Department of Health and Human Services

OFFICE OF 

INSPECTOR GENERAL 

U M 59  B
SE OF  ODIFIER  TO  YPASS

M  N
EDICARE S  ATIONAL 

C C I
ORRECT  ODING  NITIATIVE 

E
DITS 

Daniel R. Levinson

Inspector General 

November 2005

OEI-03-02-00771
 Office of Inspector General 

http://oig.hhs.gov 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, 
as amended, is to protect the integrity of the Department of Health and Human Services 
(HHS) programs, as well as the health and welfare of beneficiaries served by those 
programs.  This statutory mission is carried out through a nationwide network of audits, 
investigations, and inspections conducted by the following operating components: 
Office of Audit Services 
The Office of Audit Services (OAS) provides all auditing services for HHS, either by 
conducting audits with its own audit resources or by overseeing audit work done by others. 
Audits examine the performance of HHS programs and/or its grantees and contractors 
in carrying out their respective responsibilities and are intended to provide independent 
assessments of HHS programs and operations in order to reduce waste, abuse, and 
mismanagement and to promote economy and efficiency throughout HHS. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) conducts management and program 
evaluations (called inspections) that focus on issues of concern to HHS, Congress, and 
the public.  The findings and recommendations contained in the inspections generate 
rapid, accurate, and up-to-date information on the efficiency, vulnerability, and 
effectiveness of departmental programs.  OEI also oversees State Medicaid Fraud 
Control Units which investigate and prosecute fraud and patient abuse in the Medicaid 
program. 
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative 
investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries 
and of unjust enrichment by providers.  The investigative efforts of OI lead to criminal 
convictions, administrative sanctions, or civil monetary penalties. 
Office of Counsel to the Inspector General 
The Office of Counsel to the Inspector General (OCIG) provides general legal services to 
OIG, rendering advice and opinions on HHS programs and operations and providing all 
legal support in OIG's internal operations. OCIG imposes program exclusions and civil 
monetary penalties on health care providers and litigates those actions within HHS. 
OCIG also represents OIG in the global settlement of cases arising under the Civil False 
Claims Act, develops and monitors corporate integrity agreements, develops compliance 
program guidances, renders advisory opinions on OIG sanctions to the health care 
community, and issues fraud alerts and other industry guidance.    E X E C U T I V E   S U M M A R Y  

