Medicare LCD and Rule Making Modernization

Our firm is engaged by many clients to evaluate Medicare Local Coverage determinations (a.k.a. “Medicare LCD”) in specific regulatory compliance matters involving medical coding and medical billing for Medicare and Medicaid.  In addition, although commercial insurers do not use LCDs directly and instead create their own coverage determinations, Medicare tends to influence what the entire U.S. health care industry determines is ‘reasonable’ for covering medical services designed to treat insured patients with specific conditions.  We have found that in the past:

  1. Medicare LCDs have been inconsistent, with different policies in different jurisdictions.
  2. There is guidance in the LCD or accompanying LCD articles used in False Claims Act litigation by the U.S. Department of Justice where the guidance never went through the rigor of a public rulemaking process.  DOJ has made abrupt reversals in its policy between 2018 and 2021 as to whether this guidance is binding, coinciding with two different administrations and two U.S. Presidents, as discussed below.
  3. Third, the LCDs have not kept pace with healthcare technology innovation, particularly in genetic testing as well as in medical devices.

In this article, I discuss some of the efforts underway by the Federal government to remedy these deficiencies.

Medicare LCD Modernization

Medicare LCDs are being updated. One can appreciate the scope of updating Medicare LCDs when considering that each Medicare Administrative Contractor (MAC) maintains its own separate active and inactive set of LCDs and articles. Nationally, as of January 2019, the Medicare Coverage Database (MCD) contained over 10,480 active LCDs and over 15,000 active articles.

Each LCD has procedure and diagnosis codes, and many LCDs have associated articles. In addition, some Current Procedural Terminology (CPT) codes have been retired, and new CPT codes are now active. Each CPT code for each LCD and each associated LCD article must be updated.

In Information Technology, people sometimes speak of ‘legacy systems,’ usually meaning systems that implement essential and complex processes built on aging or outdated technology that are hard to change and hard to retire.

Here we have both legacy systems and legacy policies, both of which are incredibly complex.  Consider that much of the Medicare LCD database has nearly twenty (20) years of policies, both active and retired.

Medicare LCD and Companion Article Guidance – Binding the public without a notice-and-comment rulemaking process

Medicare LCD Updates will be an Iterative Process

The LCD update process will be iterative, so impacted parties should watch for significant revisions to the update policies. For example, Medicare LCD changes were first announced in October 2018, but an updated change request 10901 was published on January 11, 2019. The latest update made two crucial changes to the business requests (BR) and related Medicare manual Chapter 13 instructions.  These are:

1.  MACs have the discretion to host multi-jurisdictional CACs. Why does this matter?

a. The healthcare industry voiced concerns regarding ineffective Medicare Administrative Contractor processes. These included a lack of notices for public feedback in the rulemaking process, a balance of physician and on-physician representation on Contractor Advisory Committees (CACs), and concerns that CAC meetings are not open to the public.

b. In parallel to these events, in January 2018, then-Associate Attorney General Rachel Brand issued the Brand memo, which stated that health care providers could not be held liable under the False Claims Act for sub-regulatory guidance that had no public rulemaking process. This was later rescinded by the U.S. Department of Justice in a July 2021 communication.  [1]

c. In the past, as noted by none other than the U.S. HHS Office of the Inspector General (OIG), inconsistencies in LCDs in different geographic jurisdictions led to inconsistent eligibility for the same care, simply because two Medicare beneficiaries lived in two different jurisdictions.

d. The 21st Century Cures Act requires clarity and consistency, and transparency. We await to see what ‘discretion’ means concerning coordination between the MACs. (According to “Local Coverage Determination (LCD) Process Modernization Qs & A” on the CMS web site, “The 21st Century Cures Act of 2016 added language to section 1862(l)(5)(D) of the Social Security Act (the Act) directing the Secretary of the Department of Health and Human Services (DHHS) to improve the transparency of the LCD process.”)

Medicare LCD Modernization for Devices for Innovative Technology

2. MACs have the option of providing a hyperlink to the FDA clearance to market. Why is this significant?

a. Section 510 (k) of the Food, Drug, and Cosmetic Act requires that medical device manufacturers register and notify the FDA of their intent to market a new device at least 90 days in advance. There is continuous innovation in the medical device market, with new devices coming to market every month.
b. In the past, Medicare National Coverage Determinations (NCDs) and LCDs have not kept up with innovation in the medical device industry.
c. CMS published a final rule in January 2019, creating a new Medicare coverage determination corridor for new medical devices. The Medicare Coverage of Innovative Technology (MCIT) pathway provides national coverage for four years after FDA approval, effective March 1, 2021.  MCIT promises to provide coverage as soon as the same day that FDA approves new devices.

Medicare LCD Modernization Genetics

There is rapid innovation in the genetic testing market. Molecular Pathology Procedures (L35000) were revised effective January 1, 2019

Medicare LCD Modernization Changes the Location of Coding Guidance

LCDs will no longer have coding guidance listed in the document. Instead, the LCDs have accompanying, separate articles associated with the LCDs that include coding guidance.


Healthcare Industry Impact of LCD Revisions to Electronic Health Records, Claim Adjudication Systems, Providers and DME Suppliers, Regulatory Agencies and in Legal Proceedings

1. Certified Electronic Health Record Technology (CEHRT) vendors must also update their systems to match LCD edits,  aligning with updated CMS Medicare LCD policies as the Medicare Administrative Contractors update their LCDs.
2. Health plan claim adjudication systems must be updated, such as those maintained by Medicare Part C / Medicare Advantage Plans.
3. Adjacent Federal and State regulators who rely on LCDs must also update their policies and procedures.
4. Health care providers and medical device suppliers rely on LCDs to determine covered services and DME for Medicare beneficiaries.

