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Department of Health and Human Services


OFFICE OF 

INSPECTOR GENERAL 

USE OF MODIFIER 25 


Daniel R. Levinson 


Inspector General 


November 2005


OEI-07-03-00470

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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-todate 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. 
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ΔINTROD UCT ION EXECUTIVE SUMMAR Y 

OBJECTIVE 

To determine the extent to which use of modifier 25 meets Medicare 

program requirements. 

BACKGROUND 

Medicare payments for medical procedures include payments for certain 

evaluation and management (E/M) services that are necessary prior to 

the performance of a procedure. The Centers for Medicare & Medicaid 

Services (CMS) does not normally allow additional payments for 

separate E/M services performed by a provider on the same day as a 

procedure. However, if a provider performs an E/M service on the same 

day as a procedure that is significant, separately identifiable, and above 

and beyond the usual preoperative and postoperative care associated 

with the procedure, modifier 25 may be attached to the claim to allow 

additional payment for the separate E/M service. In calendar 

year 2002, Medicare allowed $1.96 billion for approximately 29 million 

claims using modifier 25. 

The Office of Inspector General (OIG) randomly selected 450 claims 

billed in calendar year 2002 using modifier 25 for medical review. OIG 

requested from the appropriate providers all medical records for 

services provided to the beneficiary on the date of service listed on the 

sampled claim. OIG was able to contact the providers who submitted 

431 of these sampled claims; therefore, 19 claims were excluded from 

the analysis. OIG contracted with certified professional coders to 

determine whether the use of modifier 25 met program requirements. 

OIG also conducted structured interviews with all carriers focusing on 

their understanding, outreach, and oversight regarding modifier 25; 

conducted interviews with staff in CMS central and regional offices 

about their oversight of modifier 25 use; and reviewed examples of 

carrier outreach relating to modifier 25. 

FINDINGS 

Thirty-five percent of claims using modifier 25 that Medicare allowed 

in 2002 did not meet program requirements, resulting in $538 million 

in improper payments. Medicare should not have allowed payment for 

these claims because the E/M services were not significant, separately 

identifiable, and above and beyond the usual preoperative and 

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EXE CUTIVE S U MMAR Y 

postoperative care associated with the procedure; or because the claims 

failed to meet basic Medicare documentation requirements. 

Some additional claims did not meet program requirements, 

although the unnecessary use of modifier 25 may not have resulted 

in improper payments. A large number of claims submitted used 

modifier 25 unnecessarily, such as by attaching the modifier to an E/M 

claim when no other service was performed on the same day. While 

such use may not lead to improper payments, it does fail to meet 

program requirements. 

Carrier oversight related to modifier 25 is limited. Carriers use 

different methods to provide outreach regarding the use of modifier 25. 

More than one-third of carriers have not conducted oversight related to 

modifier 25. 

RECOMMENDATION 

CMS should work with carriers to reduce the number of claims 

submitted using modifier 25 that do not meet program requirements. 

CMS may want to: 

o Reinforce the requirements that E/M services billed using 

modifier 25 be significant, separately identifiable, and above and 

beyond the usual preoperative and postoperative care associated 

with the procedure; 

o Encourage carriers to emphasize that appropriate documentation 

of both E/M services and procedures must be maintained to 

support claims for payments using modifier 25 even though the 

documentation is not required to be submitted with the claims; 

and 

o Emphasize that modifier 25 should only be used on claims for E/M 

services, and only when these services are provided on the same 

day as another procedure. 

CMS should also encourage carriers to reexamine their 

modifier 25 outreach activities and include modifier 25 reviews 

in their medical review strategies where appropriate. 

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AGENCY COMMENTS 

CMS concurred with the OIG recommendations and indicated that it 

recently made significant efforts to educate the provider community 

about the need for documentation to support services billed to the 

Medicare program. CMS noted that it will inform contractors of the 

OIG findings so they can take any appropriate actions. CMS will also 

modify the “Medical Claims Processing Manual” to clarify that 

appropriate documentation must be maintained to support claims for 

payments, even though providers are not required to submit the 

documentation with the claim. CMS indicated that it will explore the 

potential to place greater emphasis on modifier 25 outreach activities 

and include the modifier in contractor medical review strategies. 

