Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

INCONSISTENCIES IN STATE 

IMPLEMENTATION OF 

CORRECT CODING EDITS 

MAY ALLOW IMPROPER 

MEDICAID PAYMENTS

Suzanne Murrin

Deputy Inspector General for 

Evaluation and Inspections

April 2016

OEI-09-14-00440
 

EXECUTIVE SUMMARY: INCONSISTENCIES IN STATE IMPLEMENTATION 

OF CORRECT CODING EDITS MAY ALLOW IMPROPER MEDICAID 

PAYMENTS 

OEI-09-14-00440 

WHY WE DID THIS STUDY 

Improper payments to healthcare providers constitute a significant vulnerability for 

Medicaid, costing an estimated $17.5 billion in fiscal year 2014. Automated claims 

processing safeguards called “edits” are critical program integrity tools that are available 

to State Medicaid agencies to prevent these improper payments. The Affordable Care Act 

required all States to implement the Medicaid National Correct Coding Initiative (NCCI) 

edits by October 1, 2010. The NCCI edits are designed to encourage providers to code 

correctly by automatically denying fee-for-service Medicaid payments for services that 

do not meet basic medical or billing standards.

HOW WE DID THIS STUDY 

We used three data sources in our review. We surveyed all States about their progress 

and experiences implementing the NCCI edits. We asked all States to process a set of 

test claims to “spot check” their use of selected NCCI edits. We received their test 

claims results and survey responses in November 2014. We reviewed the cost savings 

estimates from the NCCI edits that States submitted to the Centers for Medicare & 

Medicaid Services (CMS) covering the period from January 2012 to August 2015. 

WHAT WE FOUND 

The effectiveness of the Medicaid NCCI edits was limited because some States had not 

fully implemented them and most did not use all of the edits correctly. States’ 

inconsistent implementation and use of the edits may reduce their ability to promote 

correct coding by providers and prevent improper Medicaid payments. Additionally, 

States’ lack of reporting of cost savings estimates, and the limitations of the estimates 

that were reported, inhibit CMS’s ability to meaningfully estimate national NCCI cost 

savings. Despite these weaknesses, nearly all States reported that using the NCCI edits 

benefitted their Medicaid programs, and some voluntarily used the edits on claims paid 

under managed care. 

WHAT WE RECOMMEND 

We recommend that CMS (1) take appropriate action to ensure that States fully 

implement the NCCI edits, (2) provide technical assistance to States to ensure that they 

use the NCCI edits correctly, (3) issue guidance to States on how to estimate NCCI cost 

savings and take steps to ensure that States report as required, and (4) examine whether 

using the NCCI edits on claims paid under managed care is beneficial, and if so, take 

appropriate action. CMS concurred with all four recommendations. 
 

TABLE OF CONTENTS

Objectives ....................................................................................................1

Background..................................................................................................1

Methodology................................................................................................5

Findings........................................................................................................9

Ten States had not implemented all required NCCI edits................9

Most States did not use all of the NCCI edits correctly.................11

Most States did not report NCCI cost savings to CMS as 

required, and the estimates that were reported had limited 

value...............................................................................................13

Eleven States voluntarily used NCCI edits on claims paid 

under managed care .......................................................................14

Conclusion and Recommendations............................................................16

Agency Comments and OIG Response......................................................18

Appendixes ................................................................................................19

A: Detailed Test Claims Methodology..........................................19

B: Test Claims and Expected Results ...........................................21

C: States That Reported Not Implementing Edits From All 

Six NCCI Edit Categories..............................................................24

D: States’ Test Claim Results........................................................25

E: State Reporting on Adherence to Selected NCCI 

Program Requirements...................................................................26

F: Number of Quarterly Cost Savings Estimates States 

Submitted to CMS, by Year ...........................................................27

G: States That Reported Using NCCI Edits on Managed 

Care Claims....................................................................................28

H: Agency Comments...................................................................29

Acknowledgments......................................................................................31
 

Inconsistencies in State Implementation of Correct Coding Edits May Allow Improper Medicaid Payments 1 

(OEI-09-14-00440) 

OBJECTIVES

1. To determine the extent to which States have implemented the required 

Medicaid National Correct Coding Initiative (NCCI) edits.

2. To determine the extent to which States used the NCCI edits consistent 

with NCCI program requirements.

3. To examine the extent to which States reported NCCI cost savings 

estimates to the Centers for Medicare & Medicaid Services (CMS), as 

required, and to assess the quality of the reported data. 

4. To determine whether States voluntarily used the NCCI edits on 

Medicaid claims paid under managed care.

BACKGROUND

Edits are automated claims processing safeguards that are available to 

State Medicaid agencies to help ensure program integrity.1 According to 

CMS, edits that are not implemented or working properly are a primary 

cause of improper payments.2 Improper payments to healthcare providers 

constitute a significant vulnerability for Medicaid, costing a projected 

$17.5 billion in fiscal year 2014.3

The Affordable Care Act required all States to implement the Medicaid 

NCCI edits by October 1, 2010.4 The NCCI edits automatically deny 

payment for services that do not meet basic medical or billing standards.5 

The NCCI edits are designed to encourage providers to use the correct 

medical billing codes that accurately reflect the services provided to a 

patient. These codes determine how much Medicaid pays to providers for 

each service. The NCCI edits have been an effective program integrity 

tool in the Medicare program. Since their implementation in Medicare in 

1

 CMS, Comprehensive Medicaid Integrity Plan Fiscal Years 2014-2018, p. 15. 

2

 Ibid. 

3

 CMS, Medicaid and CHIP 2014 Improper Payments Reports, p. 3. 

4

 The Patient Protection and Affordable Care Act, P.L. 111-148, § 6507 (March 23, 

2010), as amended by the Health Care Reconciliation Act of 2010, 

P.L. 111-152 (March 30, 2010), collectively known as the Affordable Care Act. 

5

 CMS, National Correct Coding Initiative Policy Manual for Medicaid Services,

Introduction p. 3, January 1, 2014. 
 

Inconsistencies in State Implementation of Correct Coding Edits May Allow Improper Medicaid Payments 2 

(OEI-09-14-00440) 

1996, the NCCI edits have saved over $7.5 billion dollars in program 

expenditures through 2013.6

Medicaid NCCI Edits

The NCCI edits are payment rules programmed into States’ claims 

processing systems to automatically deny payment for ineligible and 

incorrectly coded services on Medicaid fee-for-service claims. For 

example, an NCCI edit would deny payment to a provider who bills 

Medicaid for more than one appendectomy on the same patient. When an 

NCCI edit denies payment for a service, providers may correct the coding 

for the service and rebill the Medicaid program, if appropriate. Ideally, 

over time, providers whose payments are denied because they are 

inconsistent with NCCI edits will code future claims correctly. The NCCI 

edits are based on, among other things, standard medical practice and 

coding conventions.7

 The NCCI edits apply only to services that are 

performed by the same provider, for the same beneficiary, on the same 

date of service. 

There are two types of NCCI edits: (1) medically unlikely edits and 

(2) procedure-to-procedure edits. Each of the two edit types is used on 

claims from three types of services. Collectively, these comprise the six 

NCCI edit categories, as shown in Figure 1. In total, there are 

approximately 1.3 million NCCI edits, most of which are 

procedure-to-procedure edits. States may use the NCCI edits on claims 

paid under managed care, although it is not required.8

6

 U.S. Department of Health and Human Services, Report to Congress on the 

Implementation of the National Correct Coding Initiative in the Medicaid Program, p. 3, 

March 1, 2011. Testimony of Shantanu Agrawal, CMS Deputy Administrator and 

Director on CMS Efforts to Reduce Improper Payments in the Medicare Program before 

the Committee on Oversight & Government Reform, Subcommittee on Energy Policy, 

Health Care & Entitlements, United States House of Representatives, May 20, 2014. 

