7.3 Advance Beneficiary Notices and Financial Liability
Key Takeaways
- Form CMS-R-131 is the Advance Beneficiary Notice of Noncoverage used for Original Medicare Fee-for-Service Part B services, including hospital outpatient care; inpatient hospitals use Hospital-Issued Notices of Noncoverage for Part A stay issues.
- A mandatory ABN is required to shift Limitation On Liability when the provider expects denial as not reasonable and necessary under §1862(a)(1) or as custodial care under §1862(a)(9); a voluntary ABN is only a courtesy for statutory exclusions and does not require option selection or a signature.
- Modifier GA reports a mandatory ABN on file; GX reports a voluntary notice; GY reports statutory exclusion or a non-benefit; GZ reports an expected medical-necessity denial with no ABN, and Medicare auto-denies GZ as provider-liable.
- On the HOPD UB-04 / 837I, occurrence code 32 carries the ABN date; GA marks ABN-related lines when mixed services share the claim, and those GA lines are submitted as covered charges. Independent ASCs report the same HCPCS modifiers on the CMS-1500 / 837P and do not use occurrence code 32.
- An ABN cannot shift liability for Medically Unlikely Edit denials, for services already paid in a bundled payment, or for Medicare Part C or Part D; a missing or invalid mandatory ABN leaves the provider financially liable.
Why the notice has to exist before the service
Limitation On Liability (LOL) under Social Security Act §1879 protects a beneficiary from unexpected bills when Medicare denies a service as not reasonable and necessary under §1862(a)(1) or as custodial care under §1862(a)(9)—but only if the provider did not know, and could not reasonably have been expected to know, that Medicare would deny. Once an NCD, LCD, or article is on the street, CMS treats the facility as if it knew. The only reliable way to transfer that risk to a Fee-for-Service patient who still wants the service is a valid Advance Beneficiary Notice of Noncoverage (ABN), Form CMS-R-131, delivered before the item or service.
If the mandatory notice is missing or invalid, the MAC can hold the provider financially liable. The coder who slaps GZ on the claim after the fact is documenting that outcome, not fixing it.
Which notice: ABN, HINN, or something else
CMS's Beneficiary Notices Initiative and MLN006266 (May 2025) split the forms by setting and trust fund. Mixing them is a classic COC trap.
| Notice | Form | Facility setting the COC exam cares about |
|---|---|---|
| ABN | CMS-R-131 | Original Medicare Part B items and services, including outpatient hospital, independent labs, Part B in a SNF, home health in specified situations, and hospice/RNHCI uses listed in the form instructions |
| HINN | Hospital-Issued Notices of Noncoverage (HINN 1, 10, 11, 12) | Inpatient hospital care that is not medically necessary, not in the most appropriate setting, or custodial; not the HOPD ABN |
| SNF ABN | CMS-10055 | SNF Part A extended-care items; SNFs still use CMS-R-131 for Part B |
| MOON | CMS-10611 | Tells a patient they are an outpatient receiving observation, not an inpatient |
| MCSN | CMS-10868 | Status change from inpatient to outpatient observation, with BFCC-QIO appeal rights |
Form instructions are explicit: Medicare inpatient hospitals and SNFs must use the ABN for Medicare Part B items and services, while they use other approved notices for Part A. ABNs are never required in emergency situations. MLN006266 adds that using an ABN in the emergency department may still be appropriate when the patient is medically stable and not under duress. Do not use the ABN for Medicare Part C or Part D.
Mandatory ABN versus voluntary ABN
Mandatory ABN applies when the notifier expects denial of a service Medicare usually covers, for LOL reasons—most often medical necessity against an NCD, LCD, article, or frequency limit, or custodial care. The notice must be the current CMS form, on a single page, with the item, the plain-language reason Medicare may not pay, and a good-faith cost estimate. The patient (or representative) must choose one of three options. Pre-selecting an option invalidates the notice.
CMS-R-131 option language (plain-language version in the current form instructions):
- Option 1: Provide the service and bill Medicare for an official decision on the Medicare Summary Notice. The patient may be asked to pay now, can appeal if Medicare does not pay, and receives a refund of any overpayment if Medicare does pay (minus deductible and coinsurance). Dual-eligible patients who need a liability-shifting ABN are instructed to select Option 1 so Medicare can adjudicate before Medicaid.
- Option 2: Provide the service but do not bill Medicare. The patient pays out of pocket and has no Medicare appeal, because no claim is filed.
- Option 3: Do not provide the service. No patient payment and no appeal.
Voluntary ABN is a courtesy when the item is statutorily excluded or never a Medicare benefit (routine cosmetic surgery that is not needed to improve a malformed body member, many dental services, comfort items, and similar never-covered care). CMS does not require notice before never-covered services. If you issue the ABN voluntarily, the form instructions say the patient does not need to choose an option box or sign. Issuing a voluntary notice does not change financial liability and does not make Medicare pay. That is the distinction the prompt asked you to keep sharp: an ABN does not override statutory exclusion, and it does not convert NCD/statutory never-coverage into a payable benefit.
Routine issuance of ABNs is prohibited except for listed categories such as experimental items, services with published frequency limits (statute, regulation, NCD, or LCD), certain DME supplier problems, and services that are always denied as medically unnecessary. You cannot use an ABN to bill the patient for a Medically Unlikely Edit denial, to unbundle a service Medicare already pays as a packaged or composite payment, or to transfer liability when Medicare otherwise pays for the care.
