which ICD-9-CM diagnosis set is developed Coding information Lists the applicable CPT codes Lists the applicable ICD-9-CM codes that support medical necessity ICD-9-CM codes that do not support medical necessity can be in a separate section. Typically, contractors will state that these are any diagnoses that are not listed in the ICD-9-CM codes that support medical necessity section of the LCD. However, contractors may elect to list specific noncovered diagnoses rather than supply a lengthy list of covered ICD-9-CM codes. General information Includes the documentation requirements, appendices, and utilization guidelines Lists references and other sources of information Indicates whether related documents or LCD attachments have been developed Beginning December 7, 2003, all local coverage decisions are being published as LCDs. In contrast to local medical review policies, the LCD format will be uniform from state to state; however, variations in coverage may still occur. This table outlines the formulation and format of an LCD. Note. CMS Centers for Medicare and Medicaid Services; ICD-9-CM International Classification of Diseases, Ninth Revision, Clinical Modification. applies to, as well as ICD-9-CM codes that are covered or not covered for the procedure. However, some individual Medicare contractors have chosen not to include lists of ICD-9-CM codes on their policies but rather determine coverage on an individual basis on the basis of the indications of medical necessity described in the policy. This is a new trend among contractors and tentatively seems to be a positive change, because LCDs with no ICD-9-CM codes mean that any code may be submitted for consideration. This is considered the least restrictive policy status next to no policy at all. Beginning December 7, 2003, contractors began to issue new LCDs rather than LMRPs and to convert LMRPs to LCDS. Until the conversion has been completed, if a Medicare contractor refers to an LCD, it is referring to a new LCD that has been completed or the medical necessity provisions (ie, indications, limitations, CPT codes, and ICD-9-CM codes) of an existing LMRP that has not yet been converted to a LCD. As a contractor converts an LMRP to an LCD, it must either delete all information that does not describe when a procedure is medically reasonable and necessary or place that information in a separate article. Table 2 outlines the format and formulation of LCDs [6]. As with LMRPs, contractors are required to post LCDs on their Web sites as well as the Medicare Coverage Database located on the CMS Web site ( cms.hhs.gov/coverage/default.asp). The CMS Medicare Coverage Database allows one to search for specific LCDs and NCDs by state and/or by topic. In addition, as with LMRPs, contractors must provide minimum comment and notice periods of 45 days each for all new LCDs and all revised LCDs that either restrict existing LCDs or make substantive corrections [13]. This allows CAC representatives a chance to provide input into the development of policies and ensure that the clinical practice of medicine is accurately represented. There are potential unresolved issues regarding the relationship between an LCD and the supporting article. CMS did not clearly define whether CAC representatives would have the opportunity to comment on the separate articles (ie, coding guidelines and reasons for denial) in addition to the LCD proper. Thus far, most CMDs have been receptive to comments on both LCDs and supporting articles, and we are hopeful that unfavorable coverage policy will not be promulgated in these supporting articles without comment from the provider community. Another issue of concern is whether and where information such as certification and accreditation requirements can be included in LCDs, similar to their inclusion on LMRPs (eg, noninvasive vascular ultrasound). It is possible that this information will be in the LCD proper, the supporting article, or eliminated entirely. Thus far, we have seen examples of this information contained in the

9 904 Journal of the American College of Radiology/ Vol. 2 No. 11 November 2005 LCD proper (Arkansas BlueCross BlueShield) and examples where the information is eliminated entirely (National Heritage Insurance Company, New England). Requesting Revisions to LCDs If a physician feels that an LCD is inaccurate or that it should be revised, there is now a formal process for requesting revisions to policies. Physicians must include justification for the change, including relevant published information, with their reconsideration requests. Contractors are required to respond to change requests within 90 days and may retire the policy, revise the policy, or make no revision to the policy. No changes to an LCD that make the policy more restrictive can be undertaken by the Medicare contractor without notification and comment from the CAC [14]. The Aggrieved Beneficiary Additional recent updates to the Medicare program mandated by 522 of the Benefits Improvement and Protection Act of 2000 outline circumstances in which an aggrieved beneficiary, or a beneficiary who is in need of a service or has received a denial for a service, may challenge an LCD through a formal administrative review process. This process enables aggrieved Medicare beneficiaries to challenge the validity of LCDs and/or NCDs. However, because procedure descriptions, coding guidelines, and reasons for denial are not considered part of LCDs, beneficiaries may not challenge those aspects of the policy. According to the published rules, the beneficiaries will have to enlist the aid of their physicians, both the ordering physician and the physician performing the procedure, when challenging a policy [19]. The admin- Fig. 3. Future Part A and B Medicare administrative contractor (MAC) jurisdictions that will replace the current Medicare carriers and fiscal intermediaries are shown above. The new jurisdictions represent distinct, nonoverlapping areas. The numbers on the states represent the jurisdiction number. As the MAC contracts are awarded, the numbers will be replaced with the names of the contractors.