OBJECTIVE 
To determine (1) whether modifier 59 is being used inappropriately to 
bypass Medicares National Correct Coding Initiative (CCI) edits    
and (2) to what extent Medicare carriers are reviewing the use of 
modifier 59. 
BACKGROUND 
In January 1996, the Centers for Medicare & Medicaid Services (CMS) 
began the CCI.  This initiative was developed to promote correct coding 
by providers and to prevent Medicare payment for improperly coded 
services.  The initiative consists of automated edits that are part of the 
carriers claims processing systems. 
Specifically, the CCI edits contain pairs of Healthcare Common 
Procedure Coding System codes (i.e., code pairs) that generally should 
not be billed together by a provider for a beneficiary on the same date of 
service.  All code pairs are arranged in a column 1 and column 2 format.  
The column 2 code is generally not payable with the column 1 code.  
Throughout this report we will refer to the column 1 code as the 
primary code or service and the column 2 code as the secondary code or 
service. 
Under certain circumstances, a provider may bill for two services in a 
CCI code pair and include a modifier on the claim that would bypass the 
edit and allow both services to be paid.  A modifier is a two-digit code 
that further describes the service performed.  Thirty-five modifiers can 
be used to bypass the CCI edits.  Modifier 59 is one of these modifiers. 
Modifier 59 is used to indicate that a provider performed a distinct 
procedure or service for a beneficiary on the same day as another 
procedure or service.  It may represent a different session, different 
procedure or surgery, different anatomical site or organ system, 
separate incision or excision, separate lesion, or separate injury (or area 
of injury in extensive injuries).  Modifier 59 should be attached to the 
secondary, additional, or lesser service in the code pair.1 According to 
CMS, this is the second code in a CCI code pair.2  When modifier 59 is 
1 Medicare Claims Processing Manual, Chapter 23, section 20.9, 
http://www.cms.hhs.gov/manuals/104_claims/clm104c23.pdf. 
2 National Correct Coding Initiative Frequently Asked Questions, 
http://www.cms.hhs.gov/physicians/cciedits/. 
  OEI-03-02-00771  USE OF MODIFIER 59 TO BYPASS MEDICARES CCI EDITS  i  E X E C U T I V E   S U M M A R Y  
used, a providers documentation must demonstrate that the service 
was distinct from other services performed that day.3 
CMS provides carriers with guidance and instructions on the correct 
coding of claims, including the use of modifier 59, through manuals, 
transmittals, and CMSs Web site.  Carriers, in turn, are required by 
CMS to educate providers concerning issues such as correct coding.  
Carriers are also responsible for developing their own prepayment and 
postpayment medical review strategies to identify billing errors. 
We selected a stratified random sample of 350 code pairs for services 
that bypassed CCI edits using modifier 59 in fiscal year (FY) 2003.  An 
independent contractor conducted a coding review of the medical records 
for these services to determine the appropriateness of the use of 
modifier 59.  We performed separate analysis on our FY 2003 data to 
determine whether modifier 59 was billed with the primary or 
secondary code.  We also surveyed each Medicare carrier to learn about 
their medical review activities, claims processing systems, and provider 
education activities related to modifier 59. 
FINDINGS 
Forty percent of code pairs billed with modifier 59 in FY 2003 did not 
meet program requirements, resulting in $59 million in improper 
payments. Medicare allowed payments for 40 percent of code pairs that 
did not meet the following program requirements:  (1) the services were 
not distinct from each other or (2) the services were not documented. 
Specifically, modifier 59 was used inappropriately with 15 percent of the 
code pairs because the services were not distinct from each other. 
Medicare allowed an estimated $31 million for the secondary services in 
these code pairs.  Secondary services are the services that CCI edits would 
deny.  Most of these services were not distinct because they were 
performed at the same session, same anatomical site, and/or through the 
same incision as the primary service.  Five code pairs represented  
53 percent of the services that were not distinct. In addition to services 
that were not distinct, 25 percent of the code pairs billed with modifier 59 
were not adequately documented.  Medicare allowed an estimated   
$28 million for these services.  In most of these cases, either one or both of 
the services billed were not documented in the medical record, or the 
3 Medicare Claims Processing Manual, Chapter 12, section 30, 
http://www.cms.hhs.gov/manuals/104_claims/clm104c12.pdf. 
  OEI-03-02-00771  USE OF MODIFIER 59 TO BYPASS MEDICARES CCI EDITS  ii  E X E C U T I V E   S U M M A R Y  
documentation indicated that another code should have been billed for one 
or both of the services performed.  In the remaining cases, either the 
documentation was insufficient to make a determination, or the 
documentation was not provided.  
Eleven percent of code pairs billed with modifier 59 in FY 2003 were 
paid when the modifier was billed with the incorrect code.  Pursuant 
to the Medicare Claims Processing Manual, modifier 59 should be 
billed with the secondary, additional, or lesser service in a CCI code 
pair. However, our analysis of 3.4 million code pairs showed that     
11 percent of the code pairs were paid when modifier 59 was attached to 
the primary code only.  This billing error represented $27 million in 
Medicare paid claims. Our analysis also indicated that 37 carriers paid 
for at least 10 percent of their claims billed with modifier 59 when the 
modifier was attached to the incorrect code. 
Most carriers did not conduct reviews of modifier 59, but those 
carriers that did found providers who were using modifier 59 
inappropriately. Between 2002 and 2004, 11 of 56 carriers conducted 
1 or more reviews of the use of modifier 59.  Ten carriers completed at 
least one review and one carriers only review was still in progress.  All 
of the carriers that completed reviews found providers who were using 
modifier 59 inappropriately.  One-third of 32 reviews completed found 
error rates of 40 percent or more for services billed with modifier 59. 
RECOMMENDATIONS 
The Centers for Medicare & Medicaid Services should encourage 
carriers to conduct prepayment and postpayment reviews of the use 
of modifier 59.  Our inspection found that 40 percent of code pairs 
billed with modifier 59 did not meet program requirements. Carrier 
reviews also indicated that providers were using modifier 59 
inappropriately.  We recommend that CMS encourage carriers to 
conduct prepayment and postpayment reviews of the use of modifier 59. 
We believe carriers should use data analysis to determine how to best 
carry out these reviews.  Because we found that a small number of code 
pairs made up more than half of the services that were not distinct in 
our sample, carriers may want to focus their initial analysis on these 
code pairs.   
The Centers for Medicare & Medicaid Services should ensure that 
the carriers claims processing systems only pay claims with 
modifier 59 when the modifier is billed with the correct code.  The 
  OEI-03-02-00771  USE OF MODIFIER 59 TO BYPASS MEDICARES CCI EDITS  iii  E X E C U T I V E   S U M M A R Y  
Medicare Claims Processing Manual states that modifier 59 should be 
billed with the secondary, additional, or lesser service in the CCI code 
pair. However, our analysis indicated that the majority of carriers paid 
for at least 10 percent of their claims billed with modifier 59 when the 
modifier was attached to the primary code only.  This raises questions 
about how Medicare guidelines are being applied within the carriers 
claims processing systems. 
AGENCY COMMENTS 
CMS concurred with our recommendation to encourage carriers to 
conduct prepayment and postpayment reviews of the use of modifier 59. 
CMS stated it would inform its contractors of our study so they can 
consider our data when prioritizing their payment review strategies. 
After these reviews are completed, suspected fraud and abuse cases will 
be forwarded to the appropriate program safeguard contractor for 
further development. 
CMS also concurred with our recommendation to ensure that carriers 
claims processing systems only pay claims when modifier 59 is billed 
with the secondary code.  However, CMS reports that it is not able to 
implement an edit to ensure this correct coding at the present time. 
Instead, CMS will: 
o 	 Distribute this report to its contractors responsible for identifying 
improper payments and potential fraud, waste, and abuse. 
o 	 Share this report with the Recovery Audit Contractors that were 
implemented on a pilot basis under the Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003. 
o 	 Issue a Medlearn Matters article to provide continuing 
education to physicians on how to bill modifier 59 appropriately. 
The full text of CMSs comments can be found in the Agency 
Comments section of this report.  
OFFICE OF INSPECTOR GENERAL RESPONSE 
We appreciate CMSs multipronged approach to addressing the 
inappropriate billing and use of modifier 59 on Medicare claims.  While 
CMS reports that it cannot implement a claims processing edit to 
ensure that claims with modifier 59 are billed with the correct code at 
this time, we hope CMS will consider implementing this type of edit in 
the future. 
  OEI-03-02-00771  USE OF MODIFIER 59 TO BYPASS MEDICARES CCI EDITS  iv    T A B L E   O F   C O N T E N T S  

