Key facts for NCD 240.4.1
- Benefit category
- Diagnostic Tests (other)
- Effective date
- 03/03/2009
- Implemented 08/10/2009
- Transmittal
- Transmittal 103
- Versions published
- 1
- Manual chapter
- 240
- NCD Manual (Pub. 100-03)
TL;DR
NCD 240.4.1 sets Medicare's national policy for sleep testing for obstructive sleep apnea (osa) under the benefit category "Diagnostic Tests (other)", effective 03/03/2009 and implemented 08/10/2009. Effective for claims with dates of service on and after March 3, 2009, the Centers for Medicare & Medicaid Services finds that the evidence is sufficient to determine that the results of the sleep tests identified below can be used by a beneficiary’s… It has been revised once since publication and binds every Medicare Administrative Contractor nationally.
Item or service described
A. General
Obstructive sleep apnea (OSA) is the collapse of the oropharyngeal walls and the obstruction of airflow occurring during sleep. Diagnostic tests for OSA have historically been classified into four types. The most comprehensive is designated Type I attended facility based polysomnography (PSG), which is considered the reference standard for diagnosing OSA. Attended facility based polysomnogram is a comprehensive diagnostic sleep test including at least electroencephalography (EEG), electro-oculography (EOG), electromyography (EMG), heart rate or electrocardiography (ECG), airflow, breathing/respiratory effort, and arterial oxygen saturation (SaO 2 ) furnished in a sleep laboratory facility in which a technologist supervises the recording during sleep time and has the ability to intervene if needed. Overnight PSG is the conventional diagnostic test for OSA. The American Thoracic Society and the American Academy of Sleep Medicine have recommended supervised PSG in the sleep laboratory over 2 nights for the diagnosis of OSA and the initiation of continuous positive airway pressure (CPAP).
Three categories of portable monitors (used both in attended and unattended settings) have been developed for the diagnosis of OSA. Type II monitors have a minimum of 7 channels (e.g., EEG, EOG, EMG, ECG-heart rate, airflow, breathing/respiratory effort, SaO 2 )-this type of device monitors sleep staging, so AHI can be calculated). Type III monitors have a minimum of 4 monitored channels including ventilation or airflow (at least two channels of respiratory movement or respiratory movement and airflow), heart rate or ECG, and oxygen saturation. Type IV devices may measure one, two, three or more parameters but do not meet all the criteria of a higher category device. Some monitors use an actigraphy algorithm to identify periods of sleep and wakefulness.
Indications and limitations of coverage
B. Nationally Covered Indications
Effective for claims with dates of service on and after March 3, 2009, the Centers for Medicare & Medicaid Services finds that the evidence is sufficient to determine that the results of the sleep tests identified below can be used by a beneficiary’s treating physician to diagnose OSA, that the use of such sleep testing technologies demonstrates improved health outcomes in Medicare beneficiaries who have OSA and receive the appropriate treatment, and that these tests are thus reasonable and necessary under section 1862(a)(1)(A) of the Social Security Act.
1. Type I PSG is covered when used to aid the diagnosis of OSA in beneficiaries who have clinical signs and symptoms indicative of OSA if performed attended in a sleep lab facility.
2. Type II or Type III sleep testing devices are covered when used to aid the diagnosis of OSA in beneficiaries who have clinical signs and symptoms indicative of OSA if performed unattended in or out of a sleep lab facility or attended in a sleep lab facility.
3. Type IV sleep testing devices measuring three or more channels, one of which is airflow, are covered when used to aid the diagnosis of OSA in beneficiaries who have signs and symptoms indicative of OSA if performed unattended in or out of a sleep lab facility or attended in a sleep lab facility.
4. Sleep testing devices measuring three or more channels that include actigraphy, oximetry, and peripheral arterial tone, are covered when used to aid the diagnosis of OSA in beneficiaries who have signs and symptoms indicative of OSA if performed unattended in or out of a sleep lab facility or attended in a sleep lab facility.
C. Nationally Non-Covered Indications
Effective for claims with dates of services on and after March 3, 2009, other diagnostic sleep tests for the diagnosis of OSA, other than those noted above for prescribing CPAP, are not sufficient for the coverage of CPAP and are not covered.
D. Other
N/A
(This NCD last reviewed March 2009.)
Text reproduced from the CMS Medicare Coverage Database record for NCD 240.4.1 version 1. View the original on cms.gov.
Revision history
07/2009 - Previously, although CPAP was nationally covered for beneficiaries with OSA if diagnosed with specific tests, coverage of the tests themselves was left to local contractor discretion. As a result of this recent NCD, effective for claims with dates of service on and after March 3, 2009, Medicare will allow for coverage of the sleep testing devices, specifically: Type 1 PSG when the test is attended in a sleep lab facility, Type II or Type III if performed unattended in or out of a sleep lab facility or attended in a sleep lab facility, or Type IV measuring 3 or more channels, one of which is airflow, if performed unattended in or out of a sleep lab facility or attended in a sleep lab facility. Effective Date: 03/03/2009 Implementation Date: 08/10/2009 ( TN 103 ) (CR6534)
How this NCD shows up on remittances
A service denied under a National Coverage Determination returns CARC 50 (not deemed medically necessary) with remark N386 (decision based on an NCD); a denial citing a local policy instead carries N115. Because NCDs bind nationally, the appeal path is documentation that the patient meets the indications above, not a contractor-policy argument.
How QuickIntell applies NCD 240.4.1
QuickAuth checks the ordered service and diagnosis against NCD and LCD criteria before the encounter, QuickCode validates the diagnosis pairing on the claim, and QuickRCM routes CARC 50 denials with the policy text and the covered-code list attached so the appeal starts with evidence.
Frequently asked questions — NCD 240.4.1
What does NCD 240.4.1 cover?
Effective for claims with dates of service on and after March 3, 2009, the Centers for Medicare & Medicaid Services finds that the evidence is sufficient to determine that the results of the sleep tests identified below can be used by a beneficiary’s treating physician to diagnose OSA, that the use of such sleep testing technologies demonstrates improved health outcomes in Medicare beneficiaries who have OSA and… The full indications and limitations are reproduced on this page from the CMS Medicare Coverage Database.
When did NCD 240.4.1 take effect?
The current version (1) is effective 03/03/2009, implemented 08/10/2009, published in transmittal 103. This is the only published version.
Does a Local Coverage Determination override NCD 240.4.1?
No. A National Coverage Determination binds all Medicare Administrative Contractors; an LCD can only address services or circumstances the NCD leaves open. Claims denied under this NCD typically return CARC 50 with remark N386 (NCD) rather than N115 (LCD).
Sources
Every figure on this page is taken from the CMS publications below, as released by the Centers for Medicare & Medicaid Services. Projection built 2026-10-02. Verify against the primary file before billing or contracting decisions.
- Medicare Coverage Database NCDs via the CMS Coverage APIVersion API snapshot 2026-09-27 · effective 2026-09-20 · file national-coverage-ncd.jsonSHA-256 a90fadfd264b9ef4…
Disclaimer
This page reproduces the CMS National Coverage Determination text and, for laboratory NCDs, the CMS ICD-10 edit lists, as an operational reference. Coverage decisions depend on the full policy, the claim and the contractor; nothing here is legal, clinical or billing advice. CPT codes are shown as numbers only; CPT descriptors are copyright AMA.