Department of Health and Human Services


OFFICE OF 

INSPECTOR GENERAL 

USE OF MODIFIER 59 TO BYPASS


MEDICARE’S NATIONAL 


CORRECT CODING INITIATIVE 


EDITS 


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. 
Δ EXECUTIVE SUMMAR Y 

OBJECTIVE 

To determine (1) whether modifier 59 is being used inappropriately to 

bypass Medicare’s 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/. 

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used, a provider’s 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 CMS’s 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. 

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EXE CUTIVE S U MMAR 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 carrier’s 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 

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EXE CUTIVE S U MMAR 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 CMS’s comments can be found in the “Agency 

Comments” section of this report. 

OFFICE OF INSPECTOR GENERAL RESPONSE 

We appreciate CMS’s 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. 

 OE I-03-02-00 771 USE O F MO D I F IER 59 TO BY PA S S ME D I CARE ’ S C CI E D I TS iv 
Δ T ABLE OF CONTENTS 

EXECUTI VE SUMMARY ....................................... . i

INTRODUCTI ON ................................................ 1 

FINDI NGS ....................................................... 9 

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

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

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

RECOM M E NDATI O NS ......................................... 14 

APPENDI XES .................................................. 16 

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

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

AGENCY COMME NTS ......................................... 18 

ACKN O W LEDGMENTS ......................................... 20
Δ INTRODU C TION 

OBJECTIVE 

To determine (1) whether modifier 59 is being used inappropriately to 

bypass Medicare’s 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 Association’s “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 CMS’s 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. 

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INTROD UCT ION 

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 twodigit 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 Manual”7 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. 

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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 provider’s 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. 

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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. CMS’s 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. 

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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 CMS’s 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. 

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INTROD UCT ION 

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 CMS’s 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 

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INTROD UCT ION 

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/. 

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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 carrier’s 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 President’s Council on 

Integrity and Efficiency and the Executive Council on Integrity and 

Efficiency. 

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Δ 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 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 

Type of Error 

Projected 

Percentage 

of Code 

Pairs 

Allowed 

Amount 

(Millions) 

Services not distinct 15% $31 

Services not adequately documented 25% $28 

 - Primary, secondary, or both services not 

documented 

12% $161 

 - Different code should have been billed 7% N/A2

 - Documentation insufficient to make a 

determination 

5% $9 

 - 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. 

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F I NDING 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 

 OE I-03-02-00 771 

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. 

USE O F MO D I F IER 59 TO BY PA S S ME D I CARE ’ S C CI E D I TS 10 
F I NDING S 

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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F I NDING S 

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. 

Eleven percent of code pairs billed with modifier 

59 in FY 2003 were paid when the modifier was 

billed with the incorrect code 

The “Medicare Claims Processing 

Manual” states that modifier 59 

should be billed with the secondary, 

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 

 OE I-03-02-00 771 USE O F MO D I F IER 59 TO BY PA S S ME D I CARE ’ S C CI E D I TS 12 
F I NDING S 

percent for code pairs billed with modifier 59 when modifier 59 was 

billed with the primary code only. 

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. 

Two carriers had conducted 

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 

carrier’s 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. 

OE I-03-02-00 771 USE O F MO D I F IER 59 TO BY PA S S ME D I CARE ’ S C CI E D I TS 13 
Δ RECOMME NDA TIONS 

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: 

 OE I-03-02-00 771 USE O F MO D I F IER 59 TO BY PA S S ME D I CARE ’ S C CI E D I TS 14 
R E C O MMENDA T I O N S 

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 CMS’s comments can be found in the “Agency 

Comments” section of this report. 

OFFICE OF INSPECTOR GENERAL RESPONSE 

We appreciate CMS’s 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. 

OE I-03-02-00 771 USE O F MO D I F IER 59 TO BY PA S S ME D I CARE ’ S C CI E D I TS 15 
Δ APPENDIX ~ A 

Description of Stratified Sample 

Strata Description of Code Pairs 

Population 

of Code 

Pairs 

Medicare 

Allowance for 

Secondary 

Code 

Sample 

size 

1- High 

frequency code 

pairs 

17000/11100 Destroy benign, premalignant lesion/ Biopsy of skin lesion 1,214,267 $ 65,981,193 75 

96410/90780 Chemotherapy infusion method/ IV infusion therapy, 1 hr 

97140/97530 Manual therapy/ Therapeutic activities 

96408/90780 Chemotherapy, push technique/ IV infusion therapy, 1 hr 

2- High 

frequencydebridement 

services 

11055-56/ 

11720-21 

Trim skin lesion-Trim skin lesions, 2 to 4/ 

Debride nail, 1 to 5-Debride nail, 6 or more 

623,654 $ 21,373,167 50 

11719/11720 Trim nail(s)/ Debride nail, 1 to 5 

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 

error rate and 

high frequency 

code pairs 

88108/88104 Cytopathology, concentrate tech/ Cytopathology, fluids 74,942 $4,554,038 40 

38221/38220 Bone marrow biopsy/ Bone marrow aspiration 

4- Potential high 

error rate and 

low frequency 

code pairs 

Any combinations of the following codes: pathology codes: 88104-88112 

(excluding 88108/88104), 88160-88162, 88173, 88174, 88180, 88271-

88275, 88300-88365; urinary codes: 52000-52640; eye surgery codes: 

65400-67228; extremity surgery codes: 23930-26952 

41,741 $ 5,327,770 35 

5- High 

secondary code 

dollar amount 

Allowance for secondary code was greater than or equal to $200 

(excluding code pairs in strata 3 and strata 4) 

106,482 $ 39,225,417 50 

6- Remaining 

code pairs 

All other code pairs not in strata 1 through 5 1,365,551 $ 90,644,881 100 

Total 3,426,637 $227,106,466 350 

Source: Office of Inspector General sample of FY 2003 CCI code pairs billed with modifier 59. 

 OE I-03-02-00 771 USE O F MO D I F IER 59 TO BY PA S S ME D I CARE ’ S C CI E D I TS 16 
Δ APPENDIX ~ B 

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 

Total services that did not meet program 

40.22% 34.12% - 46.32% 

requirements 

$58,907,886 $47,210,537 - $70,605,236 

Services that were not distinct 

14.79% 10.42% - 19.16% 

$30,616,030 $21,456,650 - $39,775,409 

Services that were not adequately 

25.43% 20.04% - 30.82% 

documented 

$28,291,857 $19,466,497 - $37,117,217 

Services where the primary, secondary, or 

11.96% 7.94% - 15.98% 

both services were not documented 

$16,368,134 $9,589,143 - $23,147,125 

Services where a different code should have 

been billed 

7.42% 4.28% - 10.56% 

Services where the documentation was 

insufficient to make a determination1 

4.67% 1.98% - 7.36% 

$8,580,251 $3,688,575 - $13,471,928 

Services where the documentation was not 

provided1 

1.38% 0% - 2.77% 

$3,343,472 $0 - $7,089,485 

Services represented by five code pair 53.36% 38.70% - 68.02% 

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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Δ AGENCY COMMENTS 

 OE I-03-02-00 771 USE O F MO D I F IER 59 TO BY PA S S ME D I CARE ’ S C CI E D I TS 18 
A G E N C Y CO MMENT S

 OE I-03-02-00 771 USE O F MO D I F IER 59 TO BY PA S S ME D I CARE ’ S C CI E D I TS 19 
Δ ACKNOWLEDGMENTS 

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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