CMS did note that the majority of improper payments reported 

stemmed from instances in which the provider failed to furnish the 

documentation necessary to determine the medical necessity of the 

service, rather than uncertainty about the guidelines for using modifier 

25. Nonetheless, CMS indicates it will explore options to reinforce or 

emphasize the requirements for using modifier 25. 

OFFICE OF INSPECTOR GENERAL RESPONSE 

OIG appreciates CMS’s comments on the draft report and recognizes its 

efforts to educate the provider community and contractors regarding the 

need for documentation to support services billed to Medicare. 

However, OIG believes it is important to note that additional improper 

payments may have been made, and that without proper documentation 

OIG was unable to determine if services were provided and whether 

these payments were appropriate. 

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Δ T ABLE OF CONTENTS 

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

INTR O D U C T I ON ............................................... 1 

FINDI NGS ...................................................... 6 

 Improper payments totaled $538 million....................... 6 

 Unnecessary use exists ...................................... 9 

Carrier oversight is limited .................................. 9 

RECOM M E NDATI O N .......................................... 11 

APPENDI X .................................................... 13 

Stratification and Sample................................... 13 

AGEN CY COMME N T S ......................................... 14 

ACKN O W LEDGMENTS ........................................ 17
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Δ INTRODU C TION 

OBJECTIVE 

To determine the extent to which use of modifier 25 meets Medicare 

program requirements. 

BACKGROUND 

Evaluation and management (E/M) services that are necessary for the 

performance of a medical procedure (for example, assessing the 

site/condition of the problem area, explaining the procedure, and 

obtaining informed consent) are included in Medicare payments for the 

procedure.1 However, if a provider performs an E/M service on the same 

day as a procedure that is significant, separately identifiable, and above 

and beyond the usual preoperative and postoperative care associated 

with the procedure, the provider may attach modifier 25 to the E/M 

service claim2 to facilitate billing and to allow separate payment for the 

E/M service.

3 In calendar year 2002, Medicare allowed $1.96 billion for 

approximately 29 million services billed using modifier 25. 

Required Documentation 

Although providers are not required to provide supporting 

documentation when submitting claims using modifier 25,4 they must 

furnish “such information as may be necessary in order to determine the 

amounts due” to receive Medicare payment.5 Medical record 

documentation should include: 

o Clinical information confirming that the E/M service billed was 

above and beyond the E/M services included in the procedure, 6 

1 “CPT Assistant,” Vol. 8, Issue 9, September 1998. 

2 Within a single claim, multiple line items for individual services and procedures may be 

billed. OIG uses the term “claim” generically to refer to claims and claim line items. 

3 CMS’s “Internet-Only Manual, Educational Resource Web Guide,” CMS Manual System, 

Publication 100-4, Medicare Claims Processing, Chapter 12, § 40.2 Billing Requirements 

for Global Surgeries, A-Procedure Codes and Modifiers, 8-Significant Evaluation and 

Management on Day of Procedure. 

4 Medicare Program; Revisions to Payment Policies Under the Physician Fee Schedule for 

Calendar Year 2000, 56 Fed. Reg. 59502–59603 (1990). 

5 Social Security Act, § 1833 (e). “No payment shall be made to any provider of services or 

other person under this part unless there has been furnished such information as may be 

necessary in order to determine the amounts due . . . ” 

6 “CPT Assistant,” Vol. 8, Issue 9, September 1998. 

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INTROD UCT ION

o Information to support that the provider submitting the claims for 

payment is the same provider that furnished both the medical 

procedure(s) and the E/M service,7 and 

o Information indicating that a single beneficiary received both the 

medical procedure(s) and the E/M service billed. 

Modifier 25 should be used only with the E/M service portion of the 

Medicare claim. Procedures submitted in conjunction with an 

E/M service do not need modifier 25 in order to be paid.