EXECUTIVE SUMMARY ....................................... .  i

INTRODUCTION ................................................ 1 

FINDINGS ....................................................... 9 

Forty percent of services did not meet requirements. . . . . . . . . . . .  9

Modifier 59 billed with incorrect code . . . . . . . . . . . . . . . . . . . . . .  12

Reviews found inappropriate use. . . . . . . . . . . . . . . . . . . . . . . . . .  13

RECOMMENDATIONS ......................................... 14 

APPENDIXES .................................................. 16 

A:  Description of Stratified Sample. . . . . . . . . . . . . . . . . . . . . . . .  16

B:  Estimates and Confidence Intervals. . . . . . . . . . . . . . . . . . . . .  17

AGENCY COMMENTS ......................................... 18 

ACKNOWLEDGMENTS ......................................... 20
   I N T R O D U C T I O N  

OBJECTIVE 
To determine (1) whether modifier 59 is being used inappropriately to 
bypass Medicares National Correct Coding Initiative (CCI) edits    
and (2) to what extent Medicare carriers are reviewing the use of 
modifier 59. 
BACKGROUND 
The Medicare program provides coverage of health care services for the 
elderly and disabled.  The Centers for Medicare & Medicaid Services 
(CMS) administers the Medicare program and contracts with carriers 
nationwide to process most Medicare Part B claims.  Part B claims 
include those for physician, radiology, and laboratory services. 
Medicare paid approximately $77 billion for Part B services in fiscal 
year (FY) 2003. 
National Correct Coding Initiative 
In January 1996, CMS put the CCI into effect. This initiative was 
developed to promote correct coding by providers and to prevent 
Medicare payments for improperly coded services.  CMS developed the 
coding policies based on coding conventions defined in the American 
Medical Associations Current Procedural Terminology (CPT) Manual, 
national and local policies and edits, coding guidelines developed by 
national societies, a review of current coding practices, and analysis of 
standard medical and surgical practices.4   CMS works with a contractor 
to continually review and refine the CCI edits with input from national 
medical societies, carriers, and providers.   
CMS provides the CCI edit files to the carriers each quarter.  The CCI 
edits are updated quarterly; however, the most current version contains 
all prior additions and deletions of edits.  Previously, providers had to 
purchase the CCI edits; but as of September 2003, the CCI edits are 
available for providers to reference or download from CMSs Web site.5 
National Correct Coding Initiative Edits  
Medicare providers use the Healthcare Common Procedure Coding 
System (HCPCS) to code services provided to Medicare beneficiaries. 
The CCI edits contain pairs of HCPCS codes (i.e., code pairs) that 
4 National Correct Coding Policy Manual for Medicare Part B Carriers, Introduction, p. vi. 
5 http://www.cms.hhs.gov/physicians/cciedits/default.asp. 
  OEI-03-02-00771  USE OF MODIFIER 59 TO BYPASS MEDICARES CCI EDITS  1  I N T R O D U C T I O N  
generally should not be billed together by a provider for a beneficiary on 
the same date of service.  All code pairs are arranged in a column 1 and 
column 2 format. The column 2 code is generally not payable with the 
column 1 code. Throughout this report we will refer to the column 1 
code as the primary code or service and the column 2 code as the 
secondary code or service. 
Modifier 59 
Under certain circumstances, a provider may bill for two services in a 
CCI code pair and include a modifier on the claim. A modifier is a two-
digit code that further describes the service performed.  A modifier 
would allow the code pair to bypass the edit and both services would be 
paid. Each CCI code pair has a modifier indicator that determines 
whether a modifier can be used.  Thirty-five modifiers can be used to 
bypass the CCI edits.  Modifier 59 is one of these modifiers. 
In FY 2003, Medicare allowed $370 million for Part B services that 
bypassed the CCI edits using a modifier.6  Of this amount, $245 million  
(66 percent) was allowed for services that bypassed the CCI edits using 
modifier 59. 
Proper Use of Modifier 59 
Pursuant to the Medicare Claims Processing Manual7 and the CPT 
Manual 2003,8 modifier 59 is used to indicate that a provider 
performed a distinct procedure or service for a beneficiary on the same 
day as another procedure or service.  It may represent a: 
o  Different session, 
o  Different procedure or surgery, 
o  Different anatomical site or organ system,  
o  Separate incision or excision,  
o  Separate lesion, or  
o  Separate injury (or area of injury in extensive injuries).   
Modifier 59 should not be used with the radiation treatment 
management code 77427 or with the evaluation and management 
6 This figure represents the dollar amount paid for the secondary code in a code pair when a 