7

 CMS, State Medicaid Director Letter, National Correct Coding Initiative. SMDL 

#10-017, September 1, 2010. 

8

 Managed care covers nearly three-quarters of Medicaid enrollees. CMS, Center for 

Medicaid and CHIP Services Technical Guidance on State Implementation of the 

Medicaid National Correct Coding Initiative Methodologies, p. 7, October 10, 2014. 

CMS, Medicaid Managed Care Enrollment Report: Summary Statistics as of July 1, 

2013. Accessed at http://www.medicaid.gov on January 26, 2016. 
 

Inconsistencies in State Implementation of Correct Coding Edits May Allow Improper Medicaid Payments 3 

(OEI-09-14-00440) 

 Figure 1: Six Medicaid NCCI Edit Categories

Medically Unlikely Edits

 1. Practitioner Medically Unlikely Edits

 2. Outpatient Medically Unlikely Edits

 3. Durable Medical Equipment Medically Unlikely Edits

Procedure-to-Procedure Edits

 4. Practitioner Procedure-to-Procedure Edits

 5. Outpatient Procedure-to-Procedure Edits 

 6. Durable Medical Equipment Procedure-to-Procedure Edits

Source: CMS, Medicaid NCCI Edit Design Manual, 2014. 

Medically unlikely edits. Medically unlikely edits prevent payment for an 

inappropriate number of the same service for the same beneficiary on a 

single day. CMS defines the “medically unlikely value” for a service as

the “maximum units of service reportable” under most circumstances, 

based on standard medical practice.9 If a provider bills for more units of 

service than the medically unlikely value, payment for all units of service 

should be denied. According to CMS, denying payment for all units of 

service incentivizes providers to code correctly, because the provider must 

rebill for the correct number of services to receive any payment.10 For 

example, because an individual has only one gallbladder, the medically 

unlikely value for a gallbladder removal surgery is one. If a provider bills 

for two gallbladder removal surgeries for a patient on the same day, the 

medically unlikely edit should deny payment for both surgeries. The 

provider may then rebill for a single gallbladder removal surgery, if 

appropriate. 

Under certain circumstances, a provider may bill for multiple services 

provided to a beneficiary over a period of time (date span) without 

specifying the specific day that each service was provided. In these 

instances, the average units of service provided per day must not exceed 

the medically unlikely value for that service. For example, hospital 

patients may receive physical therapy treatment in a whirlpool once per 

day. However, hospitals may bill for more than one whirlpool treatment 

over the date span of the patient’s stay as long as the average number of 

whirlpool treatments per day rounds to one or less. 

9

 CMS, National Correct Coding Initiative Policy Manual for Medicaid Services, Chapter 

I p. I-6, January 1, 2014. 

10 CMS, Fact Sheet: Updates on the Medicaid National Correct Coding Initiative 

Methodologies, p. 4-5. Accessed at http://www.medicaid.gov on August 12, 2015. 
 

Inconsistencies in State Implementation of Correct Coding Edits May Allow Improper Medicaid Payments 4 

(OEI-09-14-00440) 

Procedure-to-procedure edits. Procedure-to-procedure edits prevent 

payment for pairs of services that providers should not bill together on the 

same day (edit pair). If a provider bills for both services in a 

procedure-to-procedure edit pair for the same beneficiary on the same day, 

the edit specifies which service should be paid and should automatically 

deny payment for the other service. For example, a cardiac stress test 

includes multiple electrocardiograms, so a provider should not bill for an 

electrocardiogram in addition to the cardiac stress test. In this example, 

the procedure-to-procedure edit should allow payment for the cardiac 

stress test and deny payment for any separately billed electrocardiograms.

Under limited circumstances, providers may bill for both services in a 

procedure-to-procedure edit pair, though they would have to include one 

or more modifiers on the claim to receive payment. A modifier is a 

two-digit code that further describes the service(s) performed, and that 

may allow the claim to bypass an NCCI edit. For example, an NCCI edit 

would not allow providers to bill for two separate surgeries on one 

shoulder for a single beneficiary on the same day. However, if two 

surgeries were performed, one on each shoulder, providers may add 

modifiers to the claim that would allow it to bypass the NCCI edit.11

Medicaid NCCI Program Requirements 

The Affordable Care Act required all States to implement the NCCI edits 

into their Medicaid claims processing systems.12 Through technical 

guidance to States, CMS specifies how States must use the NCCI edits. 

NCCI program requirements include: 

Correct order to use NCCI edits during claims processing. NCCI edits 

must be applied to Medicaid claims first, before applying any 

State-specific edits (State edits).13 Although CMS allows States to use 

additional edits, applying the NCCI edits first can help promote coding 

consistency across Medicaid providers nationwide. 

Correct quarterly edit file for use by States. CMS posts updated edit files 

for each of the six NCCI edit categories every quarter. The files are 

posted on the Medicaid Integrity Institute’s secure Web site for States to 

download. States must download and use these files, rather than a similar 

11 Modifiers should only be used to bypass NCCI edits if documentation in the medical 

record supports the use of the modifier. CMS, National Correct Coding Initiative Policy 

Manual for Medicaid Services, Chapter I p. I-23, January 1, 2014. 

12 Affordable Care Act § 6507. 

13 States may use screening edits—such as those that check for Medicaid eligibility or 

missing information—before the NCCI edits. Center for Medicaid and CHIP Services 

Technical Guidance on State Implementation of the Medicaid National Correct Coding 

Initiative Methodologies, p. 16, October 10, 2014. 
 

Inconsistencies in State Implementation of Correct Coding Edits May Allow Improper Medicaid Payments 5 

(OEI-09-14-00440) 

but less exhaustive “public-use” file that CMS publishes on its general 

Web site to inform providers of the NCCI edits.14

Correct timing for updating NCCI edits. CMS posts the updated edit files 

approximately 15 days prior to the start of each calendar quarter. States 

must use the updated set of edits beginning on the first day of the new 

calendar quarter.15

Cost savings estimates. CMS requires States to track estimated cost 

savings from the NCCI edits and report the estimates to CMS each 

quarter.16 A CMS official indicated that CMS uses the States’ reported 

cost savings data to estimate the national savings from the NCCI edits. 

CMS reports the estimated national savings to Congress as part of its 

annual Health Care Fraud and Abuse Control report, which describes 

Federal and State law enforcement and program integrity activities 

targeting health care fraud and abuse. Although CMS has provided States 

with a template for reporting cost estimates, it has not issued any guidance 

on how to estimate cost savings from the NCCI edits. 

Related Work

This report extends the Office of Inspector General’s (OIG’s) examination 

of the role of program integrity tools, such as edits, in preventing improper 

payments and protecting the integrity of healthcare programs. For 

example, in 2003, OIG found that the Medicare NCCI edits were effective 

in preventing improper payments.17 Further, in 2013, an OIG audit found 

that Georgia could have prevented $1.5 million in improper payments 

from November 1, 2010 to September 30, 2011, if it had used the 

Medicaid NCCI edits in a manner consistent with the program 

requirements.18

This report is the first national review of the Medicaid NCCI program.

METHODOLOGY

Data Collection 

In November 2014, we surveyed all 50 States and the District of Columbia 

(hereinafter referred to as States) about their progress and experiences 

14 Ibid., p. 11. 

15 Ibid., pg. 12. 

16 Ibid., pg. 3. 

17 OIG, Medicare’s National Correct Coding Initiative, OEI-03-02-00770, 

September 2003. 

18 OIG, Georgia Did Not Pay Some Line Items on Medicaid Claims in Accordance With 

Its Medicaid National Correct Coding Initiative Methodologies, A-04-12-06159, 

December 2013.
 