5. Law firms and Medicare Fraud Expert Witness professionals will need to be aware of the date of service (DOS) of the medical billing in question and whether those dates correlate with the correct, active LCD and related article.  Additionally, electronic health record forensics expert witnesses will need to comprehend updates to policies that impact dates of service.

[1] At first, under the U.S. President at the time, there was a new philosophy that there were too many regulations that created a burden to U.S. businesses, the U.S. Department of Justice explained its policy in a letter to “heads of civil litigating components” dated January 25, 2018. “On November 16, 2017, the Attorney General issued a memorandum (“Guidance Policy”) prohibiting Department components from issuing guidance documents that effectively bind the public without undergoing the notice-and-comment rulemaking process. Under the Guidance Policy, the Department may not issue guidance documents that purport to create rights or obligations binding on persons or entities outside the Executive Branch (including state, local, and tribal governments), or to create binding standards by which the Department will determine compliance with existing statutory or regulatory requirements. The Guidance Policy also prohibits the Department from using its guidance documents to coerce regulated parties into taking any action or refraining from taking any action beyond what is required by the terms of the applicable statute or lawful regulation. And when the Department issues a guidance document setting out voluntary standards, the Guidance Policy requires a clear statement that noncompliance will not in itself result in any enforcement action.”

Under the next U.S. President and a new U.S. Federal Administration, this policy was rescinded. See the U.S. Department of Justice Website, Issuance of Guidance Documents by the Department of Justice at

Michael F. Arrigo

Michael Arrigo, an expert witness, and healthcare executive, brings four decades of experience in the software, financial services, and healthcare industries. In 2000, Mr. Arrigo founded No World Borders, a healthcare data, regulations, and economics firm with clients in the pharmaceutical, medical device, hospital, surgical center, physician group, diagnostic imaging, genetic testing, health I.T., and health insurance markets. His expertise spans the federal health programs Medicare and Medicaid and private insurance. He advises Medicare Advantage Organizations that provide health insurance under Part C of the Medicare Act. Mr. Arrigo serves as an expert witness regarding medical coding and billing, fraud damages, and electronic health record software for the U.S. Department of Justice. He has valued well over $1 billion in medical billings in personal injury liens, malpractice, and insurance fraud cases. The U.S. Court of Appeals considered Mr. Arrigo's opinion regarding loss amounts, vacating, and remanding sentencing in a fraud case. Mr. Arrigo provides expertise in the Medicare Secondary Payer Act, Medicare LCDs, anti-trust litigation, medical intellectual property and trade secrets, HIPAA privacy, health care electronic claim data Standards, physician compensation, Anti-Kickback Statute, Stark law, the Affordable Care Act, False Claims Act, and the ARRA HITECH Act. Arrigo advises investors on merger and acquisition (M&A) diligence in the healthcare industry on transactions cumulatively valued at over $1 billion. Mr. Arrigo spent over ten years in Silicon Valley software firms in roles from Product Manager to CEO. He was product manager for a leading-edge database technology joint venture that became commercialized as Microsoft SQL Server, Vice President of Marketing for a software company when it grew from under $2 million in revenue to a $50 million acquisition by a company now merged into Cincom Systems, hired by private equity investors to serve as Vice President of Marketing for a secure email software company until its acquisition and multi $million investor exit by a company now merged into Axway Software S.A. (Euronext: AXW.PA), and CEO of one of the first cloud-based billing software companies, licensing its technology to Citrix Systems (NASDAQ: CTXS). Later, before entering the healthcare industry, he joined Fortune 500 company Fidelity National Financial (NYSE: FNF) as a Vice President, overseeing eCommerce solutions for the mortgage banking industry. While serving as a Vice President at Fortune 500 company First American Financial (NYSE: FAF), he oversaw eCommerce and regulatory compliance technology initiatives for the top ten mortgage banks and led the Sarbanes Oxley Act Section 302 internal controls I.T. audit for the company, supporting Section 404 of the Sarbanes Oxley Act. Mr. Arrigo earned his Bachelor of Science in Business Administration from the University of Southern California. Before that, he studied computer science, statistics, and economics at the University of California, Irvine. His post-graduate studies include biomedical ethics at Harvard Medical School, biomedical informatics at Stanford Medical School, blockchain and crypto-economics at the Massachusetts Institute of Technology, and training as a Certified Professional Medical Auditor (CPMA). Mr. Arrigo is qualified to serve as a director due to his experience in healthcare data, regulations, and economics, his leadership roles in software and financial services public companies, and his healthcare M&A diligence and public company regulatory experience. Mr. Arrigo is quoted in The Wall Street Journal, Fortune Magazine, Kaiser Health News, Consumer Affairs, National Public Radio (NPR), NBC News Houston, USA Today / Milwaukee Journal Sentinel, Medical Economics, Capitol ForumThe Daily Beast, the Lund Report, Inside Higher Ed, New England Psychologist, and other press and media outlets. He authored a peer-reviewed article regarding clinical documentation quality to support accurate medical coding, billing, and good patient care, published by Healthcare Financial Management Association (HFMA) and published in Healthcare I.T. News. Mr. Arrigo serves as a member of the board of directors of a publicly traded company in the healthcare and data analytics industry, where his duties include: member, audit committee; chair, compensation committee; member, special committee.

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