TL;DR: The Centers for Medicare & Medicaid Services modified NCD 264 governing diagnostic breath analyses, effective January 9, 2026. One breath test is covered. Three are not. Here's what your billing team needs to know.
CMS diagnostic breath analysis coverage policy under NCD 264 Medicare draws a hard line: lactose breath hydrogen testing is covered for detecting lactose malabsorption. Everything else — lactulose breath hydrogen, CO2 for bile acid malabsorption, CO2 for fat malabsorption — is excluded. The policy does not list specific CPT or HCPCS codes, which creates a documentation burden your team needs to address before submitting claims.
Quick-Reference Table
| Field | Detail |
|---|---|
| Payer | CMS |
| Policy | Diagnostic Breath Analyses — NCD 264 |
| Policy Code | NCD 264 |
| Change Type | Modified |
| Effective Date | January 9, 2026 |
| Impact Level | Medium |
| Specialties Affected | Gastroenterology, Internal Medicine, Primary Care |
| Key Action | Audit all breath test claims and confirm each one maps to lactose breath hydrogen for lactose malabsorption — the only covered indication under this policy |
CMS Diagnostic Breath Analysis Coverage Criteria and Medical Necessity Requirements 2026
NCD 264 is the National Coverage Determination governing Medicare coverage of diagnostic breath analyses. These are tests that measure hydrogen or carbon dioxide content in a patient's breath after they ingest specific compounds. The purpose is to diagnose gastrointestinal conditions.
Under this coverage policy, medical necessity is straightforward for one test and denied for three others. CMS covers lactose breath hydrogen testing when performed to detect lactose malabsorption. That's the entire covered indication. No prior authorization is listed as a requirement for this test, but your documentation still needs to show the clinical rationale clearly.
The real issue here is that "diagnostic breath analysis" is a category, not a single test. Billing teams that treat this as a blanket-covered service will face claim denial. Each test in this category is evaluated separately, and three of the four tests CMS addresses are excluded from reimbursement.
If your gastroenterology or internal medicine practice bills for any breath testing, pull your charge capture now. Confirm that every breath test claim ties specifically to lactose breath hydrogen for lactose malabsorption. Anything else falls outside this coverage policy.
CMS Diagnostic Breath Analysis Exclusions and Non-Covered Indications
CMS excludes three breath tests from Medicare coverage under NCD 264. These are not pending review. They are not covered with conditions. They are excluded — full stop.
Lactulose breath hydrogen for diagnosing small bowel bacterial overgrowth is not covered. The same test used to measure small bowel transit time is also not covered. These are common gastroenterology tests, which makes this exclusion clinically frustrating and financially significant.
CO2 breath testing for diagnosing bile acid malabsorption is excluded. CO2 testing for fat malabsorption is also excluded. If your practice performs either of these tests and bills Medicare, you are billing a non-covered service.
This is where medical necessity documentation gets complicated. Some of these tests may be appropriate for a patient's clinical situation. But CMS has made its position clear — "appropriate" and "covered" are not the same thing under this policy. If you're billing any of these three excluded tests to Medicare, talk to your compliance officer before January 9, 2026.
The practical risk here is real. If your billing team isn't separating covered lactose breath hydrogen tests from excluded lactulose or CO2 tests in your charge capture, you are generating claim denials — and potentially overpayments that trigger a repayment obligation.
Coverage Indications at a Glance
| Indication | Status | Relevant Codes | Notes |
|---|---|---|---|
| Lactose breath hydrogen — lactose malabsorption detection | Covered | Not listed in policy | Medical necessity documentation required; no prior authorization listed |
| Lactulose breath hydrogen — small bowel bacterial overgrowth | Not Covered | Not listed in policy | Excluded from Medicare reimbursement |
| Lactulose breath hydrogen — small bowel transit time measurement | Not Covered | Not listed in policy | Excluded from Medicare reimbursement |
| CO2 breath test — bile acid malabsorption | Not Covered | Not listed in policy | Excluded from Medicare reimbursement |
| CO2 breath test — fat malabsorption | Not Covered | Not listed in policy | Excluded from Medicare reimbursement |
CMS Diagnostic Breath Analysis Billing Guidelines and Action Items 2026
The effective date of January 9, 2026 gives your team a clear deadline. Use it.