Inconsistencies in State Implementation of Correct Coding Edits May Allow Improper Medicaid Payments 6 

(OEI-09-14-00440) 

implementing and using the NCCI edits, and received survey responses 

from all States. We also asked each State to process 34 test claims through 

its Medicaid claims processing system to “spot check” its use of 

34 selected NCCI edits during the period from November 1 to 15, 2014.19 

Although our test claims results are not projectable, this methodology 

allowed us to examine States’ use of edits and provided indicators of 

whether States were using the edits correctly. All but one State submitted 

test claims results.20 We followed up with States as needed to request 

clarification of their survey responses and test claims results. Finally, we 

requested from CMS the cost savings estimates that States submitted 

covering the period from January 2012 to August 2015.21 

Data Analysis

States’ implementation of the NCCI edits. To determine the extent to 

which States had implemented the edits in the six required NCCI edit 

categories, we analyzed States’ survey responses and test claims results. 

We counted a State as having implemented or not implemented the edits 

from each NCCI edit category according to their responses on the survey, 

unless the test claims results conflicted with those responses. When we 

identified conflicts between survey responses and test claims results, we 

followed up with the State to clarify whether they had implemented the 

edits. Because all of the NCCI edits for a given edit category are 

contained in a single file, we considered a State to have implemented all 

edits in a category if it reported that it used the category’s edit file and if 

the test claims results matched the States’ report. We also analyzed States’ 

responses regarding whether the edits had benefitted their Medicaid 

programs.

States’ use of the NCCI edits. To determine the extent to which States 

used the NCCI edits correctly, we analyzed States’ survey responses and 

test claims results. We analyzed States’ survey responses to determine 

whether States reported practices that were consistent with selected NCCI 

19 See Appendix A for a detailed description of our test claims methodology, including 

why we chose the 34 selected NCCI edits. See Appendix B for a list of the test claims 

and expected outcomes. 

20 Utah officials reported that they tried to run our test claims through their claims 

processing system’s test environment, but were unable to process them because of system 

limitations. Therefore, we excluded Utah from our test claims analysis. 

21 CMS required States to estimate and report NCCI cost savings beginning in 2011. 

However, States were allowed to deactivate any NCCI edits until April 2011 and 

according to CMS, many States had difficulty meeting the implementation deadline. 

Because of this, we examined States’ cost savings reporting beginning with the first 

quarter of 2012. U.S. Department of Health and Human Services, Report to Congress on 

the Implementation of the National Correct Coding Initiative in the Medicaid Program, 

p.1, March 1, 2011. 
 

Inconsistencies in State Implementation of Correct Coding Edits May Allow Improper Medicaid Payments 7 

(OEI-09-14-00440) 

program requirements on the use of medically unlikely edits (with and 

without date spans) and on the use of procedure-to-procedure edits (with 

and without modifiers). If a State reported one or more practices that were 

inconsistent with these requirements, we counted them among the States 

that did not always correctly use the applicable edits.

We also compared States’ test claims results to the expected results, based 

on NCCI program requirements. We used the test claims to assess the 

implementation and use of 14 medically unlikely edits and 20 procedure to 

procedure edits. We coded each test claim result as correctly processed, 

incorrectly processed, or not tested.22 Because the NCCI edits are 

implemented as part of a large edit category data file and then automated, 

a single incorrectly processed test claim may indicate that a State is

misusing other, similar edits. Therefore, if a State incorrectly processed 

one or more medically unlikely or procedure-to-procedure test claims, we 

counted it among the States that did not always correctly use the 

applicable edits.

Order of edits and updating the edit files. We analyzed States’ survey 

responses to determine whether they used NCCI edits prior to any State 

edits, as required, and to determine whether they updated the NCCI edit 

files correctly. 

States’ cost savings estimates. To determine the extent to which States 

reported NCCI cost savings estimates to CMS as required, we analyzed 

the cost savings reports that States submitted to CMS. To assess the cost 

savings estimates that were reported, we analyzed the States’ survey 

responses describing how they estimated NCCI cost savings.

States’ use of NCCI edits on claims paid under managed care. To examine 

whether States voluntarily used the NCCI edits on Medicaid claims paid 

under managed care, we analyzed States’ survey responses. We asked 

those States that did use the NCCI edits on managed care claims why they 

decided to do so and whether they had experienced any challenges. 

Limitations

We did not directly verify States’ survey responses or test claims results. 

Instead, we relied on the documentation that they submitted and 

follow-up correspondence, as needed. Any changes that States may have 

made to their implementation or use of the NCCI edits subsequent to our 

November 2014 data collection are not reflected in this report. 

22 In some States, certain test claims could not test the intended NCCI edit for one of 

several reasons, such as claims for services that some State Medicaid agencies did not 

cover. 
 

Inconsistencies in State Implementation of Correct Coding Edits May Allow Improper Medicaid Payments 8 

(OEI-09-14-00440) 

Our test claims results are limited in scope and completeness. We directly 

tested States’ use of only 34 edits out of more than 1.3 million NCCI edits, 

because testing all NCCI edits was not feasible. Our test claims results 

cannot be projected to the population of NCCI edits. Additionally, we 

could not test all 34 edits in some States because of limitations in the 

States’ claims processing system or other factors. Appendix A provides a 

detailed description of our test claims methodology, including reasons that 

some edits were not tested. 

Standards

This study was conducted in accordance with the Quality Standards for 

Inspection and Evaluation issued by the Council of the Inspectors General 

on Integrity and Efficiency.
 

Inconsistencies in State Implementation of Correct Coding Edits May Allow Improper Medicaid Payments 9 

(OEI-09-14-00440) 

FINDINGS

Ten States had not implemented all required NCCI 

edits

More than 4 years after CMS required States to implement the NCCI edits, 

10 States reported that they still had not implemented the edits from all 

6 required NCCI edit categories. Of these, two States had not 

implemented any NCCI edits and eight States had implemented the edits 

from only some of the edit categories. Combined, these 10 States 

accounted for nearly 20 percent of national Medicaid spending in 2014.

23

 

For a full list of the 10 States and the edit categories that they did not 

implement, see Appendix C. Figure 2 shows the proportion of States that 

had implemented the edits from all, some, and none of the NCCI edit 

categories. The remaining 41 States reported that they had implemented 

the edits from all 6 NCCI edit categories, and the test claims from 40 of 

these States generally supported that they had implemented the edits.24 

Officials from 48 States reported that implementing the NCCI edits had 

benefitted their Medicaid programs by promoting correct coding by 

providers and/or preventing improper payments. 

Figure 2: Implementation of Required NCCI Edit 

Categories Across State Medicaid Programs 

 Source: OIG analysis of States’ survey responses and correspondence, 2015.

23 In 2014, national Medicaid spending totaled $476 billion. Kaiser Family Foundation, 

State Health Facts: Total Medicaid Spending. Accessed at http://kff.org/medicaid/stateindicator/total-medicaid-spending/ on August 12, 2015. 

24 Utah officials reported that they tried to run our test claims through their claims 

processing system’s test environment, but were unable to process them because of system 

limitations. Therefore, although Utah reported implementing the edits from all NCCI edit 

categories, it was unable to submit test claims results supporting implementation. 

41

8

2

Implemented All Edit Categories

Implemented Some, But Not All, Edit Categories

Implemented No Edit Categories
 

Inconsistencies in State Implementation of Correct Coding Edits May Allow Improper Medicaid Payments 10

(OEI-09-14-00440) 

Two States had not correctly implemented any of the NCCI 

edits

Oklahoma had not implemented any of the NCCI edits into its Medicaid 

claims processing system. Oklahoma Medicaid officials reported that the 

Medicaid agency chose not to implement the edits because the State’s

claims processing system had some State edits that were “similar to the 

NCCI edits.” However, States are required to implement the NCCI edits,

even if they use State edits. Moreover, Oklahoma’s test claims results 

showed that its State edits did not deny payment for all services that would 

have been denied by the NCCI edits.

