Department of Health and Human Services 
OFFICE OF 
INSPECTOR GENERAL 
Medicare Payments for 
Nail Debridement Services 
JANET REHNQUIST 
Inspector General 
JUNE 2002 
OEI-04-99-00460  O I G
FFICE OF  NSPECTOR  ENERAL

http://www.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 
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The OIG's Office of Evaluation and Inspections (OEI) conducts short-term management and program 
evaluations (called inspections) that focus on issues of concern to the Department, the Congress, and the 
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monetary penalties.  The OI also oversees State Medicaid fraud control units which investigate and 
prosecute fraud and patient abuse in the Medicaid program. 
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 OIGs internal 
operations.  The OCIG imposes program exclusions and civil monetary penalties on health care providers 
and litigates those actions within the Department.  The OCIG also represents OIG in the global settlement 
of cases arising under the Civil False Claims Act, develops and monitors corporate integrity agreements, 
develops model compliance plans, renders advisory opinions on OIG sanctions to the health care 
community, and issues fraud alerts and other industry guidance.  EXECUTIVE SUMMARY 
PURPOSE 
To determine the appropriateness of Medicare payments for nail debridement services. 
BACKGROUND 
Podiatry is classified by Medicare as a single service speciality.  Generally, this means 
podiatrists can be licensed to practice medicine within the limited scope of podiatry. While 
Medicare reimburses podiatrists for several hundred different services, nail debridement is by 
far the single largest paid service. It accounted for almost one-fourth ($233 million of $1 
billion) of all Medicare payments to podiatrists in Calendar Year 2000. 
We focused this inspection on determining the appropriateness of Medicare nail debridement 
payments.  In doing so, we used a medical review contractor to examine beneficiary medical 
records to assure that payment was based on documented medical need. The contractor was a 
practicing podiatrist, and an active member of the American Podiatric Medical Association. 
Nail Debridement 
Nail debridement involves removal of a diseased toenail bed or viable nail plate. This may be 
performed manually with an instrument, or with an electric grinder. 
Podiatrists generally provide nail debridement to patients diagnosed with onychomycosis (i.e., 
mycosis or mycotic toenails). Mycosis is a chronic, communicable infection caused by a fungus 
which is particularly prevalent in elderly people. 
FINDINGS 
Medicare Inappropriately Paid about $96.8 Million for Nail Debridement and Related 
Podiatry Services 
Almost one-fourth (22.7 percent) of our sample nail debridement claims did not have adequate 
medical justification to support Medicare payment. We estimated that Medicare 
inappropriately paid $51.2 million for nail debridements in Calendar Year 2000. 
1 
Medicare Payments for Nail Debridement Services  OEI-04-99-00460  Furthermore, our sample showed more than half (60 percent) of the inappropriately paid nail 
debridement claims contained related podiatry services.  When a nail debridement payment is 
determined to be inappropriate, all other podiatry payments for services related to the nail 
debridement are also inappropriate. The related services would not have been performed in 
absence of the nail debridement. Medicare paid $45.6 million for such related services. 
RECOMMENDATIONS 
In about one in every four cases, the medical need for nail debridement was not documented in 
beneficiaries medical records.  Further, more than half of the inappropriate nail debridement 
payments had other related inappropriate payments. Medicare inappropriately paid $96.8 
million for such services in Calendar Year 2000. 
Even considering the possibility of poor documentation of medical records, the extent of the 
problem indicates close scrutiny is needed. At a minimum, the problem suggests medical 
records are not documented as required for Medicare payments.  More seriously, it suggests 
that Medicare paid for services not needed and services not provided. 
Accordingly, we recommend that CMS require: 
<	 Medicare carriers to closely scrutinize payment for nail debridement services through 
medical reviews.  Carriers should require podiatrists to adequately document the 
medical need for all nail debridement services. 
<  CMS carriers to collect the overpayment we found in our sample. 
<	 CMS Regional Offices and carriers to educate podiatrists on Medicare policy for 
payment of nail debridement claims. 
AGENCY COMMENTS 
The Centers for Medicare & Medicaid Services (CMS) commented on our draft report. They 
concurred with all recommendations. Specifically, CMS will continue to require contractors to 
maximize the effectiveness of their medical review strategy. CMS will also collect the 
overpayments identified in our sample, and educate podiatrists on Medicare policy for payment 
of nail debridement claims. 
The full text of CMS comments on our report are in Appendix B. 
2 
Medicare Payments for Nail Debridement Services  OEI-04-99-00460  TABLE OF CONTENTS 
EXECUTIVE SUMMARY ..................................................... 1