 8 Therefore, 

even if used appropriately for every encounter a provider has with every 

patient (one surgical procedure and one E/M service), modifier 25 should 

be used on no more than 50 percent of items billed. 

Guidance and Outreach 

Guidance to providers regarding the use of modifier 25 is available 

through a variety of sources, such as newsletters, bulletins, and letters 

from contractors and the Centers for Medicare & Medicaid Services 

(CMS). However, the governing source for determining appropriate 

payment is CMS’s “Internet-Only Manual.”9 Chapter 12, section 40.2 of 

the manual states: 

Modifier 25 is used to facilitate billing of evaluation and 

management services on the day of a procedure for which separate 

payment may be made. It is used to report a significant, 

separately identifiable evaluation and management service 

performed by the same physician on the day of a procedure. The 

physician may need to indicate that on the day a procedure or 

service that is identified with a [Current Procedural Terminology] 

code was performed, the patient’s condition required a significant, 

separately identifiable evaluation and management service above 

and beyond the usual preoperative and postoperative care 

associated with the procedure or service that was performed. 

In addition, CMS allows providers to use the Current Procedural 

Terminology (CPT) Manual, published by the American Medical 

Association, as a source of information regarding the use of modifier 25. 

The CPT Manual contains detailed descriptions of the procedure codes 

7 Social Security Act, § 1833 (e). 

8 CMS’s “Internet-Only Manual,” Pub. 100-4, Medicare Claims Processing, chapter 12. 

9 Department of Health and Human Services, CMS, “Internet-Only Manual,” retrieved 

March 7, 2005, from http://www.cms.hhs.gov/manuals/cmsindex.asp. 

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INTROD UCT ION 

and modifiers that providers use to submit claims for reimbursement to 

Medicare. 

Medicare contractors that pay Part B claims, which are called carriers, 

issue guidance to providers regarding modifier 25 through carrier 

websites, newsletters, and workshops. Carriers also conduct outreach 

activities to help educate providers about Medicare policies, including 

modifier 25. Carriers may communicate directly through e-mails or 

letters, conduct local provider education and training programs, publish 

newsletters, and conduct provider communication meetings. 

Oversight 

CMS requires carriers to conduct oversight of claims in their respective 

jurisdictions. Carriers prioritize their claims oversight activities based 

on the degree of risk to the Medicare program and available resources, 

and prepare an annual medical review strategy that they submit to 

CMS. Each carrier may choose whether modifier 25 is included in its 

annual review strategy. CMS allocates funds to conduct the reviews 

based on each carrier’s past review volume. Carriers are asked to then 

prioritize their workloads and perform reviews within that target 

budget amount. 

METHODOLOGY 

Literature Review 

The Office of Inspector General (OIG) reviewed reports and other 

documents related to modifier 25 published by CMS, Medicare carriers, 

OIG, the Government Accountability Office, and other organizations 

(such as provider groups, journals, and industry newsletters). 

Interviews 

OIG conducted structured interviews with staff in CMS central and 

regional offices regarding their oversight of modifier 25 use. OIG also 

conducted structured interviews with medical review and provider 

education staff at all 24 carriers contracting with Medicare at the time 

of the review. Carrier interviews focused on the carriers’ understanding 

of the definition of modifier 25 and the outreach and oversight they had 

conducted related to this modifier. 

Electronic Claims Review and Sample Selection 

OIG obtained all 2002 Medicare Part B provider claims from the CMS 

National Claims History file. From this file, OIG identified all allowed 

claims for services billed with modifier 25 and merged these claims with 

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INTROD UCT ION 

the Physician Identification Master Record. OIG then determined each 

provider’s proportion of modifier 25 use, based on all claims each 

provider submitted, which was used later in determining the sample for 

medical review. 

OIG divided claims submitted with modifier 25 into two groups: those 

that had no other claim for the same beneficiary on the same day for the 

same provider and those that did. 

Physicians who submitted claims included in the first group used

modifier 25 unnecessarily because no other claims were submitted for 

the beneficiaries on the dates of those services. 