Illinois had not implemented any of the NCCI edits in a manner consistent 

with NCCI program requirements. Although Illinois reported 

implementing the edits from four of the six NCCI edit categories, it did 

not implement any of the edits so as to automatically deny payments for 

improperly coded services without staff intervention.25 Illinois officials 

reported that instead, they implemented the NCCI edits as “manual 

review” edits, which send each flagged claim to a staff member for review. 

For example, if a provider billed for two gallbladder removal surgeries for 

the same beneficiary, Illinois’s claims processing system would flag that 

claim and send it to a staff member for manual review instead of 

automatically denying payment for the services. CMS officials indicated 

that Illinois’s method of manually reviewing all claims flagged by NCCI 

edits did not constitute implementation of the edits. Because Illinois did 

not implement the NCCI edits as automated edits, we were unable to 

determine from their test claims results whether they would have correctly 

processed any of the test claims.

Eight States had implemented only some of the NCCI edits 

Eight States had implemented edits from between two and five of the six 

NCCI edit categories.26 Officials from the eight States reported various 

reasons for not implementing all edits; among them, system and resource 

constraints, competing priorities, and State policies. Of the eight States, 

North Carolina, New Mexico, and Ohio reported that they were in the 

process of implementing all the edits that they had not yet implemented. 

25 CMS requires States to implement the NCCI edits to automatically deny payment for 

improperly coded services. CMS, Center for Medicaid and CHIP Services Technical 

Guidance on State Implementation of the Medicaid National Correct Coding Initiative 

Methodologies, p. 16-17, October 10, 2014. 

26 The eight States that reported they had implemented some, but not all six, of the 

required NCCI edit categories were Delaware, Louisiana, Maine, Missouri, New Jersey, 

New Mexico, North Carolina, and Ohio. 
 

Inconsistencies in State Implementation of Correct Coding Edits May Allow Improper Medicaid Payments 11

(OEI-09-14-00440) 

Louisiana reported that it was in the process of implementing the edits 

from one of the four edit categories that it had not yet implemented. The 

remaining four States did not indicate whether they were planning to 

implement their unimplemented edits. States that did not implement all 

required NCCI edits may have been improperly paying for Medicaid 

services that should have been denied by NCCI edits. For example, 

among the eight States that did not implement all required NCCI edits, the 

test claims results from six of the States showed that they would have paid 

for some services that should have been denied by NCCI edits that they 

did not implement. 

Most States did not use all of the NCCI edits correctly

Of the 49 States that implemented the NCCI edits into their claims 

processing systems, 47 did not use all of the NCCI edits correctly. These 

States reported practices that were inconsistent with the NCCI program 

requirements and/or incorrectly processed one or more test claims.27 Only 

two States – Indiana and Montana – reported following all of the NCCI 

program requirements that we reviewed and demonstrated correct use of 

the NCCI edits by correctly processing all applicable test claims. States 

that do not use all of the NCCI edits correctly may be improperly 

processing Medicaid claims—including paying for services that should be 

denied or denying payment for services that should be paid. Figure 

3 describes the ways in which States incorrectly used the NCCI edits and 

the number of States in each category. 

Figure 3: States’ Incorrect Use of NCCI Edits

Description Number of States

Did not use all medically unlikely edits correctly 35

Did not use all procedure-to-procedure edits correctly 29

Did not use the edits in the required order 18

Did not update the edits as required 13

Incorrectly used NCCI edits in at least one way 47*

Source: OIG analysis of States’ survey responses and test claims results, 2015.

*Column sums to more than 47 States because many States incorrectly used the NCCI edits 

in more than one way. 

27 See Appendix D for a full list of States’ test claims results. See Appendix E for a full 

list of States’ reporting on adherence to selected NCCI program requirements.
 

Inconsistencies in State Implementation of Correct Coding Edits May Allow Improper Medicaid Payments 12

(OEI-09-14-00440) 

Incorrect use of medically unlikely edits 

Thirty-five States did not use all of the medically unlikely edits in a 

manner consistent with NCCI program requirements. We found two main 

problems associated with States’ use of medically unlikely edits: 

1) not denying payment for all units of service on claims that trigger 

medically unlikely edits and 2) not correctly using medically unlikely edits 

on claims with date spans. The first problem arose when States did not 

program the medically unlikely edits in their claims processing systems to 

deny payment for all units of service, as required. Instead, these States 

programmed the medically unlikely edits to deny payment for only those 

units of service above the medically unlikely value. Some of these States 

reported that they were aware that their use of the medically unlikely edits 

did not align with NCCI program requirements, but reported that they used 

the edits in this way to avoid having providers rebill the Medicaid program 

for denied services. However, CMS believes that denying payment for all 

units of service incentivizes providers to correctly code future claims.28

The second problem arose when States did not program their claims 

processing systems to divide the units of service on the claim by the 

number of days in the date span before using the medically unlikely edits. 

Instead, many States denied payment for the service if the units of service 

exceeded the medically unlikely value without adjusting for the date span, 

possibly denying payment for eligible services.

Incorrect use of procedure-to-procedure edits 

Twenty-nine States did not use all of the procedure-to-procedure edits in a 

manner consistent with NCCI program requirements. The main problem 

with States’ use of procedure-to-procedure edits involved not following 

NCCI program requirements for using modifiers. This included paying 

for services that should be denied and denying payment for services that

should be paid. State officials reported various reasons for misusing edits 

on claims with modifiers; among them, misunderstanding program 

guidance about when modifiers should allow claims to bypass NCCI edits 

and allowing some, but not all, modifiers to bypass NCCI edits. 

Incorrect order of NCCI and State edits 

Eighteen States did not use the NCCI edits on claims before using State 

edits, as required. When State edits are used before NCCI edits, they may 

“alter” the claim by denying payment for one or more services. These 

changes could cause claims to bypass NCCI edits when they should not. 

28 CMS, Fact Sheet: Updates on the Medicaid National Correct Coding Initiative 

Methodologies, p. 4-5. Accessed at http://www.medicaid.gov on August 12, 2015. 
 

Inconsistencies in State Implementation of Correct Coding Edits May Allow Improper Medicaid Payments 13

(OEI-09-14-00440) 

Incorrect updating of NCCI edits 

Thirteen States did not comply with NCCI program requirements for 

updating the NCCI edits. Five of the thirteen States reported that they did 

not download the Medicaid NCCI files from the Medicaid Integrity 

Institute Web site, as required. Instead, they downloaded and 

implemented the less comprehensive public NCCI edit files available for 

provider education on the Medicaid.gov Web site. Five other States 

reported that State officials did not download the NCCI edit files 

themselves, as required. Instead, claims processing contractors 

downloaded and implemented the NCCI edit files independently. 

According to CMS, only States should have access to the files on the 

Medicaid Integrity Institute Web site.

The remaining three States reported that they did not download and begin 

using the quarterly edit files on the first day of each calendar quarter, as 

required. Rhode Island reported that it did not implement any quarterly 

edit files, and gave no explanation. Maryland reported that it implemented

the quarterly edit files, but took 4-6 months to implement them, and 

Missouri reported that it updated the edit files once per year. Officials 

from Maryland and Missouri attributed the delays to resource constraints. 

Most States did not report NCCI cost savings to CMS 

as required, and the estimates that were reported had 

limited value 

As of August 2015, 48 States had not reported NCCI cost savings 

estimates to CMS every quarter, as required. Of these States, 23 had 

reported cost savings estimates for some, but not all, quarters and 25 had 

never reported cost savings estimates. Some State officials explained that 

they had technical challenges or were unaware of the reporting 

requirement. Only one State – Mississippi – consistently reported their 

quarterly cost savings estimates to CMS. See Appendix F for a full list of 

States and the number of cost savings reports they submitted to CMS. 

