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January 12, 2012

Instruction on Billing for Non-covered Items/Services

CGS has discovered that many times when providers are billing for self-administered pharmacy and other items/services for which they are seeking denial, these items are not being denied holding the beneficiary liable. To prevent this from occurring, providers should bill non-covered, statutorily excluded services in the following manner:

  • Submit the revenue code for which you seek denial
  • Use the HCPCS code A9270
  • Append the GY modifier
  • Submit your charges as non-covered


Rev Code HCPCS & Modifier Units Total Charges Non-covered Charges Date of Service
0637 A9270GY 3 $17.50 $17.50 MMDDYY
0273 A9270GY 3 $25 $25 MMDDYY

The HCPCS code A9270 is by definition for a non-covered item or service. However, in order to assign liability to the beneficiary, the GY modifier must be appended to the HCPCS code or the provider will be held liable.

The above instruction was initially issued, per CR 3115 dated April 2, 2004External PDF. At that time a clarification was published indicating that unless the non-covered service included the -GY modifier the provider should be held liable. In order for a modifier to be used it must be appended to a HCPCS or CPT code.

The following excerpts are taken from the Centers for Medicare & Medicaid Services (CMS) Internet-Only Manual System, Publication 100-04, Medicare Claims Processing Manual, Chapter 1, Section 60External PDF.

Excerpt of 60.1.1

Billing follows the determination of the liability condition and notification of the beneficiary (if applicable based on the condition). To the extent possible in billing, providers should split claims so that one of these three conditions holds true for all services billed on a claim, and therefore no more than one type of beneficiary notice on liability applies to a single claim. This approach should improve understanding of potential liability for all parties and speed processing of the majority of claims.

Liability is determined between providers and beneficiaries when Medicare makes a payment determination by denying a service. Determinations must always be made on items submitted as non-covered (i.e., properly submitted non-covered charges are denied). These denials have appeal rights, such as any other denials. However, appeals rights in these cases are not expected to be used frequently since submitting services as non-covered should indicate agreement of the beneficiary and provider that there is no expected Medicare payment and therefore no amount in dispute.

Payment Liability Condition 1. There is no required notice if beneficiaries elect to receive services that are excluded from Medicare by statute, which is understood as not being part of a Medicare benefit, or not covered for another reason that a provider can define, but that would not relate to potential denials under §§1879 and 1862 (a) (1) of the Act. However, applicable conditions of participation (COPs) may require a provider to inform a beneficiary of payment liability before delivering services not covered by Medicare, if the provider intends to charge the beneficiary for such services. Some examples of Medicare statutory exclusions include hearing aids, most dental services and most prescription drugs for beneficiaries with fee-for-service Medicare prior to enactment and effectiveness of a drug benefit in 2006 under the Medicare Prescription Drug, Improvement and Modernization Act of 2003.

In addition to what may be required by the COPs, providers are advised to respect Medicare beneficiaries' right to information as described in 'Medicare and You' (the Medicare handbook) by alerting them to potential payment liability. If written notification of potential liability for statutory exclusions is either required or desired, an explanation and sample voluntary notice suggested for this purpose can be found at the Centers for Medicare & Medicaid Services (CMS) websiteExternal Website (see Notices of Exclusions from Medicare Benefits, NEMBExternal PDF.

Excerpt of 60.1.2

Medicare will not pay for services excluded by statute, which often are services not recognized as part of a covered Medicare benefit. Examples of such services are given to beneficiaries in the 'Medicare and You' handbook, at the end of the Part A/Part B Cost and Coverage subsection under Section 4 on the Original Medicare Plan. Such services cannot necessarily be recognized in the definition of a specific procedure or diagnosis code. For example, under some conditions, a given code may be covered as part of a given benefit, but under other cases when no benefit is applied, the same code would not be covered.

  1. Medicare does not require procedures excluded by statute to be billed on institutional claims submitted to FIs/RHHIs unless one of the following is true:
    1. Established policy requires either all services in a certain period, covered or non-covered, be billed together so that all such services can be bundled for payment consideration (i.e., procedures provided on the same day to beneficiaries under OPPS), or billing is required for reasons other than payment (i.e., utilization chargeable in inpatient settings)
    2. A beneficiary requests Medicare be billed in a manner that the service in question will be reviewed by Medicare.
  2. To submit a non-covered line item on a claim with other covered services (Payment Liability Conditions 1 and 3), use the modifier –GY on all line items for statutory exclusions. Submit all charges for those item(s) as non-covered charges, and otherwise complete the claim as is appropriate for the covered charges. More information is given on the –GY modifier (see §60.4.2 in this chapter). This option should only be used when providers are unable to split non-covered services onto a separate claim.
  3. To submit statutory exclusions on entirely non-covered claims (Payment Liability Condition 1 only), use condition code 21, a claim-level code, signifying all charges that are submitted on that claim are non-covered charges. No GY modifiers need be attached to any of the procedure codes on such a claim, and all charges must be submitted as non-covered.

Excerpt of 60.4.2

In the past, modifiers were more frequently used to qualify procedure codes submitted on professional billing formats, such as Form CMS-1500, to entities like Medicare carriers. Use of modifiers has increased in institutional billing over time. Unlike professional claims, institutional claims did not always require the use of procedure codes in addition to revenue codes.

The Health Insurance Portability and Accountability Act (HIPAA) requires all submitters of electronic claims to use the 837 electronic format. The version of this format providers must use as of that time relates modifiers to associated procedure codes, including HCPCS (Form Locator 44 of the hard copy claim). Therefore, HCPCS/procedural coding is required on any non-covered line item using one of the modifiers described in this instruction. In fact, the FI shared system will require procedure codes to be present any time a modifier is used, whether the line is covered or not.

Providers should use explicit procedure or HCPCS coding to describe services and items they deliver, even when submitting these items as non-covered. In cases in which general HCPCS coding may be needed to submit a non-covered service for which Medicare institutional claims have not required HCPCS coding in the past, such as with drugs or supplies, the following HCPCS code can be used with the appropriate revenue code in order to employ a modifier:

A9270 – Non-covered item or service.

The FI/RHHI systems will accept this code, which, since it is noncovered by Medicare by definition, will be denied in all cases. Liability will rest with the provider, unless a modifier is used to assign liability to the beneficiary (i.e., -GL, -GY, -TS), when the beneficiary has been informed, prior to service delivery, that he/she may be liable for payment.

Since the CMS has included the Notice of Exclusion from Medicare Benefit (NEMB) as a component of their Beneficiary Notice Initiative (BNI), CGS recommends its use for statutorily excluded services. This form can be offered to all Medicare beneficiaries when they present to your outpatient departments for treatment. The NEMB can be annotated to state that self-administered drugs and take-home supplies are not covered by Medicare in an outpatient hospital setting. By offering the NEMB to the beneficiary upon arrival, it reinforces and reminds the beneficiary of the policy regarding statutory exclusions.

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