From the second group, OIG excluded all providers submitting fewer 

than 25 claims using modifier 25 and those whose proportion of 

modifier 25 use was less than 1 percent, due to the low risk these 

providers pose. 

OIG grouped the remaining 24.8 million claims into six strata based on the 

provider’s proportion of modifier 25 use and volume of claims. OIG then 

randomly selected 75 claims from each of the six strata to create a sample 

of 450 claims. The appendix provides an overview of the six strata. 

Medical Record Request 

For each of the 450 sampled claims, OIG requested the provider 

identified to provide all medical records for services rendered to the 

beneficiary on the date of service listed. OIG achieved a 92 percent

(415/450) response rate to the request for medical records. This 

response rate was spread across all six strata. 

For the remaining 35 providers, either OIG received no response to the

requests for medical records or requests were returned because of 

invalid addresses. OIG attempted to identify alternative addresses for 

these providers by consulting Medicare contractors, the Unique 

Provider Identification Number Registry Web site, State licensing 

boards for the provider’s State of practice, and State licensing boards in 

contiguous States. OIG then mailed a request to each address 

identified. When telephone numbers were available, OIG also 

attempted to contact these providers by telephone. 

Through these efforts, OIG was able to obtain valid addresses 

for 14 of the remaining 35 providers. OIG made at least four attempts 

to contact each of these providers, two or more of which were made via 

certified mail to each valid address identified. OIG received return 

receipts for these 14 providers, indicating that they received the 

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INTROD UCT ION

request. OIG did not receive the requested documents from 13 of these 

providers. One provider submitted documentation after the completion 

of the data collection and review, and was therefore included in the 14 

providers who did not respond to the OIG request. Two providers 

refused to provide medical records because they no longer maintained 

the records in question. One provider had retired and forwarded all 

medical records to his patients; the other was a physical therapist 

providing services to the patients of a provider OIG was unable to 

contact. 

OIG was unable to obtain valid addresses or telephone numbers for 

18 providers and unable to contact 1 additional provider. These 19 

providers were not included in the analysis. Providers for 431 of the 

450 sampled claims had the opportunity to respond and were included 

in the analysis. 

Medical Record Review 

OIG contracted with certified professional coders who used the medical 

records received from providers to determine whether the use of 

modifier 25 met program requirements. One of two coders reviewed 

each sampled record using a data collection instrument specifically 

designed for this study. This data collection instrument was based on 

the CMS definition of modifier 25 in the “Internet-Only Manual,” 

Chapter 12, section 40.2. CMS approved the instrument prior to use. 

After the initial coding review, a second coder reviewed each completed 

data collection instrument to be sure that the initial coder addressed 

each question correctly and clearly explained the results from a coding 

perspective. The project manager, a registered nurse with 18 years’ 

experience, also conducted a quality assurance evaluation of all reviews 

to ensure that the answers to questions were complete, consistent, and 

clearly communicated. In addition, interrater reliability testing was 

conducted on a 5-percent sample of the reviews. This means that for 

5 percent of the records reviewed, the source medical record was 

rereviewed by a second coder in addition to the review done by the 

primary reviewer. Results of the second review were then compared 

with the original review to ensure that the coders were in agreement. 

Standards 

This study was conducted in accordance with the “Quality Standards for 

Inspections” issued by the President’s Council on Integrity and 

Efficiency and the Executive Council on Integrity and Efficiency. 

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Δ FINDINGS

Thirty-five percent of claims using 

modifier 25 that Medicare allowed in 2002 did 

not meet program requirements, resulting 

in $538 million in improper payments 

In 2002, Medicare should not 

have allowed payments for 

35 percent of claims for 

E/M services billed using 

modifier 25. These claims totaled 

$538 million in improper payments that Medicare and/or beneficiaries 

made. The payments were improper because the services were deemed 

(1) noncovered because they did not meet the requirements for use of 

modifier 25 or (2) undocumented due to failure to meet basic Medicare 

documentation requirements under section 1833(e) of the Social 

Security Act (the Act).10 These claims were distributed across strata, 

provider specialty types, and the Medicare carriers that allowed the 

claims. See Table 1 below for a summary of the improper payments. 