INTRODUCTION ............................................................ 4

FINDINGS

$96.8 Million Inappropriately Paid for Podiatry Services ........................... 9

RECOMMENDATIONS ..................................................... 12

AGENCY COMMENTS  ..................................................... 13

APPENDIX A  Confidence Intervals  ........................................... 14

APPENDIX B  CMS Comments  ............................................. 15

ACKNOWLEDGMENTS .................................................... 17

3

Medicare Payments for Nail Debridement Services  OEI-04-99-00460  INTRODUCTION 
PURPOSE 
To determine the appropriateness of Medicare payments for nail debridement services. 
BACKGROUND 
Medicare is a Federal health insurance program for individuals age 65 and older, and for 
certain categories of disabled people.  Medicare was authorized in 1965 by Title XVIII of the 
Social Security Act. The Centers for Medicare & Medicaid Services (CMS) administers 
Medicare, the nation's largest health insurance program, covering approximately 39 million 
beneficiaries. 
Under Medicare, podiatry is classified as a single service speciality. Generally, this means 
podiatrists can be licensed to practice medicine within the limited scope of podiatry. Some of 
the services that podiatrists may receive Medicare reimbursement for include nail debridement, 
surgical excision of affected nails, and topical treatment of the nail. Podiatry services performed 
within the scope of applicable State licenses are generally reimbursable under the Medicare 
program. 
Nail Debridement 
Nail debridement involves the removal of a diseased toenail bed or viable nail plate.  This may

be performed manually with an instrument, or with an electric grinder.

Podiatrists generally provide nail debridement to patients diagnosed with onychomycosis (i.e.,

mycosis or mycotic toenails). Mycosis is a chronic, communicable infection caused by a fungus

which is particularly prevalent in elderly people. Clinical evidence of mycotic nails can be

demonstrated by one or more of the following conditions:

<  nail hypertrophy - thickening of nail, 

<  discoloration of nail,

<  subungual debris - situated under the nail, or

<  onycholysis - loosening or separation of nail from the nail bed.