| # | Action Item |
|---|---|
| 1 | Audit your current breath test billing before January 9, 2026. Pull claims from the last 12 months. Identify every breath test billed to Medicare. Flag any that involve lactulose breath hydrogen or CO2-based testing. These are your exposure points. |
| 2 | Update your charge capture to separate covered and non-covered breath tests. Lactose breath hydrogen for lactose malabsorption is covered. The three excluded tests must be flagged as non-covered in your system. If your charge capture doesn't differentiate, you'll generate denials every time. |
| 3 | Check whether your Medicare Administrative Contractor has issued a local coverage determination (LCD) on diagnostic breath analyses. NCD 264 is a national policy, but MACs sometimes publish supplementary LCDs with additional billing guidelines or code-level guidance. An LCD from your MAC could provide the specific CPT code requirements that NCD 264 doesn't list. |
| 4 | Build your medical necessity documentation template for lactose breath hydrogen. CMS doesn't list prior authorization requirements for this test, but coverage is not unconditional. Your documentation needs to show that the test was ordered to diagnose lactose malabsorption. Generic "breath test ordered" notes won't hold up in a post-payment audit. |
| 5 | Identify any patients currently being tested for small bowel bacterial overgrowth, bile acid malabsorption, or fat malabsorption via breath analysis. If these patients are Medicare beneficiaries, you need to issue an Advance Beneficiary Notice of Noncoverage (ABN) before performing the test. Without an ABN, you cannot bill the patient if Medicare denies — which, under NCD 264, it will. |
| 6 | Loop in your compliance officer if your practice performs lactulose or CO2 breath tests regularly. The volume of excluded test claims you've submitted historically could be a problem. Your compliance officer needs to assess whether a self-disclosure or corrective action plan is warranted. Don't wait for a RAC audit to surface this. |
| Previous Version | Current Version |
|---|---|
| Coverage is considered experimental and investigational for all indications | Coverage is considered medically necessary when specific criteria are met |
| Prior authorization is not required | Prior authorization is required for initial treatment |
| Documentation must include clinical history | Documentation must include clinical history |
| Re-review every 24 months | Re-review every 12 months with updated clinical documentation |
CPT, HCPCS, and ICD-10 Codes for Diagnostic Breath Analyses Under NCD 264
NCD 264 does not list specific CPT codes, HCPCS codes, or ICD-10-CM codes. This is a known limitation of this policy document.
The absence of listed codes does not mean coding is irrelevant — it means your team needs to do additional work to find the right codes. Here's how to approach it.
What the Policy Covers
| Indication | Status | Codes Listed in Policy | Recommended Next Step |
|---|---|---|---|
| Lactose breath hydrogen — lactose malabsorption | Covered | None | Check MAC LCD and CMS Claims Processing Instructions for applicable CPT codes |
| Lactulose breath hydrogen — small bowel bacterial overgrowth | Not Covered | None | Do not bill to Medicare; issue ABN if patient is a Medicare beneficiary |
| Lactulose breath hydrogen — small bowel transit time | Not Covered | None | Do not bill to Medicare; issue ABN if patient is a Medicare beneficiary |
| CO2 — bile acid malabsorption | Not Covered | None | Do not bill to Medicare; issue ABN if patient is a Medicare beneficiary |
| CO2 — fat malabsorption | Not Covered | None | Do not bill to Medicare; issue ABN if patient is a Medicare beneficiary |
Finding the Right Codes
Your Medicare Administrative Contractor is your best resource here. MACs routinely publish article-level billing guidance that maps specific CPT codes to NCD-covered services. Contact your MAC directly or search their website for billing guidance on breath hydrogen testing.
CMS also references Claims Processing Instructions in the cross-reference section of NCD 264. Check those instructions — they often contain the code-level specificity the NCD itself omits.
Do not fabricate or assume codes for diagnostic breath analysis billing. Billing an unverified code to Medicare — even for a covered indication — creates a different kind of claim denial risk than billing a non-covered service. Get the right code from your MAC before you submit.
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