Table 1: Improper Payments for Claims Using Modifier 25 

Sample Weighted Projection 

Basis for Improper Payment 

Number of 

Services 

Services 

(Proportion) 

Allowed 

Amount 

Services 

(Proportion) 

Allowed 

Amount 

Noncovered Failed to meet modifier 25 

requirements 9 0.02 $469.75 

Failed to document E/M 

service and/or procedure 116 0.27 $6,868.20 

Missing identifying 

information Undocumented 19 0.04 $1,202.72

Did not respond to request 14 0.03 $1,127.51 

 Total 158 0.36 $9,668.18 0.35* $538 million

 Source: OIG medical review of claim line items billed with modifier 25 and allowed by Medicare in 2002 and 2005. 

* This percentage is projected and may therefore vary slightly from the sample proportion. 

10 These projected statistics use weights derived by dividing the population of an individual 

stratum by the number of sampled claims in that stratum. For the point estimate of 

35 percent, the confidence interval at 95 percent is 28 to 40 percent. For the estimated 

dollar amount of $538 million, the confidence interval at 95 percent is $431 million to 

$643 million. 

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F I NDING S 

Noncovered 

Medical reviewers determined that Medicare should not have allowed 

2 percent (9/431) of the sampled claims reviewed because the 

E/M services for which payments were made did not meet the 

requirement that the services be significant, separately identifiable, and 

above and beyond the usual preoperative and postoperative care 

associated with the procedure. Therefore, these services were not 

covered. 

For example, documentation for one of the records reviewed indicated 

that a Medicare beneficiary had returned for a nail debridement 

procedure after a previous visit. The patient’s condition had been 

evaluated prior to the day of the procedure. The provider documented 

some E/M services the day of the procedure, but did not document any 

E/M services above and beyond the services necessary to perform the 

debridement on the day of the procedure. Therefore, payment for the 

separate E/M service should not have been allowed. 

Undocumented 

Providers failed to furnish documentation that met Medicare program 

payment requirements for 34 percent (149/431) of the sampled claims. 

These claims did not meet the requirements of section 1833(e) of the 

Act, which states that, to receive Medicare payment, providers must 

furnish “such information as may be necessary in order to determine the 

amounts due.” The providers who submitted these claims failed to 

document E/M services and/or procedures, provided documentation that 

was missing identifying information, or failed to respond to OIG 

request(s) for documentation. 

It is important to note that some of the undocumented claims might 

have fallen into the noncovered category had OIG received more 

complete documentation. For example, if a provider performed only a 

procedure but billed for both the procedure and an E/M service, the E/M 

service should not have been allowed. However, OIG could not 

determine if missing documentation was the result of the provider 

simply not supplying it, thus failing to meet the requirements of 

section 1833(e) of the Act, or because an E/M service did not meet 

program requirements. OIG grouped all cases involving missing 

documentation into the undocumented category. 

Failure to document E/M service and/or procedure. Medical reviewers found 

that providers did not document the E/M services and/or procedures for 

27 percent (116/431) of the sampled claims received from providers. For 

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F I NDING S 

example, documentation for one of the records reviewed indicated that a 

Medicare beneficiary presented for a flu shot. The provider submitted a 

claim for the flu shot and an E/M service, the latter using modifier 25. 

Both claims were allowed. The provider furnished documentation that 

a flu shot was provided, but no documentation to support the claim for a 

separate E/M service. 

Another provider documented the E/M service provided to a beneficiary 

but did not document that the procedures were performed. In this 

instance, Medicare allowed the E/M service that was documented and 

four physical therapy procedures that were not documented. These 

physical therapy procedures were listed in the record as planned 

treatment, but there was no documentation that these procedures were 

actually performed. Without documentation of the procedures, 

Medicare should not have allowed these claims because it is impossible 

to determine if the procedures were provided and if the E/M service met 

program requirements. 