According to our review, States’ reported cost savings estimates had 

limited value in terms of measuring actual cost savings from the NCCI 

edits. See Figure 5 for an illustration of these limitations. Estimating 

NCCI cost savings is difficult because the NCCI edits deny services 

before the final payment amount is determined.29 Because of this, States 

estimate cost savings in different ways. Some States reported measuring 

29 Claims processing systems use an algorithm at the end of claims processing to 

determine how much a State Medicaid agency will pay for approved Medicaid services. 

This is referred to as the paid amount. NCCI edits deny services before the paid amount 

is calculated. 
 

Inconsistencies in State Implementation of Correct Coding Edits May Allow Improper Medicaid Payments 14

(OEI-09-14-00440) 

cost savings using the amount billed by the provider. This approach may 

overestimate cost savings because the amount that Medicaid pays for a 

service is typically less than the amount billed by the provider. 

Differences in estimation methodologies may be one reason that States 

reported a wide range of cost savings. For example, in the first two 

quarters of 2015, States’ individual estimates of cost savings ranged from

as little as $55,000 to as much as $127 million per quarter. States’ lack of 

reporting, and the limitations of the cost savings estimates that were 

reported, inhibit CMS’s ability to develop a meaningful estimate of 

national NCCI cost savings to report to Congress. 

Figure 5: Summary of NCCI Cost Savings Data Limitations and Impact

NCCI Cost Savings Data Limitation Impact

NCCI edits deny services before the 

payment amount is determined

Unable to determine cost savings from the 

denied service

States estimate cost savings in different 

ways

Cannot compare savings across States or 

calculate a national total

Some States measure savings using the 

amount billed by the provider

Savings may be overestimated, because 

billed amounts typically exceed what 

Medicaid pays

Source: OIG analysis of States’ cost savings reports and survey responses, 2015. 

Eleven States voluntarily used NCCI edits on claims 

paid under managed care 

Although managed care covers nearly three-quarters of Medicaid 

enrollees, CMS generally does not require States to use NCCI edits on 

claims paid under managed care.30 However, 11 States chose to use NCCI 

edits on managed care claims (see Appendix G for a list of these States). 

Among the 11 States, many reported that they decided to use the NCCI 

edits on managed care claims to ensure correct coding and to make their 

claims processing consistent across their Medicaid programs for both 

fee-for-service and managed care. Other States reported that they applied 

the NCCI edits to managed care claims to achieve cost savings. Officials 

from 9 of the 11 States reported no challenges to using the NCCI edits on 

30 CMS, Medicaid Managed Care Enrollment Report: Summary Statistics as of July 1, 

2011. Accessed at http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By 

-Topics/Data-andSystems/Downloads/2011-Medicaid-MC-Enrollment-Report.pdf on 

July 16, 2015. 
 

Inconsistencies in State Implementation of Correct Coding Edits May Allow Improper Medicaid Payments 15

(OEI-09-14-00440) 

managed care claims. Officials from the other two States reported that the 

only challenge was getting their managed care organizations to implement 

the edits in a timely manner. 
 

Inconsistencies in State Implementation of Correct Coding Edits May Allow Improper Medicaid Payments 16

(OEI-09-14-00440) 

CONCLUSION AND RECOMMENDATIONS

According to CMS, edits that are not implemented or working properly are 

a primary cause of improper payments. When used correctly by States, 

NCCI edits automatically deny Medicaid payments for services that do not 

meet basic medical or billing standards. However, the effectiveness of the 

NCCI edits was limited because some States had not fully implemented

the edits and most did not use all of the edits in a manner consistent with 

NCCI program requirements. Although some States reported that they 

unintentionally used the edits incorrectly, other States reported that they 

were aware that their use of the edits was not consistent with 

requirements, and gave a variety of reasons for this. States’ inconsistent 

implementation and use of the edits may reduce their ability to promote 

correct coding by providers and prevent improper Medicaid payments. 

Further, States’ lack of reporting of cost savings estimates, and the 

limitations of the estimates that were reported, inhibit CMS’s ability to 

meaningfully estimate national NCCI cost savings. 

To address these deficiencies, we recommend that CMS:

Take appropriate action to ensure that States fully implement 

the NCCI edits

CMS should take appropriate action to ensure that the 10 States that have 

not implemented edits from all six required edit categories do so. 

Appropriate actions may include corrective action plans, assessing 

penalties, and/or offering incentives to States that have not fully 

implemented the NCCI edits. 

Provide technical assistance to States to ensure that they use 

the NCCI edits correctly 

As part of its ongoing efforts, CMS should provide targeted technical 

assistance to ensure that States understand and follow NCCI program 

requirements concerning the issues identified in this report. CMS may 

wish to vary its assistance depending upon whether States are 

unintentionally misusing the edits or have chosen not to use the edits 

correctly. 

Issue guidance to States on how to estimate NCCI cost 

savings and take steps to ensure that States report as required 

In order to develop a meaningful estimate of national NCCI cost savings 

that it can include in its report to Congress, CMS should issue guidance to 

ensure that all States estimate cost savings in a consistent way. CMS 

should also take steps to ensure that States report those estimates as 

required. 
 

Inconsistencies in State Implementation of Correct Coding Edits May Allow Improper Medicaid Payments 17

(OEI-09-14-00440) 

Examine whether using the NCCI edits on claims paid under 

managed care is beneficial, and if so, take appropriate action 

CMS should assess the impact of using the NCCI edits on claims paid 

under Medicaid managed care. This could include identifying the number 

of denied services, examining changes in provider billing, or if feasible, 

estimating cost savings. If CMS identifies an overall benefit, it should 

encourage States to use the NCCI edits on managed care claims and could 

share best practices from States on how to do so. 
 

Inconsistencies in State Implementation of Correct Coding Edits May Allow Improper Medicaid Payments 18

(OEI-09-14-00440) 

AGENCY COMMENTS AND OIG RESPONSE

CMS concurred with all four of our recommendations. In its comments, 

CMS stated that it would work with States to support their implementation 

of the NCCI edits and explore the use of incentives and other efforts to 

bring States into compliance. In addition, CMS stated that it would 

reevaluate its current technical assistance process and explore the barriers 

and challenges to State compliance with NCCI requirements. CMS noted 

that it recently consolidated the Medicare and Medicaid NCCI programs 

into a single program in order to increase the technical assistance that 

CMS can offer to the States. CMS further stated that it would work with 

States to develop and implement a methodology for estimating cost 

savings from the Medicaid NCCI similar to the methodology used to 

measure savings from the Medicare NCCI program. Finally, CMS stated 

that it will explore the current policies and processes for managed care 

claims processing and identify opportunities to improve the NCCI 

program with regard to managed care claims. The full text of CMS 

comments is provided in Appendix H.
 

Inconsistencies in State Implementation of Correct Coding Edits May Allow Improper Medicaid Payments 19

(OEI-09-14-00440) 

APPENDIX A 

Detailed Test Claims Methodology

We asked each State to process a set of 34 test claims through its Medicaid 

claims processing system to verify whether States were using 34 selected 

NCCI edits correctly. Fifty States submitted test claims results based on 

testing conducted during the period from November 1 – 15, 2014.31 

We worked with CMS to develop the test claims methodology. CMS 

officials used their program knowledge to select the 34 edits. They chose 

edits related to services that they expected most State Medicaid programs 

to cover. The test claims were designed to test edits from all three 

categories of medically unlikely edits (with and without date spans), and 

all three categories of procedure-to-procedure edits (with and without 

modifiers). Services on 25 of the test claims should have been denied by 

an NCCI edit, and 9 claims included modifiers or date spans that should 

have allowed the services to be paid. Because these edits were 

purposively selected, our results cannot be projected to the population of 

NCCI edits. However, because the edits are implemented as part of a 

large edit category data file and then automated, a single incorrectly 

processed test claim may indicate that a State is misusing other, similar 

edits. Appendix B provides a list of the test claims and expected results. 

