Practice Management: Local Coverage Determinations - Where They Come From and Why They Matter

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September 1, 2013 Volume 77, Number 9
Practice Management: Local Coverage Determinations - Where They Come From and Why They Matter Sharon K. Merrick, M.S., CCS-P

My first column of the year asked the question, “Will 2013 be the year of the audit?” The article discussed the heightened compliance concerns that anesthesiologists and other physicians could anticipate in the coming year. It also touched upon some of the tools and resources practices can use to help ensure that their coding, billing and documentation will stand up to scrutiny. The May 2013 column continued that thought by featuring the National Correct Coding Initiative (NCCI). This month, we will cover another important compliance consideration: Local Coverage Determinations (LCDs).

National Coverage Determinations (NCD) are applicable to the entire Medicare program without regard to the specific geographic locale in which the item or service covered by the NCD is delivered. When there is no established national policy, Medicare Administrative Contractors (MACs) can develop LCDs that apply to care provided within their jurisdictions. LCDs inform the medical community of the conditions that must be present in order for the local contractor to consider a service or procedure to be covered and paid. Medicare is to cover only services that are reasonable and necessary. This standard is established in the Social Security Act, Sec. 1862. [42 U.S.C. 1395y]1

(a) Notwithstanding any other provision of this title, no payment may be made under part A or part B for any expenses incurred for items or services –

(1)(A) which, except for items and services described in a succeeding subparagraph, are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member….

Exceptions include certain vaccinations, screenings and hospice care. With every claim submitted, the provider of the care certifies that the care meets this standard. While “reasonable and necessary” has not been more fully fleshed out in statute or regulation, the Centers for Medicare & Medicaid Services (CMS) includes its litmus test in section 13.5.1 of its Program Integrity Manual as part of its explanation of the LCD process. This manual states that when developing a draft LCD:

Contractors shall consider a service to be reasonable and necessary if the contractor determines that the service is:

  • Safe and effective; and
  • Appropriate, including the duration and frequency that is considered appropriate for the item or service, in terms of whether it is:
  • Furnished in accordance with accepted standards of medical practice for the diagnosis or treatment of the patient’s condition or to improve the function of a malformed body member;
  • Furnished in a setting appropriate to the patient’s medical needs and condition;
  • Ordered and furnished by qualified personnel;
  • One that meets, but does not exceed, the patient’s medical need; and
  • At least as beneficial as an existing and available medically appropriate alternative.

  • A MAC will initiate the draft LCD process for any number of reasons. One reason may be that the MAC has concerns that a high-volume or high-dollar service creates too much opportunity for potential mispayment. Whatever the underlying reason, there is a defined and established process that must be followed. The following is simply an outline of that process, and readers are encouraged to review the process in more detail. See the CMS Program Integrity Manual, Chapter 13 – Local Coverage Determinations, available on the CMS website at

    Criteria on Which an LCD Is to Be Based:

    As stated in Section 13.7.1 of the manual,

    In order of preference, LCDs should be based on:

  • Published authoritative evidence derived from definitive randomized clinical trials or other definitive studies, and
  • Published authoritative evidence derived from definitive randomized clinical trials or other definitive studies, and
  • General acceptance by the medical community (standard of practice), as supported by sound medical evidence based on:

  •  - Scientific data or research studies published in peer-review medical journals;

     - Consensus of expert medical opinion (i.e., recognized authorities in the field); or

     - Medical opinion derived from consultations with medical associations or other health care experts.

    Comment Period and Notice Period:

    A comment period must last a minimum of 45 days and begins when the draft LCD is sent to the Contractor Advisory Committee. During that time, the contractor receives comments from all interested stakeholders, including impacted providers, specialty societies (state components and, when indicated, national organizations) and others, including patients and the public. A notice period must also run for at least 45 days and begins once all comments have been reviewed and a final LCD is issued. The new LCD becomes effective after the notice period closes.

    According to Section 13.7.2, Contractors shall provide for both a comment period and a notice period in the following situations:

  • All New LCDs
  • Revised LCDs that Restrict Existing LCDs - Examples: adding non-covered indications to an existing LCD; deleting previously covered ICD-9 codes.
  • Revised LCDs that make a Substantive Correction - If the contractor identifies an error published in an LCD that substantively changes the reasonable and necessary intent of the LCD, then the contractor shall extend the comment and/or notice period by an additional 45 calendar days.

  • Contractor Advisory Committee (CAC):

    Even as CMS works to consolidate administration of the Medicare program down to 10 jurisdictions, each state still has its own CAC. There is a seat for each specialty on each CAC. ASA works very diligently to make sure that anesthesia and pain are well represented. There are also seats for representatives from other organizations and a beneficiary representative. The CAC is chaired by the Contractor Medical Director (CMD) and one other CAC member elected by the other representatives. While all decisions are made by the CMD, the CAC can play an important role in helping him/her make good decisions. CAC members serve as a two-way conduit of communication. In addition to providing advice to the CMD, they also serve as a source of information back to their local community and their specialty. As stated in section

    CAC members serve to improve the relations and communication between Medicare and the physician community. Specifically, they:

  • Disseminate proposed LCDs to colleagues in their respective State and specialty societies to solicit comments;
  • Disseminate information about the Medicare program obtained at CAC meetings to their respective State and specialty societies; and
  • Discuss inconsistent or conflicting MR [medical review] policies.

  • Compliance requires that you submit claims for services that are “reasonable and necessary” per your contractor’s determination. Understanding how the contractor makes this determination may assist you in doing so. It is very important that you understand the role that you can play in this process to help ensure that determinations are patient-centered and clinically correct. Watch your contractor’s website for proposed LCDs and take advantage of the opportunity to comment on them. Instructions on how to comment are included in each draft LCD.



    In order to avoid a negative Value-Based Payment Modifier (VBPM) adjustment in 2015 (with performance period of 2013), anesthesia groups of 100 or more eligible professionals must sign up for or “self-nominate” for the 2013 Physician Quality Reporting System (PQRS) program through the Group Payment Reporting Option (GPRO). The Centers for Medicare & Medicaid Services (CMS) has created two self-nomination periods. The second one will run from July 15, 2013 to October 15, 2013 and is the most relevant to anesthesiologists because it will offer the options anesthesiologists will need to select to avoid the negative adjustment in 2015; the option to select the Administrative Claims reporting mechanism for 2013 PQRS Group reporting and to elect not to participate in quality-tiering.

    Groups of 100 or more eligible professionals must:

  • Self-nominate to participate in 2013 PQRS as group,
  • Select the Administrative Claims option (only available during the July 15, 2013 to October 15, 2013 nomination period), and
  • Do not elect quality-tiering

  • CMS is providing regular and frequent updates on its website at:

    For more information, please see the “Practice Management” column from the April 2013 ASA NEWSLETTER.

    Sharon Merrick, M.S., CCS-P is ASA Director of Payment and Practice Management.


    1. Compilation of the Social Security laws: exclusions from coverage and Medicare as secondary payer. Social Security website. Reviewed or modified June 17, 2013. Accessed July 8, 2013.