beneficiary had no more than two services on the same day by the same provider.  
7 Chapter 23, section 20.9.  http://www.cms.hhs.gov/manuals/104_claims/clm104c23.pdf. 
8 Appendix A, p. 404. 
  OEI-03-02-00771  USE OF MODIFIER 59 TO BYPASS MEDICARES CCI EDITS  2  I N T R O D U C T I O N  
service codes 99201-99499.  Modifier 59 should only be used if there is 
no other CCI modifier that best explains the circumstances. 
The Medicare Claims Processing Manual further clarifies that 
modifier 59 should be attached to the secondary, additional, or lesser 
service in the code pair.9  According to CMS, this is the second code in a 
CCI code pair.10  The following example explains the proper use of 
modifier 59: 
If an infusion procedure is performed, the routine placement of 
the intravenous catheter for that procedure should not be billed 
separately because it is considered a component of the infusion 
procedure.  However, if a catheter is placed in a different site 
later in the day, modifier 59 should be attached to the code 
representing the placement of the catheter.  This would indicate 
that two separate procedures were actually performed.  In this 
case, both codes would be paid.11 
Documentation Requirements 
Providers must maintain adequate documentation in the medical record 
to support the services billed.  Section 1833(e) of the Social Security Act 
requires that providers furnish such information as may be necessary  
in order to determine the amounts due in order to receive Medicare 
payment.  In addition, pursuant to the Medicare Claims Processing 
Manual, when modifier 59 is used, a providers documentation must 
demonstrate that the service was distinct from other services performed 
that day.12  For example, to allow both a bone marrow biopsy procedure 
and a bone marrow aspiration procedure to be billed together, the 
medical record must indicate that the services were performed through 
separate incisions or at separate sessions.13  Other types of CCI code 
pairs must have documentation demonstrating that the services were 
9  Chapter 23, section 20.9, http://www.cms.hhs.gov/manuals/104_claims/clm104c23.pdf. 
10 National Correct Coding Initiative Frequently Asked Questions, 
http://www.cms.hhs.gov/physicians/cciedits/. 
11 Adapted from, National Correct Coding Policy Manual for Medicare Part B Carriers, 
version 9.3, Chapter XI, p. 1. 
12 Chapter 12, section 30, http://www.cms.hhs.gov/manuals/104_claims/clm104c12.pdf. 
13 National Correct Coding Policy Manual for Medicare Part B Carriers, version 9.3, 
Chapter I, pp. 14-15. 
  OEI-03-02-00771  USE OF MODIFIER 59 TO BYPASS MEDICARES CCI EDITS  3  I N T R O D U C T I O N  
performed sequentially14 or that a different level of service was provided 
to indicate that the services were distinct from each other.15 
Carrier Guidance  
CMS provides carriers with guidance and instructions on the correct 
coding of claims, including the use of modifier 59, through manuals, 
transmittals, and the CMS Web site.  CMSs Web site contains the CCI 
edits as well as the National Correct Coding Policy Manual for 
Medicare Part B Carriers (NCCI policy manual), the Medicare Claims 
Processing Manual, and responses to frequently asked questions 
concerning CCI.  The NCCI policy manual contains a general policy 
chapter and 10 narrative chapters each corresponding to a separate 
section of the CPT Manual. Most chapters contain some examples of 
circumstances when it is appropriate to use modifier 59 with certain 
code pairs or types of code pairs. This manual is updated each year in 
October. 
Education for Providers 
CMS requires carriers to educate providers concerning issues such as 
correct coding.  Using data analysis, carriers develop their own 
strategies for conducting prepayment and postpayment medical review 
to identify errors.  Carriers target individual providers who require 
education when claims review indicates billing problems.  Depending on 
the level of error identified, carriers may address providers coverage or 
coding-related problems through educational letters, telephone 
conferences, or face-to-face meetings.  Carriers also use mass media and 
training seminars to give timely and accurate Medicare information to 
the provider community. 
Clarification of the National Correct Coding Initiative Policy Manual 
During the course of our inspection, we shared information with the 
CCI workgroup16 concerning CCI edits that were frequently bypassed 
using modifier 59.  The workgroup addressed many of the issues 
concerning these code pairs when updating the October 2004 version 
of the NCCI policy manual.   
14 National Correct Coding Policy Manual for Medicare Part B Carriers, version 9.3, 
Chapter XI, p. 9. 
15 Ibid., Chapter X, p. 3. 
16 The workgroup consists of staff at CMS headquarters and at the CCI contractor. 
  OEI-03-02-00771  USE OF MODIFIER 59 TO BYPASS MEDICARES CCI EDITS  4  I N T R O D U C T I O N