For each test claim, we provided the States with basic information that 

mirrored actual Medicaid claims, such as the service type, procedure code, 

date of service, and units of service. States then ran the claims through 

their claims processing systems’ test environments, which simulate what 

would have happened if they were real Medicaid claims. States submitted 

to OIG an electronic print-out of the results of the processed test claims. 

For example, if a service would have been denied by an NCCI edit, the 

test claim results included a message indicating which service was denied 

by an NCCI edit. If the test claim would have been paid, the test claim 

results showed the amount that the provider would have been paid for the 

service(s). 

We reviewed States’ test claims results and compared them to the 

expected results, according to NCCI program requirements. We then 

assigned each test claim result to one of the following categories: 

 Correctly processed: the result matched the expected result 

according to NCCI program requirements (i.e., payment for the 

31 Utah officials reported that they tried to run our test claims through their claims 

processing system’s test environment, but were unable to process them because of system 

limitations. Therefore, we excluded Utah from our test claims analysis. 
 

Inconsistencies in State Implementation of Correct Coding Edits May Allow Improper Medicaid Payments 20

(OEI-09-14-00440) 

correct service(s) were denied by an NCCI edit, or the correct 

service(s) were paid, as expected); 

 Incorrectly processed: the result did not match the expected result 

according to NCCI program requirements (i.e., payment for a 

service was denied by an NCCI edit when it should not have been, 

or a service was paid when it should have been denied by an NCCI 

edit); 

 Not tested: our test claim did not test the intended NCCI edit for 

one of several reasons. These reasons include: 1) the State paid 

for the tested service using a payment method to which the NCCI 

edits did not apply (e.g., many States pay for outpatient hospital 

services using revenue codes), 2) the service was not covered by 

the State’s Medicaid program, or 3) a technical issue prevented 

testing whether the NCCI edit worked as intended. 

We shared these initial test claims determinations and the expected results 

with each State. We gave States an opportunity to provide explanations 

for any incorrectly processed test claims. We evaluated States’ responses, 

consulted with CMS as needed, and made adjustments to our 

determinations when appropriate. 

After we finalized our test claim determinations, we calculated the number 

of test claims that each State processed correctly and incorrectly. We 

excluded test claims results that we coded as “not tested.” We also 

calculated the number of States that incorrectly processed one or more test 

claims designed to test procedure-to-procedure edits or one or more test 

claims design to test medically unlikely edits. For these calculations, we 

excluded States that did not implement the associated edit categories. For 

a full list of States and their test claims results, see Appendix D.
 

Inconsistencies in State Implementation of Correct Coding Edits May Allow Improper Medicaid Payments 21

(OEI-09-14-00440) 

APPENDIX B

Test Claims and Expected Results

Claims to Test Practitioner Procedure-to-Procedure Edits

Test Claim Provider Type Code32 Modifier From Date To Date Units of Service Expected Result

1 Practitioner 

58554 10/2/2014 10/2/2014 1

57106 should be denied with 

NCCI denial message 57106 10/2/2014 10/2/2014 1

2 Practitioner 

57282 8/2/2014 8/2/2014 1

56810 should be denied with 

NCCI denial message 56810 8/2/2014 8/2/2014 1

3 Practitioner 

72255 1/15/2014 1/15/2014 1

72255 should be denied with 

NCCI denial message 72240 1/15/2014 1/15/2014 1

4 Practitioner 

24100 5/6/2013 5/6/2013 1

64417 should be denied with 

NCCI denial message 64417 RT 5/6/2013 5/6/2013 1

5 Practitioner 

47420 7/7/2013 7/7/2013 1

47420 should be denied with 

NCCI denial message 47600 7/7/2013 7/7/2013 1

6 Practitioner 

59400 1/15/2014 1/15/2014 1

Both codes should pay

99213 25 1/15/2014 1/15/2014 1

7 Practitioner 

49550 59 1/15/2014 1/15/2014 1

Both codes should pay

49505 1/15/2014 1/15/2014 1

8 Practitioner 

90723 9/23/2013 9/23/2013 1

90636 should be denied with 

NCCI denial message 90636 9/23/2013 9/23/2013 1

(Continued on page 22)

32 The five character codes and descriptions included in this document are obtained from 

Current Procedural Terminology (CPT), copyright 2013 by the American Medical 

Association (AMA). CPT is developed by the AMA as a listing of descriptive terms and five 

character identifying codes and modifiers for reporting medical services and procedures. 

Any use of CPT outside of this document should refer to the most current version of the 

Current Procedural Terminology available from AMA. Applicable FARS/DFARS apply.
 

Inconsistencies in State Implementation of Correct Coding Edits May Allow Improper Medicaid Payments 22

(OEI-09-14-00440) 

Claims to Test Outpatient Hospital Procedure-to-Procedure Edits

Test Claim Provider Type Code Modifier From Date To Date Units of 

Service Expected Result

9

Outpatient 

hospital

58660 10/2/2014 10/2/2014 1

49400 should be denied with 

NCCI denial message 49400 10/2/2014 10/2/2014 1

10 Outpatient 

hospital

57010 8/2/2014 8/2/2014 1

56810 should be denied with 

NCCI denial message 56810 8/2/2014 8/2/2014 1

11 Outpatient 

hospital

72265 1/15/2014 1/15/2014 1

72265 should be denied with 

NCCI denial message 72255 1/15/2014 1/15/2014 1

12 Outpatient 

hospital

24110 5/6/2013 5/6/2013 1

Both codes should pay

64417 RT 5/6/2013 5/6/2013 1

13 Outpatient 

hospital

45990 7/7/2013 7/7/2013 1

45990 should be denied with 

NCCI denial message 45333 7/7/2013 7/7/2013 1

14 Outpatient 

hospital

59510 1/15/2014 1/15/2014 1

Both codes should pay

99214 25 1/15/2014 1/15/2014 1

15 Outpatient 

hospital

49501 1/15/2014 1/15/2014 1

Both codes should pay

49520 59 1/15/2014 1/15/2014 1

16 Outpatient 

hospital

90748 9/23/2013 9/23/2013 1

90743 should be denied with 

NCCI denial message 90743 9/23/2013 9/23/2013 1

Claims to Test Durable Medical Equipment Procedure-to-Procedure Edits

Test Claim Provider Type Code Modifier From Date To Date Units of 

Service Expected Result

17

Durable 

Medical 

Equipment

L0454 9/3/2014 9/3/2014 1

L0455 should be denied with 

NCCI denial message L0455 9/3/2014 9/3/2014 1

18

Durable 

Medical 

Equipment

L0472 1/15/2014 1/15/2014 1

L0468 should be denied with 

NCCI denial message L0468 1/15/2014 1/15/2014 1

19

Durable 

Medical 

Equipment

L1846 LT 8/4/2013 8/4/2013 1

Both codes should pay

L1845 RT 8/4/2013 8/4/2013 1

20

Durable 

Medical 

Equipment

L5840 RT 11/15/2013 11/15/2013 1

L5826 should be denied with 

NCCI denial message L5826 RT 11/15/2013 11/15/2013 1

(Continued on page 23)
 

Inconsistencies in State Implementation of Correct Coding Edits May Allow Improper Medicaid Payments 23

(OEI-09-14-00440) 