4 
Medicare Payments for Nail Debridement Services  OEI-04-99-00460  Medicare Coverage of Nail Debridement 
Medicare covers nail debridement when at least one of the following three conditions exists: 
<	 Medicare covers nail debridement for beneficiaries with systemic conditions involving 
neurological or vascular diseases. Such conditions can cause severe circulatory 
problems or diminished sensation in the legs or feet. 
<	 Medicare covers nail debridement for ambulatory beneficiaries with clinical evidence of 
mycosis of the toenail, marked limitation of ambulation, and pain.  Additionally, 
ambulatory beneficiaries with a secondary infection resulting from one or more mycotic 
toenails may be covered. 
<	 Medicare covers nail debridement for non-ambulatory beneficiaries with clinical 
evidence of pain or a secondary infection resulting from one or more mycotic toenails. 
Medicare Cost for Nail Debridement 
Over the past 5 years, podiatry services have been among the top 25 Medicare reimbursable 
services. In Calendar Year 2000, Medicare payments to podiatrists exceeded $1 billion, 
making them the highest reimbursed non-physician single service specialty group. This was 
more than double the reimbursements received by the second highest reimbursed group --
chiropractors. 
Medicare reimburses podiatrists for several hundred different services, however nail 
debridement was by far the largest paid single service.  In Calendar Year 2000, Medicare paid 
$233 million for nail debridement services, accounting for almost one-fourth of about $1 billion 
in total Medicare payments to podiatrists. 
METHODOLOGY 
Scope 
We evaluated the medical necessity of nail debridement services in Calendar Year 2000.  We 
contracted with a Podiatrist to review medical records for 110 randomly sampled nail 
debridement claims. The contractor also reviewed all other podiatry services that were 
performed on the same date as the nail debridement service to determine if they were related to 
the nail debridement. 
5 
Medicare Payments for Nail Debridement Services  OEI-04-99-00460  Sample Selection 
We used the CMS 1 percent National Claims History File to identify Medicare nail 
debridement claims (CPT code 11720 and 11721) paid during the first quarter of Calendar 
Year 2000 (January 1, 2000 to March 31, 2000).1 From this universe of 14,893 nail 
debridement claims, we selected a simple random sample of 120 claims for medical review. 
Additionally, we determined that nail debridement claims paid by Medicare during Calendar 
Year 2000 were uniformly distributed among the four quarters. Therefore, the number of 
claims paid in the first quarter was typical of claims paid in each of the following three quarters. 
We based our determination of claims distribution on CMS data in the 100 percent National 
Claims History (NCH) file for Calendar Year 1999, and the 1 percent NCH file for Calendar 
Year 2000. 
Because 99 percent of all Medicare nail debridement services are performed by podiatrists2, 
our sample resulted in only claims that had been submitted by podiatrists.  However, several 
other types of physicians perform nail debridements. 
Data Collection 
For the 120 sample claims, we requested podiatrists to furnish appropriate medical justification 
from patient medical records. Specifically, for the period July 1999 through June 2000, we 
requested: 
1. Initial history and physical examination information, 
2. All interim history and physical examinations, 
3. Beneficiary evaluation or assessments, 
4. Physician/consultation notes, 
5. Medication and service order sheets, and 
6. Nurses notes. 
We reduced our sample by 2 claims (from 120 to 118) because the providers identity was not 
readily apparent. The provider did not include a Unique Provider Identification Number 
(UPIN) on the claim. 
1Includes all claims processed as of June 30, 2000. 
2CMS Part B Extract and Summary System (BESS). 
6 
Medicare Payments for Nail Debridement Services  OEI-04-99-00460  We further reduced our sample by 8 claims (from 118 to 110) because we could not verify that 
podiatrists actually received our request for beneficiary medical records. Attempting to assure 
that the podiatrists received our request, we mailed three separate requests. Receiving no 
response, we then attempted to request the patient records by telephone.  However, the 
addresses shown in CMS files were either incorrect or no longer valid.  In a final attempt, we 
searched for the podiatrists telephone numbers by using various Internet search engines. 
Table 1 summarizes our adjusted sample. 
Table 1 
Sample of Nail Debridement Claims 
Number 
Simple Random Sample  120 
Claims Excluded: 
Unable to verify provider -- no UPIN on claim  2 
Unable to verify provider received medical record request  8 
Claims Reviewed  110 
Normally, CMS carriers should deny claims that do not have a UPIN, and claims for providers 
who fail to furnish requested medical documentation.  While we are concerned about the 
validity of such claims, we did not, however, count the 10 that appear in our sample as an 
inappropriate payment. We simply excluded them from our analysis. This approach provides a 
more conservative estimate of inappropriate payments for nail debridement services. 
Of the 110 podiatrists we contacted, 107 (97.3 percent) responded by providing the 
appropriate medical records. One of the podiatrists who did not provide the medical 
documentation told us that he could not find it.  The remaining two did not respond to our 
request at all.  Since we verified by telephone that our medical review request had in fact been 
