The Centers for Medicare and Medicaid Services (CMS), the US agency that administers the Medicare program, defines "medical necessity" as services or items reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member. Medicare will not pay for any tests that CMS determines as unnecessary for diagnosis or treatment of disease.

A laboratory may not submit a claim to Medicare or other government payers for any test it suspects is not medically necessary unless:

• The patient has signed an Advanced Beneficiary Notice, or
• A patient has requested the lab to submit such a claim for a determination by Medicare.

Medicare does not pay for screening tests or tests that are ordered in the absence of signs or symptoms.

Billing department employees are responsible for following all policies and procedures related to the submission of claims to reduce erroneous billings.