Claims to Test Practitioner Medically Unlikely Edits

Test Claim Provider Type Code Modifier From Date To Date Units of 

Service Expected Result

21 Practitioner A4566 10/2/2014 10/2/2014 3

All units of service (UOS) of 

A4566 should be denied with 

NCCI denial message

22 Practitioner 92570 10/2/2014 10/2/2014 2

All UOS of 92570 should be 

denied with NCCI denial 

message

23 Practitioner 31612 1/1/2014 1/1/2014 2

All UOS of 31612 should be 

denied with NCCI denial 

message

24 Practitioner 97012 1/15/2014 1/19/2014 7 All UOS of 97012 should pay

25 Practitioner 97026 1/15/2014 1/19/2014 8

All UOS of 97026 should be 

denied with NCCI denial 

message

26 Practitioner 92921 10/5/2013 10/5/2013 3

All UOS of 92921 should be 

denied with NCCI denial 

message

Claims to Test Outpatient Hospital Medically Unlikely Edits

Test Claim Provider Type Code Modifier From Date To Date Units of 

Service Expected Result

27 Outpatient 

hospital A4290 10/2/2014 10/2/2014 3

All UOS of A4290 should be 

denied with NCCI denial 

message

28 Outpatient 

hospital 35045 10/2/2014 10/2/2014 3

All UOS of 35045 should be 

denied with NCCI denial 

message

29 Outpatient 

hospital 27193 1/15/2014 1/15/2014 2

All UOS of 27193 should be 

denied with NCCI denial 

message

30 Outpatient 

hospital 97022 1/15/2014 1/19/2014 7 All UOS of 97022 should pay

31 Outpatient 

hospital 97028 1/15/2014 1/19/2014 8

All UOS of 97028 should be 

denied with NCCI denial 

message

32 Outpatient 

hospital 92925 10/5/2013 10/5/2013 3

All UOS of 92925 should be 

denied with NCCI denial 

message

Claims to Test Durable Medical Equipment Medically Unlikely Edits

Test Claim Provider Type Code Modifier From Date To Date Units of 

Service Expected Result

33

Durable 

Medical 

Equipment

L5629 1/15/2014 1/15/2014 3

All UOS of L5629 should be 

denied with NCCI denial 

message

34

Durable 

Medical 

Equipment

A7014 9/4/2013 9/10/2013 9 All UOS of A7014 should pay

Source: CMS, 2014.
 

Inconsistencies in State Implementation of Correct Coding Edits May Allow Improper Medicaid Payments 24

(OEI-09-14-00440) 

APPENDIX C 

States That Reported Not Implementing Edits From All Six 

NCCI Edit Categories

State

Unimplemented Procedure-to-Procedure 

Edits?

Unimplemented Medically Unlikely 

Edits? Number of 

Unimplemented 

Categories Practitioner Outpatient

Durable 

Medical 

Equipment

Practitioner Outpatient

Durable 

Medical 

Equipment

1. Illinois       6

2. Oklahoma       6

3. Louisiana     4

4. New Jersey     4

5. Maine    3

6. Missouri    3

7. Ohio   2

8. Delaware  1

9. North Carolina  1

10. New Mexico  1

Source: OIG analysis of States’ survey responses and correspondence, 2015.
 

Inconsistencies in State Implementation of Correct Coding Edits May Allow Improper Medicaid Payments 25

(OEI-09-14-00440) 

APPENDIX D 

States’ Test Claims Results

STATE

Number of 

test claims 

correctly 

processed

Number of 

test claims 

incorrectly 

processed

Number of

edits not 

tested

Correctly 

processed all 

procedure-toprocedure test 

claims?

Correctly 

processed all 

test claims with 

modifiers?

Correctly 

processed all 

medically 

unlikely test 

claims?

Correctly 

processed all 

test claims with 

date spans?

AK 9 0 25    

AL 23 3 8  

AR 15 1 18  

AZ 14 7 13 

CA 15 1 18   

CO 19 0 15    

CT 12 4 18   

DC 27 6 1  N/A*

DE 28 5 1  

FL 21 2 11  

GA 25 1 8  

HI 12 9 8

IA 16 7 11   

ID 28 2 4  

IN 28 0 6    

KS 27 5 2

KY 24 0 10    

LA 15 8 11 N/A N/A

MA 24 2 8  

MD 6 5 23  

ME 17 9 8 N/A N/A

MI 21 3 10 

MN 28 1 5  

MO 5 10 19 N/A N/A

MS 25 4 5

MT 27 0 7    

NC 18 1 15    

ND 19 0 15    

NE 25 1 8   

NH 25 2 7   

NJ 7 12 15  

NM 22 1 11    

NV 17 8 9 

NY 21 3 10  N/A

OH 20 1 13    N/A

OR 14 2 18   

PA 6 7 21 

RI 8 4 22 

SC N/A 4 14  

SD 33 0 1    

TN 32 2 0 

TX 16 1 17   

UT N/A N/A N/A N/A N/A N/A N/A

VA 23 0 11    

VT 24 2 8  

WA 22 5 7  

WI 28 0 6    

WV 24 2 8 

WY 22 4 8 

Source: OIG analysis of States’ survey responses, test claims, and correspondence, 2015.

*For some States, certain test claims results categories were not applicable (N/A). For example, if they related to an edit category that the 

State did not implement.
 

Inconsistencies in State Implementation of Correct Coding Edits May Allow Improper Medicaid Payments 26

(OEI-09-14-00440) 

APPENDIX E

State Reporting on Adherence to Selected NCCI Program 

Requirements

State Reported 

correctly using 

procedure-toprocedure 

modifiers?

Reported 

correctly 

denying all units 

of service with 

medically 

unlikely edits?

Reported 

correctly using 

medically 

unlikely edits on 

claims with date 

spans?

Reported using 

the edits in the 

correct order? 

Reported using 

the correct edit 

files when 

updating the 

edits?

Reported 

updating the 

edits as 

required?

AK    

AL      

AR    

AZ   Unclear* 

CA  N/A**    

CO     

CT    

DC   N/A N/A 

DE    

FL  Unclear  

GA      

HI     

IA     

ID   N/A 

IN      

KS     

KY     

LA N/A N/A 

MA     

MD  Unclear Unclear

ME  N/A N/A N/A 

MI      

MN    

MO  N/A N/A  Unclear

MS     

MT      

NC     

ND    

NE      

NH      

NJ  

NM     

NV     

NY   N/A  

OH   N/A  

OR      

PA   

RI    Unclear

SC   N/A  

SD    

TN   

TX     

UT    

VA   N/A  

VT   Unclear  

WA  Unclear  

WI     

WV     

WY     

Source: OIG analysis of States’ survey responses, 2015.

*For some States, we were unable to determine whether their reported process was consistent with NCCI program requirements. 

**For some States, certain requirements were not applicable (N/A). For example, some States do not allow Medicaid claims to have 

date spans.
 

Inconsistencies in State Implementation of Correct Coding Edits May Allow Improper Medicaid Payments 27

(OEI-09-14-00440) 

APPENDIX F

Number of Quarterly Cost Savings Estimates States Submitted 

to CMS, by Year

State 2012 2013 2014 2015* Total

AK 0 0 0 0 0

AL 4 4 3 2 13

AR 0 0 0 0 0

AZ 4 4 3 2 13

CA 4 4 4 1 13

CO 0 3 3 1 7

CT 0 0 0 0 0

DC 0 0 0 0 0

DE 0 0 0 0 0

FL 0 0 0 0 0

GA 0 0 0 0 0

HI 4 4 3 2 13

IA 4 4 2 1 11

ID 0 0 4 1 5

IN 0 0 0 0 0

KS 3 3 3 2 11

KY 4 0 0 1 5

LA 1 4 4 2 11

MA 0 0 0 0 0

MD 0 0 0 0 0

ME 0 0 0 0 0

MI 0 0 0 0 0

MN 4 4 4 0 12

MO 0 0 0 0 0

MS 4 4 4 2 14

MT 4 4 2 0 10

NC 4 4 3 2 13

ND 4 3 0 0 7

NE 4 4 3 1 12

NH 0 0 0 0 0

NJ 0 0 0 0 0

NM 0 0 0 0 0

NV 1 4 4 1 10

NY 0 0 0 0 0

OH 0 0 0 0 0

OR 0 0 0 0 0

PA 4 4 3 2 13

RI 0 0 0 0 0

SC 0 0 0 0 0

SD 3 4 3 2 12

TN 0 0 0 0 0

TX 0 0 0 0 0

UT 4 2 0 1 7

VA 0 2 3 2 7

VT 4 4 2 0 10

WA 1 4 4 2 11

WI 0 0 0 0 0

WV 0 0 0 0 0

WY 4 3 0 0 7

Source: OIG analysis of quarterly cost savings estimates that States submitted to CMS covering the 

period of January 2012 to August, 2015. 

