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New Denial Edits to Be Implemented Jan. 6, 2014

Authors: Jennifer Arbuckle, CPC, OCS, Academy Coding Specialist and
Cherie McNett, Academy Director of Health Policy


Have you revalidated your enrollment with CMS?

If you enrolled with CMS prior to March 25, 2011 then you will need to revalidate with CMS. Use the Internet-based PECOS to look for your Medicare enrollment record. To learn more about revalidate via Internet-based PECOS visit www.aao.org/pecos. You have until March 2015 to complete this.


How can I make sure that I am enrolled or have properly revalidated?

You can go to Ordering and Referring Report to verify if your name and NPI is present. This file is updated every two weeks. If you are not enrolled, visit the CMS website to learn how. All enrollment applications, including those submitted over the Internet, require verification of the information reported. Sometimes, Medicare enrollment contractors may request additional information in order to process the enrollment application. Waiting too long to begin this process could mean that your enrollment application may not be processed prior to the implementation date of the ordering/referring Phase 2 provider edits.


What will happen if you do not enrolled or revalidated with CMS?

The new denial edits on the ordering/referring providers in Medicare Part B, DME, and Part A Home Health Agency (HHA) claims will be implemented on Jan. 6, 2014.


What are the ordering and referring edits?

The edits determine if the Ordering/Referring Provider (1) has a current Medicare enrollment record and contains a valid NPI, and (2) is of a provider type that is eligible to order or refer for Medicare beneficiaries. For a full list of eligible provider types, refer to the MLN Matters® Article #SE1305.


But how does this affect ophthalmology?

If you own an optical shop, you will be affected because you are supplying a DME. Your claims will be crosschecked to make sure your NPI is tied to DMEPOS enrollment. This means, you have to also enroll as a DMEPOS supplier. Also, your claims will be denied if you enter a referring or ordering provider that did not enroll or revalidate. Physicians and others who are eligible to order and refer items or services need to establish their Medicare enrollment record with a valid NPI and must be of a specialty that is eligible to order and refer. You need to ensure that these providers have current Medicare enrollment records.


How and when will these denial edits be implemented?

You may have heard about Phase 1 and Phase 2. Let’s explain what these two phases mean.

Phase 1 began Oct. 5, 2009. This is the information phase to alert the billing provider that the identification of the ordering/referring provider is missing, incomplete, or invalid, or that the ordering/referring provider is not eligible to order or refer. Below are messages you may have seen on your adjudicated claims.

Part B Providers and suppliers who submit claims to carriers:


N264 Missing/incomplete/invalid ordering provider name
N265 Missing/incomplete/invalid provider ordering provider identifier


DME suppliers who submit claims to carriers:


N544 Alert:  Although this was paid, you have billed a referring/ordering provider that does not match our system record. Unless corrected, this will not be paid in the future.

Phase 2 is that future. In Phase 2, if the ordering/referring provider does not pass the edits, the claim will be denied. This means that the billing provider will not be paid for the items or services that were furnished based on the order or referral.

These are the denial edits you will begin to see for Part B providers and suppliers who submitted claims to Part A/B MACs including DME MACs:


254D or 001L Referring/Ordering Provider Not Allowed to Refer/Order
255D or 002L Referring/Ordering Provider Mismatch

These denial edits will affect claims submitted on or after Jan. 6, 2014.


I received one of these denials, what do I do now?

You cannot bill the patient! Claims from billing providers and suppliers that are denied because they failed the ordering/referring edit will not expose a Medicare beneficiary to liability. Therefore, an Advance Beneficiary Notice (ABN) is not appropriate in this situation.

Then what should you do? If your claim was denied inappropriately, you can file an appeal through the standard claims appeals process.


I have done everything correctly, how do I accurately complete the claim form?

  • When submitting the CMS 1500 form, you should only include the first and last name as it appears on the Ordering and Referring Report in item 17. Do not enter “nicknames”, credentials (e.g. “Dr.”, “MD”, etc.) or middle names (initials) in the Ordering/Referring name field.
  • Ensure that the name and NPI you enter belongs to a provider and not an organization such as a group practice.
  • With electronic claim submission, make sure that the qualifier in the (X12N 237P 4010A1) 2310A MN102 loop is a 1 (person) and not 2 (organization).