received by the two podiatrists we considered their claims inappropriate for Medicare 
payment. 
7 
Medicare Payments for Nail Debridement Services  OEI-04-99-00460  Data Analysis 
To determine the medical necessity of the 110 nail debridement claims, we used a medical 
review contractor. The contractor was a practicing podiatrist, and an active member of the 
American Podiatric Medical Association.  The medical review contractor determined if the 
Medicare payments were appropriate. This determination was based on the medical necessity 
for nail debridement documented in the claim and in the medical records obtained from 
podiatrists. In making the determination of medical necessity, the contractor used CMS policy 
as criteria for allowed nail debridement service. 
Additionally, for nail debridement claims that were determined to be inappropriately paid, the 
contractor reviewed all other podiatry services billed on the same date of service. The 
contractor determined whether or not the other services were related to, or independent of, the 
nail debridement service. If the service was related to the nail debridement, it would not have 
been performed if the nail debridement had not been performed. Therefore, given that the nail 
debridement service was inappropriately paid, any related podiatry services were also 
determined to be inappropriately paid. 
We summarized the number of sampled claims that our medical review contractor determined 
to lack medical justification, and were therefore inappropriate for Medicare payment. We then 
projected this finding to all nail debridement payments by Medicare during the first quarter 
(January 1 through March 31) of Calendar Year 2000. 
Next, we summarized the extent of related nail debridement services that our medical review 
contractor determined to be inappropriate based on a lack of medical justification for nail 
debridement. We then projected that finding to all nail debridement claims during the first 
quarter of Calendar Year 2000. 
The nail debridement claims paid by Medicare during Calendar Year 2000 were uniformly 
distributed among the four quarters.  Therefore, we estimated inappropriate Medicare 
payments for nail debridement services for the entire Calendar Year 2000.  We did so by 
multiplying our first quarter results by four. Likewise, we estimated inappropriate payments for 
5 years (Calendar Years 2000 through 2004) by multiplying our first quarter results by twenty. 
All calculations were computed using software for the Statistical Analysis of Correlated Data 
(SUDAAN) and SAS software. 
We conducted this inspection in accordance with the Quality Standards for Inspections 
issued by the Presidents Council on Integrity and Efficiency. We conducted our review from 
June 2000 to October 2001. 
8 
Medicare Payments for Nail Debridement Services  OEI-04-99-00460  FINDINGS 
Medicare Inappropriately Paid about $96.8 Million for Nail Debridement and Related 
Podiatry Services 
Almost one-fourth of our sample nail debridement claims did not have adequate medical 
justification.  Additionally, more than half of the nail debridement claims lacking adequate 
medical justification had related services that were inappropriately paid. 
Medicare inappropriately paid $51.2 million for nail debridement services in Calendar 
Year 2000 
Almost 23 percent (25 of 110) of our sampled nail debridement claims did not have adequate 
medical justification to support Medicare payment. 
Table 2 shows the number of nail debridement claims for which beneficiary medical records 
lacked medical justification. 
Table 2 
Nail Debridement Claims That Should Not Have Been Paid 
Reason for Denying Payment  Claims  Percent 
Claims Reviewed  110  100.0% 
Medical Records Did Not Support Claim  19  17.3% 
No Record That Service Was Provided  3  2.7% 
Medical Records Not Provided to Justify Claim  3  2.7% 
Claims Inappropriately Paid  25  22.7% 
Of the 25 claims inappropriately paid, 19 (17.3 percent) were not medically justified because 
they did not contain sufficient documentation to demonstrate that the services were necessary. 
For example, several claims lacked a clinical description of the nails condition, while other 
claims lacked a diagnosis of mycosis. 
Additionally, the medical records for three claims (2.7 percent) had no indication that nail 
debridement services were performed on the date claimed. 
9 
Medicare Payments for Nail Debridement Services  OEI-04-99-00460  Finally, podiatrists did not furnish requested medical records to support another three nail 
debridement claims (2.7 percent). One of the three podiatrists said they could not find the 
beneficiarys medical record.  The other two podiatrists did not respond to our requests. 
We projected the inappropriate claims (22.7 percent) in our random sample to the 1,503,024 
Medicare nail debridement claims submitted from January 1, 2000 through March 31, 2000.3 
Our projection showed that 341,186 claims totaling $12.8 million were inappropriately paid 
during the 3-month period. 
Since the number of nail debridement claims submitted in the second quarter of Calendar Year 
2000 (1,503,024) was consistent with those submitted for the rest of the year4, we estimated 
that Medicare inappropriately paid $51.2 million in Calendar Year 2000 for nail debridement 
claims.  For a 5-year period (2000-2004), such inappropriate nail debridement payments 
would cost the Medicare Trust Fund $256 million.  See Appendix A for point estimates, 
confidence intervals, and cost estimates. 
Medicare inappropriately paid $45.6 million for related podiatry services in Calendar 
