CMS Proposes 50 Percent Reduction in Claims Submitted with Modifier 25

The proposal is on the table as part of proposed E&M changes.

EDITOR’S NOTE: The following story was published by RACmonitor on Aug. 16, 2018.

By now I am sure that everyone is well aware that the Centers for Medicare & Medicaid Services (CMS) has proposed modifications to the reimbursement model for the outpatient/office evaluation and management (E&M) code sets, as well as the anticipated documentation relaxation accompanying the proposal. These two portions of the proposed changes are getting much publicity, but what seems to be getting missed with all of the E&M hype is the proposed reimbursement changes to services billed with a Modifier 25.

CMS’s proposed change in this area would impact not the documentation requirements, but rather the reimbursement model associated with the Modifier 25. Currently, if a claim is received by CMS that includes an E&M service with a Modifier 25 and a procedure, both the E&M and the procedure are reimbursed at 100 percent of the allowed amount. The proposal is that the reimbursement for the service with the lower value (either the E&M or the procedure) would be reduced by 50 percent. This reimbursement change, along with the proposed flat rate reimbursement for office/outpatient E&M services, could be catastrophic for many practices and healthcare organizations servicing Medicare beneficiaries.

Why is CMS proposing this change? It has provided two reasons:

  • Multiple payment reduction: CMS is comparing an E&M with a procedure to a surgical encounter in which multiple payment reductions are applicable.
  • Efficiencies: CMS feels that there are “efficiencies” associated with an E&M encounter and procedure on the same visit that the multiple payment rule should be applied to these instances.

Based on the current rules associated with the proper use of Modifier 25, I am not really sure how either of these reasons are valid.

I am sure that many of you would agree with me that we have seen inappropriate use of this modifier, from minor deficiencies by those who just do not quite understand the rules (or know they exist) all the way to major indiscretions that are at times done purposefully in order to bypass claims edits and obtain additional reimbursement. Regardless of rules, regardless of reimbursement changes, our industry will continue to have individuals who either don’t know the rules or those who just don’t care what the rules are. I don’t disagree that the modifier could use some updating, maybe even starting with a change to the description of the modifier that a layperson could understand. But the current modifier rules provide for treating the patient beyond the procedure, and therefore I am not sure what efficiencies are created in treating multiple issues or concerns.

Actually, let’s start with a ground-level view of defining the current use and support of Modifier 25. It is used when a procedure (with a 0-10-day global period) is performed on the same day as an E&M encounter. Typically, these procedures are those that are performed by a physician/NPP in the office setting. Under the current edits, CMS indicates that the reimbursement for this category of procedures includes reimbursement for the decision process to render the procedure. Therefore, if the patient presents to the office for a problem, regardless of whether the provider has seen the patient or treated the problem before, if the provider decides that the patient would benefit from a procedure, then the E&M service is not additionally reimbursed. However, a Modifier 25 could be appended to the E&M encounter to indicate that there was more to the encounter other than the standard decision-making for the procedure rendered.

Under the current rule, there are two ways to support the appropriate use of this modifier. We will define each and provide an example.

The first is the easier of the two, and that is if another problem is treated by the provider on the same date of service. This would then provide reimbursement above and beyond the “standard” decision-making process for the procedure.

For example, say a patient presents to an orthopedist for evaluation of osteoarthritis of the right knee. After reviewing the history of the knee and examining the knee, the provider decides an injection is the appropriate treatment at this time. However, the patient also has a new (or it could be established, just as well) additional complaint of back pain. The provider then obtains a history of this additional problem, examines the back, and documents a plan of care regarding the back. The E&M service is supported and reimbursed based on the back problem, as it was a separate issue and was thoroughly reviewed, addressed, and treated by the provider during the visit, in addition to the standard decision-making for the knee.

So, I am curious where our efficiency is, and how this is a multiple payment reduction, when technically the E&M is unrelated to the need for the procedure – and under the multiple payment reduction rules, would Modifier 59 for unbundling the two apply? In order for Modifier 25 to be supported when you have an additional problem, you are only allowed to use it if the work associated with the additional problem was “significant” enough to require reviewing the history of that problem, examining the affected organ system (and others that might be impacted as well), and developing a plan of care. Thereby, our provider is only using Modifier 25 to truly represent an encounter in which two problems were thoroughly addressed.

The second option, according to the current Modifier 25 rule, is confusing, but in layman’s terms, it would be when the “standard” decision-making process for the procedure is followed by additional review, examination, or work on the part of the provider. In these instances, we would expect the documentation to include the medical necessity of this additional review/work. If we take into consideration CMS’s application of the multiple payment reduction in this instance, it does seem more applicable than in the former. These encounters do represent work done over and above the typical consideration(s) for the procedure; however, there are efficiencies.

However, let’s flip this coin around for a minute. Would this mean that the Modifier 25 rules, as they exist, would then go away, and a provider could always bill an E&M with a procedure? Doubtful. But for those providers using this code correctly, this would create additional revenue, even at a 50 percent reduction.

Based on analyzing the current rules and standards, comparing them to the proposed changes, and considering the multiple payment reduction, we can see that there are instances in which this could apply, but certainly it would not apply in all of them – as is the same case with the use of this rule with surgical encounters. Maybe the “happy medium” here is just like surgeries: apply the multiple payment reduction, but provide an avenue to unbundle the payment, when necessary. There have been commercial carriers that have implemented this guidance, such as BCBS, and UHC proposed similar guidance but rescinded it at the last minute.

I am afraid that not enough comments are being posted regarding this portion of the proposed fee schedule, as most are focusing on the E&M reimbursement model change and the documentation relaxation proposed change.

Consider the financial implication this will have on your practice, and consider posting your comments for CMS consideration.

As a reminder, you can post your comments or review others by visiting:

Submit electronic comments on this regulation to, follow the instructions for “submitting a comment.”

Mail written comments to:

CMS-1676-P 2
Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1676-P
P.O. Box 8016
Baltimore, MD 21244-8013

Allow sufficient time for mailed comments to be received before the close of the comment period.

Express or overnight mail. You may send written comments to:

Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1676-P
Mail Stop C4-26-05
7500 Security Boulevard
Baltimore, MD 21244-1850

Deliver (by hand or courier) written comments before the close of the comment period to:

Centers for Medicare & Medicaid Services, Department of Health and Human Services,
Room 445-G, Hubert H. Humphrey Building,
200 Independence Avenue, SW.,
Washington, DC 20201

Comment on this article

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Shannon DeConda CPC, CPC-I, CEMC, CMSCS, CPMA®

Shannon DeConda is the founder and president of the National Alliance of Medical Auditing Specialists (NAMAS) as well as the president of coding and billing services and a partner at DoctorsManagement, LLC. Ms. DeConda has more than 16 years of experience as a multi-specialty auditor and coder. She has helped coders, medical chart auditors, and medical practices optimize business processes and maximize reimbursement by identifying lost revenue. Since founding NAMAS in 2007, Ms. DeConda has developed the NAMAS CPMA® Certification Training, written the NAMAS CPMA® Study Guide, and launched a wide variety of educational products and web-based educational tools to help coders, auditors, and medical providers improve their efficiencies. Shannon is a member of the RACmonitor editorial board and is a popular guest on Monitor Mondays.

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