Why Understanding the ABN Is Essential for Providers and Medicare Beneficiaries

By Tiffany Ferguson, LMSW, CMAC, ACM

The Advance Beneficiary Notice (ABN), Form CMS-R-131, provided by the Centers for Medicare & Medicaid Services (CMS, is vital for healthcare providers, revenue cycle teams, and Medicare beneficiaries.

What is an ABN?

An ABN is a formal notice provided to Medicare Fee-for-Service (FFS) beneficiaries prior to the start of an outpatient service such as labs, imaging, physical therapy, or observation services, particularly when a service or item may not be covered by Medicare.  To confuse things more, ABNs are used as well for some Part A benefits such as hospice, home health, and religious non-medical health care institutions (RNHCIs).  ABNs are not used for Medicare Advantage, Managed Medicaid, commercial, or Part D plans.

These plans, however, may have similar forms that often fall under the prior authorization process in the form of an Integrated Denial Notice (IDN).

ABNs are utilized prior to or during the continuation of services that Medicare does not cover when services exceed Medicare frequency coverage guidelines, or when services are deemed not medically necessary. It serves as an alert to the patient that they may be responsible for payment if Medicare denies coverage for the specific service or item. It also informs the patient of services that are always outside of current Medicare coverage determinations. The form provides an opportunity for what the estimated costs are for the service or item if Medicare denies coverage.  The form allows for the patient to acknowledge receipt of this information but also consider the financial impact should they proceed with the service. The form allows for an opportunity to stop and communicate with the patient to ensure they can make an informed decision regarding services they did not know were potentially not medically necessary or approved by Medicare.  

There are two types of ABNs, mandatory and voluntary.  Mandatory ABNs are issued when the provider thinks Medicare may not cover a service or item.  In this case, the patient can choose whether they want to proceed and agree to financial liability should Medicare deny coverage. 

Voluntary ABNs are issued when Medicare does not pay for a particular service, such as cosmetic procedures. This ABN informs the patient up front of Medicare coverage guidelines and ensures that patient is aware of the full cost.

Why Are ABNs Important?

ABNs ensure transparency between healthcare providers and Medicare beneficiaries. They inform patients about potential costs and empower them to make informed decisions regarding their care. It clarifies the financial responsibility of the patient in cases where Medicare may not cover certain services or items such as custodial care. For non-covered services or items, issuing an ABN is a legal requirement. It also helps protect providers and healthcare organizations from financial loss if Medicare denies coverage.

ABNs are often issued by the patient registration or financial services staff; however, they are also included as a form that can be delivered under by provider professionals and are a part of the Utilization Review Committee.

How are ABNs reported?

The billing office will report the following modifiers regarding ABN utilization on the claim to notify the MACs that the notice has been provided or not, communicating potential patient financial liability.

• GA is used when the mandatory ABN has been completed.

• GX is used when the voluntary ABN has been completed.

• GY is used when the service falls outside Medicare statutory guidelines (think services Medicare never pays)

• GZ is used when you expect the service to be denied and failed to provide an ABN. (i.e., self-denial).

ABNs ensure transparency and informed decision-making while clarifying the financial responsibilities of the patient. Understanding the purpose and significance of ABNs is essential for both providers, patients, utilization review, case management, billing staff, and especially patients in navigating the complexities of healthcare services and coverage.