Missing identifying information. Four percent (19/431) of the records 

reviewed were missing identifying information, such as the beneficiary 

or physician name, or a physician signature. Section 1833(e) of the Act 

states that providers must furnish information necessary to determine 

the amount of payment due. Without identifying information, reviewers 

cannot determine if the same provider furnished or the same beneficiary 

received both the procedure and the E/M service. Therefore, these 

records failed to meet basic documentation requirements and made it 

impossible to determine whether the use of modifier 25 met CMS 

requirements. 

Providers did not respond to requests for documentation. Despite repeated 

requests, providers failed to furnish the documentation required to 

support payment for the E/M services and associated procedures for 

3 percent (14/431) of the sampled claims. Therefore, Medicare should 

not have paid these claims because it is impossible to determine if the 

services were provided. 

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F I NDING S 

Some additional claims did not meet program 

requirements, although the unnecessary use of 

modifier 25 may not have resulted in improper 

payments 

The primary study objective was 

to determine the extent to which 

the use of modifier 25 meets 

Medicare program 

requirements. However, in 

developing the sample, OIG identified a large number of claims on 

which modifier 25 was used unnecessarily. While unnecessary use of 

modifier 25 does not always lead to improper payments, such use fails to 

meet program requirements. 

In 2002, Medicare allowed 9 percent of all claims (2.6 million) using 

modifier 25 in which the provider billed for only one service on a single 

day. Because modifier 25 is to be used only with an E/M service that 

the same provider furnished on the same day as a procedure, the use of 

modifier 25 was unnecessary. These 2.6 million claims, submitted by 

192,974 providers, were distributed among many specialty types and 

multiple carriers.11 

Twenty-eight percent of all providers in the sample population used 

modifier 25 on more than 50 percent of their claims, thus using it 

unnecessarily. Modifier 25 should only be used with the E/M service 

portion of a Medicare claim and not on the procedure portion of the 

claim. Therefore, even if used properly for every encounter a provider 

has with every beneficiary, modifier 25 should be used on no more than 

50 percent of services billed. Claims submitted for some providers 

included the modifier on every item billed to Medicare in 2002—both 

procedures and E/M services. 

Carrier oversight related to Carriers have many ways of 

modifier 25 is limited communicating information to 

providers regarding modifier 25. 

Carriers may communicate directly through e-mails or letters, conduct 

local provider education and training programs, publish newsletters, 

and conduct provider communication meetings. The majority of carriers 

reported using one or two of these channels. 

11 The number of providers was calculated by counting Unique Physician Identification 

Numbers listed on these claims. 

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F I NDING S 

Thirty-eight percent (9/24) of carriers reported that they have never 

conducted any review of modifier 25. These carriers indicated that the 

use of modifier 25 had not “risen to a level” to warrant inclusion in their 

medical review strategy, or that resource limitations prohibited them 

from doing so. 

The remaining 15 carriers reported having conducted some type of 

review for modifier 25 at least once since 1998. Twelve carriers found 

improper use, and 10 of these reported high error rates. For 

example, one carrier reported an error rate of 39 percent, while another 

reported a 44 percent error rate. Despite these results, carriers 

indicated to us that modifier 25 reviews are not a priority. 

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ΔFR IE NDING C O MMENDA S T I O N S RECOMME NDA TIONS 

In 2002, Medicare allowed $538 million in improper payments for 

services billed using modifier 25. At the time of the review, carrier 

oversight was limited despite evidence of problems with modifier 25. 

Without changes, future Medicare expenditures related to 

modifier 25 remain at risk. 

CMS should work with carriers to reduce the number of improper 

claims submitted using modifier 25. CMS may want to: 

o Reinforce the requirements that E/M services billed using 

modifier 25 be “significant, separately identifiable” and “above and 

beyond the usual preoperative and postoperative care associated 

with the procedure;” 

o In its outreach to providers, encourage carriers to emphasize that 

appropriate documentation of both E/M services and procedures 

must be maintained to support claims for payments using 

modifier 25 even though documentation is not required to be 

submitted with the claims; and 

o Emphasize that modifier 25 should only be used on claims for E/M 

services, and only when these services are provided on the same day 

as another procedure. 