METHODOLOGY 
Sample Selection 
We matched the CCI edits that were in effect in FY 2003 against    
100 percent FY 2003 Part B claims data from CMSs National Claims 
History File.  To determine if a code pair was active on a particular date 
of service and if the code pair allowed a modifier on that date, we used 
the CCI edits from version 9.3 (October 2003) as well as the modifier 
indicator change lists from version 8.3 (October 2002) through version 
9.3. 
We defined our population as code pairs that allowed a modifier and 
that bypassed the CCI edits because modifier 59 was present.  The 
population consisted of approximately 3.4 million code pairs with    
$227 million in payments for the secondary codes after we excluded the 
following services: 
o 	 Code pairs that had another valid CCI modifier in addition to 
modifier 59,17 
o 	 Services where a beneficiary had more than two services on the 
same day by the same provider,18 
o 	 Services represented by codes 99201-99499 or 77427 since 
modifier 59 should not be billed with these codes,  
o 	 Services rendered by three providers who were under 
investigation, and 
o 	 Services where the payment for the secondary service in the code 
pair was less than or equal to $24.19 
From the population, we selected a stratified random sample of 350 code 
pairs to send to an independent contractor for coding review.  The strata 
definitions were based on the frequencies of code pairs in the 
population, the dollar amount of the secondary code in a code pair, and 
information received from members of the CCI workgroup. The details 
of our stratification are outlined in Appendix A. 
17 These code pairs were excluded to be certain that the use of modifier 59 was the only 
reason CCI edits were bypassed. 
18 No additional analysis was conducted to determine the effect this had on the types of 
services excluded from our population. 
19 Excluding these services eliminated 25 percent of code pairs (1 million) and 6 percent of 
the dollars ($15 million) from our population. 
  OEI-03-02-00771  USE OF MODIFIER 59 TO BYPASS MEDICARES CCI EDITS  5  I N T R O D U C T I O N  
Medical Record Request 
We sent our initial written request for medical records by Federal 
Express to all providers in our sample.  The requests were sent to 
addresses found in CMSs Unique Provider Identification Number 
(UPIN) file.  A number of requests were returned as undeliverable.  We 
looked for alternate addresses in the UPIN file, searched the Internet, 
and contacted carriers to find correct address information. We 
continued to send requests to alternate addresses until we found a valid 
address or exhausted all possibilities.  We were unable to locate six 
providers. We removed the services performed by these providers from 
subsequent data analysis. 
We sent up to two follow-up requests by Federal Express to providers 
who did not respond to our first request. We were able to contact 
providers for 344 code pairs in our sample.  Three of these providers 
were excluded from our data analysis because they were unable to 
provide the records for a valid reason or the records arrived too late to 
be included in our coding review. This left us with 341 CCI code pairs 
for analysis.  Of these, six were considered undocumented because the 
provider did not send the records requested.  The remaining 335 records 
were forwarded for coding review. 
Medical Record Review 
We sent 335 medical records to an independent contractor for coding 
review to determine whether modifier 59 was used inappropriately to 
bypass CCI edits. The records were reviewed by experienced certified 
coders.  We asked the coders to determine whether both services in the 
code pairs were documented, whether another code should have been 
billed for one or both of these services, and whether the services were 
distinct from each other.  For services that were not distinct, we asked 
the coders to describe why they were not distinct services. We provided 
the coders with a copy of the October 2003 version of the NCCI policy 
manual and instructed them to refer to it as well as the 2002 and 2003 
CPT and HCPCS manuals in making their determinations. The coding 
review was conducted between October and December 2004. 
Calculation of Improper Payments 
We calculated the total amount paid for secondary services in CCI code 
pairs when the services were not distinct or the secondary services were 
not adequately documented.  It is the secondary code in the code pair 
that would be denied by the CCI edits.  We did not include the dollar 
amounts for code pairs when the coding review determined that only the 
  OEI-03-02-00771  USE OF MODIFIER 59 TO BYPASS MEDICARES CCI EDITS  6  I N T R O D U C T I O N  
primary code was not documented20 or that one or both services should 
have been coded differently.21  We totaled the allowed amounts for 
inappropriate services and weighted the estimates to reflect our 
stratified sample design. The point estimates and confidence intervals 
for these statistics are presented in Appendix B. 
Claim Data Review 
We performed separate analysis on the 3.4 million FY 2003 code pairs 
from which we selected our sample to determine whether modifier 59 
was billed with the primary or secondary code in the CCI code pairs.  
This analysis enabled us to determine whether the carriers claims 
processing systems handled claims according to the requirements in the 
Medicare Claims Processing Manual.  The manual instructs providers 
to bill modifier 59 with the secondary, additional, or lesser service in a 
CCI code pair.22  According to CMS, this is the second code in a CCI code 
pair.23  We considered modifier 59 to be billed with the incorrect code 
when modifier 59 was billed with the primary code only.  To calculate 
the amount paid when modifier 59 was billed with the primary code 
only, we totaled the payments for the secondary services in these code 
pairs. 
The Centers for Medicare & Medicaid Services and Carrier Surveys 
We conducted telephone surveys with CMS central office and each CMS 
regional office to determine what roles they have in ensuring the proper 
use of modifier 59.  These surveys were conducted between January and 
May 2004. 
We also surveyed all Medicare Part B carriers to determine the extent 
to which carriers review the use of modifier 59.  We asked the carriers 
about their medical review activities, claims processing systems, and 
provider education and outreach activities.   
We received 30 individual survey responses.  The 30 responses 
represented all 56 carrier jurisdictions since some carriers handle 
operations for more than 1 State.  If carrier operations differed from 
20 These payments were excluded because our estimates of improper payments were based 
on the allowances for the secondary code only. 
21 Since we did not analyze whether these services were upcoded (billed at a higher level 
than the service actually performed) or downcoded, we did not calculate the amount 
Medicare allowed for the services. 
22 Chapter 23, section 20.9, http://www.cms.hhs.gov/manuals/104_claims/clm104c23.pdf. 
23 National Correct Coding Initiative Frequently Asked Questions, 
http://www.cms.hhs.gov/physicians/cciedits/. 
  OEI-03-02-00771  USE OF MODIFIER 59 TO BYPASS MEDICARES CCI EDITS  7  I N T R O D U C T I O N  
jurisdiction to jurisdiction, we instructed the carriers to complete more 
than one survey; otherwise, we instructed them to complete one survey. 
In our analysis, we applied the carriers response to all of the applicable 
jurisdictions.  Therefore, our total number of carriers is 56. We 
conducted the surveys from October through December 2004. 
Standards 
This inspection was conducted in accordance with the Quality 
Standards for Inspections issued by the Presidents Council on 
Integrity and Efficiency and the Executive Council on Integrity and 
Efficiency. 
  OEI-03-02-00771  USE OF MODIFIER 59 TO BYPASS MEDICARES CCI EDITS  8    F I N D I N G S  
Medicare allowed payments for 
Forty percent of code pairs billed with   
40 percent of code pairs that did 
modifier 59 in FY 2003 did not meet program 
not meet the following program 
requirements, resulting in $59 million in 
requirements: (1) the services were 
improper payments  not distinct from each other or 
(2) the services were not adequately 
documented. We estimate that Medicare allowed $59 million for these 
services in FY 2003.  A summary of improper payments is presented in 
Table 1 below. 
Table 1. Code Pairs That Did Not Meet Program Requirements 
Projected 
Type of Error  Percentage  Allowed 
of Code  Amount 
Pairs  (Millions) 
Services not distinct  15%  $31 
Services not adequately documented  25%  $28 
   - Primary, secondary, or both services not  
12%  $161 
documented 
   - Different code should have been billed   7%  N/A2
   - Documentation insufficient to make a 
5%  $9 
determination 
   - Documentation not provided  1%  $3 
Total  40%  $59 
1 Estimate includes allowed amounts for secondary services only.