Delivery standards from MLN006266 and the form instructions: issue far enough in advance for a real choice; explain the notice and answer questions; keep a copy. CMS expects retention for five years from the date of care when no longer state-law period applies, including notices where the patient declined care or refused to sign. Remote delivery (phone followed by paper or electronic copy) is allowed if documented. A notice issued after the service cannot shift liability backward for care already given.
Modifiers GA, GX, GY, GZ — and where they sit on the claim
MLN006266 Table 2 and Medicare Claims Processing Manual Chapter 1, §60.4.2, plus Chapter 30, §50, are the current CMS instructions. Learn the four modifiers as a liability language, then learn the claim form.
| Modifier | CMS meaning | Notice | Who is liable if Medicare denies as expected | How the line is submitted |
|---|---|---|---|---|
| GA | Waiver of liability statement issued as required; ABN on file | Mandatory ABN | Beneficiary (if the ABN is valid) | Covered charge so Medicare can make a payment determination |
| GX | Notice of liability issued, voluntary under payer policy | Voluntary ABN | Beneficiary (service is never covered) | Noncovered; may be paired with GY |
| GY | Item or service statutorily excluded or not a Medicare benefit | Optional / not required | Beneficiary | Noncovered |
| GZ | Expected denial as not reasonable and necessary, no ABN | None | Provider | Noncovered; since July 1, 2011, auto-denied as provider-liable without medical-necessity review |
GA is not a synonym for “patient signed something.” It reports a mandatory ABN. GX is not a synonym for GA; it is only for voluntary notice of a never-covered service. Using GX on a medical-necessity CT because “we told the patient verbally” is the wrong modifier family. GY is the statutory-exclusion flag even when no notice was given. GZ is the facility eating the charge.
GK (reasonable and necessary item associated with GA or GZ, used in DME upgrade billing) is not used on institutional claims. Noridian and CMS transmittals state that institutional claims with GK are returned to the provider. HOPD coders should not reach for GK on a UB-04.
UB-04 / 837I (HOPD)
Hospital outpatient claims follow Chapter 1, §60.4.1–60.4.2:
- Report occurrence code 32 with the date the beneficiary signed the ABN when ABN-related outpatient services are billed.
- If one ABN covers the whole claim, occurrence code 32 can apply to the claim. If mixed ABN-related and unrelated services must travel together, still report occurrence code 32, and append GA only to the ABN-related lines. Those GA lines stay in covered charges so Medicare can adjudicate. Other lines may be covered or noncovered as appropriate.
- GY lines are noncovered statutory-exclusion charges. GZ lines are noncovered provider-liable medical-necessity charges.
- Do not confuse occurrence code 32 with condition code 20 (beneficiary-requested demand bill / medical review) or condition code 21 (no-payment bill, often to obtain a denial for a secondary payer). Those condition codes are different billing pathways.
CMS-1500 / 837P (independent ASC and professional claims)
CMS Claims Processing Manual Chapter 14 requires a certified independent ASC to bill the 837 professional format or, rarely, paper CMS-1500, with place of service 24. There is no occurrence code 32 on that form. The ABN story is told with HCPCS modifiers in Item 24D (or the 837P equivalent): GA when a mandatory ABN is on file, GY for statutory exclusion, GX when a voluntary notice was issued (alone or with GY), GZ when you expect a medical-necessity denial and did not issue an ABN. A hospital provider-based outpatient department that is not a separately certified ASC continues to bill the UB-04, not the 1500, for facility services.
Facility scenarios
HOPD CT with a valid mandatory ABN. The article will not support the diagnosis. Registration delivers CMS-R-131 before the scan. The patient selects Option 1. On TOB 13x, the coder reports occurrence code 32 with the ABN date, keeps the CT in covered charges, and appends GA because the same claim also carries a payable clinic visit that was never on the ABN. Medicare denies the CT as not reasonable and necessary; the remittance should show beneficiary liability.
Same-day surgery, missed notice. The surgeon adds a skin lesion destruction the LCD will not cover for the documented diagnosis. No ABN was issued. The facility still performs the destruction. The line is GZ, provider-liable. You cannot repair that with a same-day ABN handed over in recovery.
Cosmetic blepharoplasty that is never a benefit. Medicare statutory exclusion, not a close medical-necessity call. A voluntary ABN may be offered as a courtesy without forcing a signature. The claim line is GY (and GX if a voluntary notice was actually issued). Do not report GA. Do not tell the patient the ABN will make Medicare “try to pay” as if it were Option 1 medical-necessity billing unless you are in a true LOL situation.
Inpatient versus outpatient. Utilization review decides an admission is not medically necessary. That is HINN territory, not CMS-R-131. If the same patient later has a Part B outpatient diagnostic test that an LCD will deny, that test is an ABN problem on the outpatient claim.
The coder's close: match the coverage reason (medical necessity versus statutory exclusion), the notice (mandatory ABN, voluntary ABN, HINN, or none), and the claim mechanic (occurrence code 32 and GA on the UB-04 versus modifiers on the 1500). When those three agree, the Compliance domain—and the HOPD or ASC remittance—make sense.
A hospital outpatient department expects Medicare to deny a CT scan as not reasonable and necessary, issues a valid mandatory ABN, and bills the CT on the same UB-04 as other covered services that were not listed on the ABN. Under current CMS institutional instructions, how should the ABN-related CT be reported?
Which HCPCS modifier reports that an item or service is statutorily excluded from Medicare or does not meet the definition of any Medicare benefit?
A hospital determines that a Medicare patient's inpatient stay is not medically necessary and wants to transfer potential liability for that inpatient care. Which notice family does CMS instruct hospitals to use, rather than the outpatient ABN?