CMS should also encourage carriers to reexamine their 

modifier 25 outreach activities and include modifier 25 reviews in their 

medical review strategies where appropriate. 

AGENCY COMMENTS 

CMS concurred with the OIG recommendations and indicated that it 

had recently made significant efforts to educate the provider community 

about the need for documentation to support services billed to the 

Medicare program. CMS noted that it will inform contractors of the 

OIG findings so they can take any appropriate actions. CMS will also 

modify the “Medical Claims Processing Manual” to clarify that 

appropriate documentation must be maintained to support claims for 

payments, even though providers are not required to submit the 

documentation with the claim. CMS indicated that it will explore the 

potential to place greater emphasis on modifier 25 outreach activities 

and include the modifier in contractor medical review strategies. 

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R E C O MMENDA T I ON 

CMS did note that the majority of improper payments reported 

stemmed from instances in which the provider failed to furnish the 

documentation necessary to determine the medical necessity of the 

service, rather than from uncertainty about the guidelines for using 

modifier 25. Nonetheless, CMS indicates it will explore options to 

reinforce or emphasize the requirements for using modifier 25. The full 

text of the agency’s comments can be found in the “Agency Comments” 

section of this report. 

OFFICE OF INSPECTOR GENERAL RESPONSE 

OIG appreciates CMS’s comments to the draft report and recognizes its 

efforts to educate the provider community and contractors regarding the 

need for documentation to support services billed to Medicare. 

However, OIG believes it is important to note that additional improper 

payments may have been made, and that without proper documentation 

OIG was unable to determine whether services were provided and the 

appropriateness of some payments. OIG made changes to the report in 

response to CMS’s technical comments. 

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Δ APPENDIX 

Stratification of Medical Review Sample Based on Claims Submitted Using 

Modifier 25 That Medicare Allowed in 2002 

Stratum Based on Volume of 

Claims and the Proportion of 

a Provider’s Allowed Claims 

Submitted Using Modifier 25 

Top 10 percent based 64,841 0.3% $4 million 1 on number of claims 

100 Percent 

Remaining 90 55,767 0.2% $3.6 million 2 percent 

Top 10 percent based 50 percent to 2.9 million 12% $168.2 million 3 on number of claims 

less than 

Remaining 90 100 percent 4.1 million 16.5% $262.7 million 4 percent 

20 percent to less than 8.8 million 35% $576.9 million 5 50 percent 

1 percent to less than 20 percent 8.9 million 36% $623.7 million 6 

Total 24.8 million 100% $1.6 billion 

Number of 

Claims in 

Sample 

Universe 

Percentage 

of Claims 

in Sample 

Universe 

Allowed 

Dollars for 

Claims in 

Sample 

Universe 

Stratum 

Source: OIG, stratification of 2002 Medicare modifier 25 claims, 2005. 

Note: All providers submitting fewer than 25 claims using modifier 25 and those whose proportion of 

modifier 25 use was less than 1 percent were excluded because they posed a low risk. 

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Δ AGENCY COMMENTS 

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A G E N C Y CO MMENT S

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A G E N C Y CO MMENT S

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Δ ACKNOWLEDGMENTS 

This report was prepared under the direction of Brian T. Pattison, 

Regional Inspector General for Evaluation and Inspections in the 

Kansas City regional office, and Gina C. Maree, Assistant Regional 

Inspector General. Other principal Office of Evaluation and Inspections 

staff who contributed include: 

Deborah Walden, Team Leader 

Michael P. Barrett, J.D., Program Analyst 

Steven Milas, Program Analyst 

Michala Walker, Program Analyst 

Stephanie London, Program Specialist 

Linda Frisch, Program Specialist 

Doris Jackson, Program Specialist 

Tricia Davis, Director, Medicare & Medicaid Branch 

Technical Assistance 

Barbara Tedesco, Mathematical Statistician 

Robert Gibbons, Program Analyst 

Scott Hutchison, Program Analyst 

Tara Bernabe, Program Analyst 

Nancy Molyneaux, Program Analyst 

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