2 We did not estimate allowed amounts when one or both services should have been coded differently. 

Source: Office of Inspector General analysis of medical records request and coding review results, 
2005. 
Fifteen percent of code pairs billed with modifier 59 were not distinct. 
Modifier 59 was used inappropriately with 15 percent of the code pairs 
because the services were not distinct from each other.  In most cases, 
services were not distinct because they were performed at the same 
session, same anatomical site, and/or through the same incision. 
Medicare allowed an estimated $31 million for the secondary services in 
these code pairs.  Secondary services are the services that CCI edits 
would deny. 
  OEI-03-02-00771  USE OF MODIFIER 59 TO BYPASS MEDICARES CCI EDITS  9  F I N D I N G S  
Five code pairs represented over half of the services that were not distinct. 
Just five code pairs made up 53 percent of the services that were not 
distinct, representing an estimated $11 million in payments.  We 
compared the percentage of services that were not distinct for these five 
code pairs to the percentage of services that were not distinct for all 
other code pairs in our population.  Our comparison found a statistically 
significant difference between these two groups.24 
In our sample data, modifier 59 was used inappropriately most often 
with the CCI code pair for bone marrow biopsy (38221) and bone 
marrow aspiration (38220).  This code pair represented 13 of our 
62 sampled services that were not distinct from each other.  In all of 
these cases, modifier 59 was inappropriate because the two services 
were not distinct since they were performed at the same session and 
through the same incision.  Pursuant to the NCCI policy manual, these 
two procedures are only distinct when performed through different 
incisions or at different sessions.25 
A code pair for physical therapy (97140/97530) represented another 
eight of our sampled services that were not distinct from each other. In 
all of these cases, modifier 59 was not appropriate because the medical 
record did not document that the services were performed in different 
15-minute time intervals.  Pursuant to the Medicare Claims Processing 
Manual, time spent performing physical therapy services must be 
included in the medical record.26 Without this documentation, these 
services cannot be considered distinct.  
A cytopathology code pair (88108/88104) represented six of the services 
billed inappropriately with modifier 59 in our sample.  In most of these 
cases, the documentation showed that the services were performed on 
the same specimen; therefore, pursuant to the NCCI policy manual, 
only one code should have been billed.27 
Two code pairs for chemotherapy and IV infusion (96410/90780 and 
96408/90780) represented another six of our sampled services that were 
not distinct.  In all of these cases, the documentation showed that two 
24 For the five code pairs, 29 percent of services were not distinct.  For all other code pairs, 
9 percent of services were not distinct.  This difference is statistically significant at the 
95 percent confidence level based on a chi-square test of independence (p = .0016). 
25 Version 9.3, Chapter I, pp. 14-15.  