Year 2000 
Our medical review identified 25 inappropriately paid related podiatry services. Fifteen 
inappropriately paid nail debridement claims contained the 25 related podiatry services. 
Related podiatry services are other billable Medicare services associated with nail debridement. 
Related services conducted as a part of nail debridement services include debridement of skin -
- full thickness, paring or cutting lesions, and topical treatment of nails. 
When payment for nail debridement is determined to be inappropriate, all other payments for 
services related to that nail debridement are also inappropriate. Related services would not be 
performed unless nail debridement was performed. Conversely, appropriate support of the 
need for nail debridement would also support the need for related services. 
We projected the 25 inappropriate payments for related podiatry services from our sample of 
110 claims to the 1,503,024 Medicare nail debridement claims submitted from January 1, 2000 
through March 31, 2000. Our projection showed inappropriate Medicare payments of $11.4 
million for the 3-month period. 
3 CMS 100 percent National Claims History File, as of June 30, 2000. 
4 CMS 1 percent National Claims History File data for Calendar Year 2000. 
10 
Medicare Payments for Nail Debridement Services  OEI-04-99-00460  Since the number of nail debridement claims submitted in the first quarter of Calendar Year 
2000 were consistent with those submitted for the rest of the year, we estimated that Medicare 
inappropriately paid $45.6 million for related podiatry services in Calendar Year 2000. For a 
5-year period (2000-2004), inappropriate related service payments would cost the Medicare 
Trust Fund $228 million. See Appendix A for point estimates, confidence intervals, and cost 
estimates. 
11 
Medicare Payments for Nail Debridement Services  OEI-04-99-00460  RECOMMENDATIONS 
CC 
In about one in every four cases, the medical need for nail debridement was not documented in 
beneficiaries medical records.  Further, more than half of the inappropriate nail debridement 
payments had other related inappropriate payments. Medicare inappropriately paid about 
$96.8 million for such services in Calendar Year 2000. 
Even considering the possibility of poor documentation of medical records, the extent of the 
problem indicates close scrutiny is warranted. At a minimum, the problem suggests medical 
records are not documented as required for Medicare payments.  More seriously, it suggests 
that Medicare paid for services not needed and services not provided. 
Accordingly, we recommend that CMS require: 
<	 Medicare carriers to closely scrutinize payment for nail debridement services through 
medical reviews.  Carriers should require podiatrists to adequately document the 
medical need for all nail debridement services. 
<  CMS carriers to collect the overpayment we found in our sample. 
<	 CMS Regional Offices and carriers to educate podiatrists on Medicare policy for 
payment of nail debridement claims. 
12 
Medicare Payments for Nail Debridement Services  OEI-04-99-00460  AGENCY COMMENTS 
The Centers for Medicare & Medicaid Services (CMS) commented on our draft report. They 
concurred with all recommendations. 
CMS is taking a proactive approach in addressing the recommendations in our report. 
Specifically, they highlighted three initiatives they are implementing: 
<	 CMS will share this report with the contractors in their next vulnerability report. In 
addition, CMS will work with their contractors and the podiatry community to ensure 
that podiatrists understand Medicares documentation requirements for nail 
debridement services. 
<	 CMS will direct the appropriate Medicare carriers to recover overpayments for the nail 
debridement services mentioned in our report. 
<	 CMS will issue a standard article on Medicare nail debridement payment policy and 
post the article on contractor and CMS Web sites. 
The full text of CMS comments on our report are in Appendix B. 
13 
Medicare Payments for Nail Debridement Services  OEI-04-99-00460  APPENDIX A 
January - March 2000 
Point Estimate and Confidence Intervals 
Point  Lower 95%  Upper 95% 
Nail Debridement  $12.8 million  $8.3 million  $17.3 million 
Related Services  $11.4 million  $5.8 million  $17.1 million 
Total  $24.2 million  $14.1 million  $34.4 million 
Estimated Inappropriate Medicare Payments 
Period  Nail  Related  Total 
Jan - Mar 2000 
$12.8 million  $11.4 million  $24.2 million 
Projection 
Annual Estimate  $51.2 million  $45.6 million  $96.8 million 
5 Year Estimate  $256.0 million  $228.0 million  $484.0 million 
*Projections and estimates are based on a medical review of 110 podiatry claims 
14 
Medicare Payments for Nail Debridement Services  OEI-04-99-00460  APPENDIX B 
15 
Medicare Payments for Nail Debridement Services  OEI-04-99-00460  16 
Medicare Payments for Nail Debridement Services  OEI-04-99-00460  A C K N O W L E D G M E N T S  
This report was prepared under the direction of Jesse J. Flowers, Regional Inspector General for 
Evaluation and Inspections in the Atlanta Regional Office and Graham D. Rawsthorn, Assistant 
Regional Inspector General.  Other principal Office of Evaluation and Inspections staff who contributed 
include: 
Region  Headquarters

Rodney Holliman, Lead Analyst  Stuart Wright, Program Specialist

Dwayne Grant, Team Leader 
Robert Gibbons, Program Analyst 
Gerius Patterson, Program Analyst 
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Medicare Payments for Nail Debridement Services  OEI-04-99-00460