10 Allen, Keysor/Local Medicare Payment Policy 905 istrative burden placed on the beneficiaries at this point suggests that this appeals process will result in few reconsiderations. Competitive Bidding for Medicare Contractors Section 911 of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 calls for Medicare contracting reform and the replacement of all fiscal intermediaries (currently responsible for administration of Medicare Part A claims) and carriers (currently responsible for administration of Medicare Part B claims) with new contractors, called Medicare administrative contractors (MACs). Centers for Medicare and Medicaid Services will use competitive procedures to replace all carriers and fiscal intermediaries by 2011, beginning in 2005 [20]. The MACs will be selected through a full and open competitive bidding process and will consist of 15 primary A/B MACs, which will administer both Part A and Part B claims; 4 specialty MACs administering home health and hospice claims; and 4 specialty MACs servicing durable medical equipment suppliers. Fig. 3 is a map of the 15 primary A/B MAC jurisdictions, which will replace the existing Medicare carrier and fiscal intermediary jurisdictions. The new jurisdictions represent distinct, nonoverlapping locations and were created with the goal of balancing the number of fee-for-service beneficiaries and providers as well as the number of claims processed. In contrast, in the current system, more than 60% of all fee-for-service claims are processed by the 6 largest fiscal intermediaries and the 7 largest carriers. Every 5 years, all of the MAC contracts will be rebid to allow potential new contractors to take over the jurisdictions [21]. Existing contractors are keenly interested in maintaining their Medicare contracts and are evaluating all of their policies, procedures, and coverage determinations. They are specifically interested in lowering coding error rates and providing an accurate claims process. Therefore, it is possible that providers will see effects of some of these initiatives by their contractors in the months ahead, although exactly what additional burdens contractors will place on providers is not yet clear. CONCLUSION In this article, we have described the details of the structure and process of the local Medicare reimbursement system. Both the benefits of unparalleled physician input into the coverage decision-making process as well as the detriments of variability of coverage from state to state were discussed. Although the local Medicare reimbursement and claims process has its faults, federal law provides a unique opportunity for providers to influence Medicare coverage at the local level. By mandating that the contractors have CMDs and physician-based CACs, physicians have access to the Medicare coverage decision process that is far superior to that of the private payers. REFERENCES CFR parts 405, 410, 411, et seq. 2. Woody IO. The fundamentals of the US Medicare physician reimbursement process. J Am Coll Radiol 2005;2: Social Security Act 1842, 42 USC 1395u(a). 4. PIM chap , rev. 71, Social Security Act 1862, 42 USC 1395y(a). 6. PIM chap , rev. 71, PIM chap , rev. 71, Medicare Prescription Drug, Improvement and Modernization Act of (a)(1). 9. CMS manual system, pub , CR3376, transmittal 113, Centers for Medicare and Medicaid Services. What doctors need to know about the advance beneficiary notice (ABN). Available at: Accessed November 5, PIM exhib , rev. 77, PIM chap F, rev. 71, PIM chap , rev. 71, PIM chap , rev. 71, US General Accounting Office. GAO Report to the chairman, Subcommittee on Health, Committee on Ways and Means, House of Representatives. Medicare: divided authority for policies on coverage of procedures and devices results in inequities. April Balanced Budget Act of (b). 17. CMS program memorandum intermediaries/carriers, CR 1724, transmittal AB , Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act of CFR parts 400, 405, and Medicare Prescription Drug, Improvement and Modernization Act of (a)(1). 21. Centers for Medicare and Medicaid Services. Primary A/B MAC jurisdictions. Available at Accessed May 5, 2005.