26 Chapter 5, Section 20.2, http://www.cms.hhs.gov/manuals/104_claims/clm104c05.pdf. 

27 Version 9.3, Chapter X, p. 3. 

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services were performed but did not indicate whether the supportive 
medication was administered sequentially to the chemotherapy. 
Pursuant to the NCCI policy manual, such documentation is needed to 
demonstrate that these services were performed at different sessions 
and, therefore, are both payable.28 
Services for an additional 28 code pair combinations in our sample were 
found to be not distinct. Each of these code pairs had one or two 
services that were not distinct. 
Twenty-five percent of the code pairs billed with modifier 59 were not 
adequately documented. Modifier 59 was used inappropriately with 
25 percent of the code pairs because the services were not adequately 
documented in the medical record. In most cases, either one or both of 
the services in a code pair was not documented or the documentation 
indicated that a different code should have been billed for one or both of 
the services. In the remaining cases, either the documentation was 
insufficient to make a determination or the documentation was not 
provided. Medicare allowed an estimated $28 million for the secondary 
services in these code pairs. 
One or both services not documented.  For 12 percent of the code pairs, one 
or both of the services billed were not documented in the medical record. 
Specifically, in 4 percent of code pairs, the primary service was not 
documented. We did not calculate the amount Medicare allowed for 
these services. In the remaining 8 percent of these code pairs, either 
both services were not documented or the secondary service was not 
documented. Medicare allowed an estimated $16 million for secondary 
services when these services were not documented.  For example, one 
provider billed for two podiatry services. However, the medical record 
only showed that the patient visited the office to pick up medication. 
The record did not include documentation for either podiatry service 
billed. 
Different code should have been billed. For 7 percent of the code pairs, 
another code should have been billed for one or both of the services 
performed. We did not analyze whether these services had been 
upcoded (billed at a higher level than the service actually performed) or 
downcoded. Therefore, we did not calculate the amount Medicare 
allowed for these services. 
28 Version 9.3, Chapter XI, p. 9. 
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Documentation insufficient to make a determination.  For 5 percent of the 
code pairs, the documentation provided was not sufficient to determine 
whether the services were distinct. In these cases, the documentation 
provided was not legible or did not sufficiently support the use of the 
code(s) billed. For example, a provider documented removal of polyps 
but not the specific technique for the removal.  Therefore, the 
documentation was insufficient for the coder to determine the correct 
code for the procedure.  Medicare allowed an estimated $9 million for 
the secondary services in these code pairs. 
Documentation not provided.  Providers did not send us the requested 
records for 1 percent of the code pairs.  These providers either did not 
send records for the beneficiary for the date of service we requested or 
did not send records for the beneficiary at all.  Medicare allowed an 
estimated $3 million for the secondary services in these code pairs.  
Confidence intervals for these estimates are presented in Appendix B. 
The Medicare Claims Processing 
Eleven percent of code pairs billed with modifier 
Manual states that modifier 59 
59 in FY 2003 were paid when the modifier was 
should be billed with the secondary, 
billed with the incorrect code  additional, or lesser service in a CCI 
code pair.  According to CMS, this is 
the second code in a CCI code pair. However, our review of 3.4 million 
code pairs billed with modifier 59 in FY 2003 found that 11 percent of 
the code pairs were paid when modifier 59 was attached to the primary 
code only.  This billing error represented $27 million in Medicare paid 
claims. 
In addition, another 13 percent of code pairs were paid when modifier 
59 was billed with both the primary and secondary codes. The 
remaining 76 percent of code pairs were paid when modifier 59 was 
attached to the secondary code only.  
For each carrier, we analyzed the paid claims for code pairs billed with 
modifier 59.  Thirty-seven carriers paid for at least 10 percent of their 
code pairs when the modifier was attached to the primary code only. 
These carriers paid between 10 and 32 percent of code pairs billed with 
modifier 59 when modifier 59 was billed with the primary code only.  
Nineteen of the thirty-seven carriers paid between 10 and 15 percent, 
16 carriers paid between 16 and 28 percent, and 2 carriers paid 32 
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percent for code pairs billed with modifier 59 when modifier 59 was 
billed with the primary code only. 
Between 2002 and 2004, 11 of 
Most carriers did not conduct reviews of 
56 carriers conducted 1 or more 
modifier 59, but those carriers that did found 
reviews of the use of modifier 59. 
providers who were using modifier 59 
Two carriers had conducted 
inappropriately 
prepayment reviews of modifier 59, 
eight had conducted postpayment reviews, and one conducted both 
types of reviews. Ten carriers completed at least one review and one 
carriers only review was still in progress. All of the carriers that 
completed reviews reported that they found providers who were using 
modifier 59 inappropriately. Many carriers chose to focus on modifier 
59 because they had identified vulnerabilities through analysis of claims 
data or through provider appeals and denials. 
The 11 carriers conducted a total of 32 reviews of services billed with 
modifier 59. One-third of the 32 reviews conducted by the carriers 
found error rates of 40 percent or more among certain providers for 
services billed with modifier 59. Specifically, three of these reviews 
found error rates of nearly 100 percent among providers billing for bone 
marrow biopsy and bone marrow aspiration with modifier 59. As stated 
previously, this is the code pair that made up the highest number of 
services in our sample that were not distinct from each other. Another 
six reviews found error rates between 5 and 20 percent for services 
billed with modifier 59. Five reviews found no errors. We did not 
receive error rates for 10 reviews because either the reviews were still 
in progress or the error rate was not provided by the carrier. 
Several carrier reviews resulted in the collection of overpayments. One 
carrier recovered over $200,000 in improper payments. In addition, 
some carriers put certain providers claims under review as a result of 
their findings. Carriers that conducted reviews and found 
inappropriate use of modifier 59 reported that they either educated 
individual providers on the proper use of the modifier or offered all 
providers education on modifier 59 through seminars and/or newsletter 
articles. 
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The Centers for Medicare & Medicaid Services should encourage 
carriers to conduct prepayment and postpayment reviews of the use 
of modifier 59.  Our inspection found that 40 percent of code pairs 
billed with modifier 59 were inappropriate.  Carrier reviews also 
indicated that providers were using modifier 59 inappropriately.  We 
recommend that CMS encourage carriers to conduct prepayment and 
postpayment reviews of the use of modifier 59.  We believe carriers 
should use data analysis to determine how to best carry out these 
reviews. Because we found that a small number of code pairs made up 
more than half of the services that were not distinct in our sample, 
carriers may want to focus their initial analysis on these code pairs.   
The Centers for Medicare & Medicaid Services should ensure that 
the carriers claims processing systems only pay claims with 
modifier 59 when the modifier is billed with the correct code.  The 
Medicare Claims Processing Manual states that modifier 59 should be 
billed with the secondary, additional, or lesser service in the CCI code 
pair. However, our analysis indicated that the majority of carriers paid 
at least 10 percent of their claims billed with modifier 59 when the 
modifier was attached to the primary code only.  This raises questions 
about how Medicare guidelines are being applied within carriers claims 
processing systems.   
AGENCY COMMENTS 
CMS concurred with our recommendation to encourage carriers to 
conduct prepayment and postpayment reviews of the use of modifier 59. 
CMS stated it would inform its contractors of our study so they can 
consider our data when prioritizing their payment review strategies. 
After these reviews are completed, suspected fraud and abuse cases will 
be forwarded to the appropriate program safeguard contractor for 
further development. 
CMS also concurred with our recommendation to ensure that carriers 
claims processing systems only pay claims when modifier 59 is billed 
with the secondary code.  However, CMS reports that it is not able to 
implement an edit to ensure this correct coding at the present time. 
Instead, CMS will: 
  OEI-03-02-00771  USE OF MODIFIER 59 TO BYPASS MEDICARES CCI EDITS  14  RR	 EE CC OO MM MM EE NN DD AA TT II OO NN SS  
o 	 Distribute this report to its contractors responsible for identifying 
improper payments and potential fraud, waste, and abuse. 
o 	 Share this report with the Recovery Audit Contractors that were 
implemented on a pilot basis under the Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003. 
o 	 Issue a Medlearn Matters article to provide continuing 
education to physicians on how to bill modifier 59 appropriately. 
The full text of CMSs comments can be found in the Agency 
Comments section of this report. 
OFFICE OF INSPECTOR GENERAL RESPONSE 
We appreciate CMSs multipronged approach to addressing the 
inappropriate billing and use of modifier 59 on Medicare claims. While 
CMS reports that it cannot implement a claims processing edit to 
ensure that claims with modifier 59 are billed with the correct code at 
this time, we hope CMS will consider implementing this type of edit in 
the future. 
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Description of Stratified Sample 
Population    Medicare  Sample 
of Code    Allowance for  size 
Strata  Description of Code Pairs 
Pairs  Secondary 
Code 
1- High  17000/11100  Destroy benign, premalignant lesion/ Biopsy of skin lesion  1,214,267  $ 65,981,193  75 
frequency code 
96410/90780  Chemotherapy infusion method/ IV infusion therapy, 1 hr 
pairs 
97140/97530  Manual therapy/ Therapeutic activities 
96408/90780  Chemotherapy, push technique/ IV infusion therapy, 1 hr 
2- High  11055-56/  Trim skin lesion-Trim skin lesions, 2 to 4/                623,654  $ 21,373,167  50 
frequency-  11720-21  Debride nail, 1 to 5-Debride nail, 6 or more 
debridement 
11719/11720  Trim nail(s)/ Debride nail, 1 to 5 
services  
11057/11721  Trim skin lesions, over 4/ Debride nail, 6 or more 
11040/11721  Debride skin, partial/ Debride nail, 6 or more 
3- Potential high  88108/88104  Cytopathology, concentrate tech/ Cytopathology, fluids  74,942  $4,554,038  40 
error rate and   
high frequency 
38221/38220  Bone marrow biopsy/ Bone marrow aspiration 
code pairs 
4- Potential high  Any combinations of the following codes:  pathology codes:  88104-88112  41,741  $ 5,327,770  35 
error rate and     (excluding 88108/88104), 88160-88162, 88173, 88174, 88180, 88271-
low frequency  88275, 88300-88365; urinary codes:  52000-52640; eye surgery codes:  
code pairs  65400-67228; extremity surgery codes:  23930-26952 
5- High  Allowance for secondary code was greater than or equal to $200    106,482  $ 39,225,417  50 
secondary code  (excluding code pairs in strata 3 and strata 4) 
dollar amount 
6- Remaining  All other code pairs not in strata 1 through 5  1,365,551  $ 90,644,881  100 
code pairs 
Total  3,426,637  $227,106,466  350 
Source: Office of Inspector General sample of FY 2003 CCI code pairs billed with modifier 59. 
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The table below contains statistical estimates presented in the Findings section of 
this report.  Point estimates and confidence intervals were weighted based on the 
stratified random sample design and are reported at the 95 percent confidence 
interval. 
Estimates and Confidence Intervals 
Statistic  Point Estimate  95% Confidence Interval 
40.22%  34.12% - 46.32% 
Total services that did not meet program 
requirements   
$58,907,886  $47,210,537 - $70,605,236 
14.79%  10.42% - 19.16% 
Services that were not distinct  
$30,616,030  $21,456,650 - $39,775,409 
25.43%  20.04% - 30.82% 
Services that were not adequately 
documented 
$28,291,857  $19,466,497 - $37,117,217 
11.96%  7.94% - 15.98% 
Services where the primary, secondary, or  
both services were not documented  
$16,368,134  $9,589,143 - $23,147,125 
Services where a different code should have 
7.42%  4.28% - 10.56% 
been billed 
4.67%  1.98% - 7.36% 
Services where the documentation was 
insufficient to make a determination1 
$8,580,251  $3,688,575 - $13,471,928 
1.38%  0% - 2.77% 
Services where the documentation was not 
provided1 
$3,343,472  $0 - $7,089,485 
53.36%  38.70% - 68.02% 
Services represented by five code pair 
combinations that were not distinct 
$11,222,880  $6,313,582 - $16,132,177 
1 The relative precision for these estimates exceeds 50 percent. 
Source: Office of Inspector General analysis of medical records request and coding review results, 2005. 
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This report was prepared under the direction of Robert A. Vito, Regional 
Inspector General for Evaluation and Inspections in the Philadelphia 
regional office, and Linda M. Ragone, Deputy Regional Inspector 
General. Other principal Office of Evaluation and Inspections staff who 
contributed include: 
Tara Bernabe, Team Leader 
Nancy J. Molyneaux, Program Analyst 
Linda Frisch, Program Specialist 
Doris Jackson, Program Specialist 
Tricia Davis, Director, Medicare & Medicaid Branch 
Barbara Tedesco, Mathematical Statistician 
Kevin Farber, Mathematical Statistician 
Scott Horning, Program Analyst 
Steve Milas, Program Analyst 
Michael P. Barrett, Program Analyst 
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