*At the time of our data collection, States should have submitted two quarterly estimates in 2015.
 

Inconsistencies in State Implementation of Correct Coding Edits May Allow Improper Medicaid Payments 28

(OEI-09-14-00440) 

APPENDIX G

States That Reported Using NCCI Edits on Managed Care 

Claims

State

Arizona

Florida

Iowa

Indiana

Kansas

Kentucky

Louisiana

Massachusetts 

South Carolina

Tennessee

Vermont

Source: OIG analysis of States’ survey 

responses, 2015. 
APPENDIXH

Agency Comments

(:"4 DEPARTMENT OF HEALTH & HUMAN b1iRVICES CelltStS for Medlcste & Medicaid Services

200 Independertce Avenue SW

Washington, DC 20201

MAR Z 9 2016

TO: Daniel R. Levinson

FROM:

Inspector General

Andrew M. Slavin /S/

Acting Administrator

SUBJECT: Office of Inspector General (OIG) Draft Report: "Inconsistencies in State Implementation

of Correct Coding Edits May Allow Improper Medicaid Payments" (OE1-09-14-00440)

The Centers for Medicare & Medicaid Services (CMS) appreciates the opportunity to review and

comment on the Office of the Inspector General's (OlG) draft report. CMS takes seriously its

responsibility for the accountability, fiscal integrity, and funding of the Medicaid program.

eMS continuously works to reduce and prevent improper Medicaid payments. As one part of

eMS' program integrity strategy, eMS works with states to implement automated claims

processing safeguards called edits to prevent improper payments. The Affordable Care Act

(ACA) required all states to implement the Medicaid National Correct Coding Initiative (NCCI),

which utilizes edits by October 2010. These edits automatically deny payments for ineligible

and incorrectly coded services for Medicaid fee-for-service claims and promotes national correct

coding methodologies for Medicaid claims, CMS provides guidance and technical assistance to

.states on the implementation of the NCCI edits as needed and recently consolidated the Medicare

.andMedicaid NCCI programs into a single program in order to increase the technical assistance

eMS can offer the states .. CMS will continue to work with states to make sure that the NCCI

edits effectively benefit the Medicaid program.

CMS is strongly committed to program integrity efforts in Medicaid. In addition to the NCCI,

CMS is increasing its role in Medicaid provider enrollment through additional guidance and

outreach to states for compliance with ACA requirements, conducting collaborative audits

through Audit Medicaid Integrity Contractors, which conduct post-payment reviews of Medicaid

claims, revising the State Program Integrity reviews to include more in-depth analysis of state

program integrity issues, and building stronger relationships with states to understand challenges

and improve information sharing through our State Liaisons.

OIG's recommendations and CMS' responses are below:

OIG Recommendation:

The OIG recommends that CMS take appropriate action to ensure that states fully implement the

NCCI edits.

Inconsistencies in State Implementation of Correct Coding Edits May Allow Improper Medicaid Payments

(OEI-09-14-00440)

29

/S/

APPENDIXH 

Agency Comments 

.,.,.......""s. 

{ DEPARTMENTbFHEALTH&HUMANSERVlCES Centers for Medicare & Medicaid Services 

\~:5~ 200 Independence Avenue SW 

Washington, DC 20201 

MAR Z92016 

TO: 	 Daniel R. Levinson 

Inspector General 

FROM: 	 Andrew M. Slavitt 

Acting Administrator 

SUBJECT: 	 Office of Inspector General (OlG) Draft Report: "Inconsistencies in State Implementation 

ofConect Coding Edits May Allow Improper Medicaid Payments" (OEl-09-14-00440) 

The Centers for Medicare & Medicaid Services (CMS) appreciates the opportunity to review and 

comment on the Office of the Inspector General's (OIG) draft report. CMS takes seriously its 

responsibility for the accountability, fiscal integrity, and funding ofthe Medicaid program. 

CMS continuously works to reduce and prevent improper Medicaid payments. As one part of 

CMS1 program integrity strategy, CMS works with states to implement automated claims 

processing safeguards called edit~ to prevent improper payments. The Affordable Care Act 

(ACA) required all states to implement the Medicaid National Correct Coding Initiative (NCCI), 

which utilizes edits by October 2010. These edits automatically deny payments for ineligible 

and incorrectly coded services for Medicaid fee-foMervice claims and promotes national cot1'ect 

coding methodologies for Medicaid claims. CMS provides guidance and technical assistance to 

-.states on the implementation of the NCCI edits as needed and recently consolidated the Medicare 

.and: Medicaid NCCI programs into a single program in order to increase the technical assistance 

CMS can offer the states .. CMS will continue to work with states to make sure that the NCCI 

edits effectively benefit the Medicaid program. 

CMS is strongly committed to program integrity efforts in Medicaid. In addition to the NCCT, 

CMS is increasing its role in Medicaid provider enrollment through additional guidance and 

outreach to states for compliance with ACA requirements, conducting collaborative audits 

through Audit Medicaid Integrity Contractors, which conduct post~payment reviews of Medicaid 

claims, revising the State Program Integrity reviews to include more in-depth analysis of state 

program integrity issues, and building stronger relationships with states to understand challenges 

and improve inf01mation sharing through our State Liaisons. 

OIG's recommendations and CMS' responses are below: 

OIG Recommendation: 

The OIG recommends that CMS take appropriate action to ensure that states fully implement the 

NCCI edits. 

Inconsistencies in State Implementation of Correct Coding Edits May Allow Improper Medicaid Payments 

(OEl-09-14-00440) 

29 
 

Inconsistencies in State Implementation of Correct Coding Edits May Allow Improper Medicaid Payments 30

(OEI-09-14-00440) 
 

Inconsistencies in State Implementation of Correct Coding Edits May Allow Improper Medicaid Payments 31

(OEI-09-14-00440) 

ACKNOWLEDGMENTS

This report was prepared under the direction of Blaine Collins, Regional 

Inspector General for Evaluation and Inspections in the San Francisco 

regional office, and Michael Henry, Deputy Regional Inspector General. 

Abby Amoroso served as the team leader for this study, and Rosemary 

Rawlins served as the lead analyst. Central office staff who provided 

support include Althea Hosein, Joanne Legomsky, and Melicia Seay.

We would also like to acknowledge the contributions of other Office of 

Evaluation and Inspections staff, including Joyce Greenleaf.
Office of Inspector General

http://oig.hhs.gov 

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95452, 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 individuals 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 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. These assessments help reduce waste, abuse, and 

mismanagement and promote economy and efficiency throughout HHS. 

Office of Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 

HHS, Congress, and the public with timely, useful, and reliable information on significant 

issues. These evaluations focus on preventing fraud, waste, or abuse and promoting 

economy, efficiency, and effectiveness of departmental programs. To promote impact, OEI 

reports also present practical recommendations for improving program operations. 

Office of Investigations 

The Office of Investigations (OI) conducts criminal, civil, and administrative investigations 

of fraud and misconduct related to HHS programs, operations, and individuals. With 

investigators working in all 50 States and the District of Columbia, OI utilizes its resources 

by actively coordinating with the Department of Justice and other Federal, State, and local 

law enforcement authorities. The investigative efforts of OI often lead to criminal 

convictions, administrative sanctions, and/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 for OIG’s internal operations. OCIG represents OIG in all civil and 

administrative fraud and abuse cases involving HHS programs, including False Claims Act, 

program exclusion, and civil monetary penalty cases. In connection with these cases, OCIG 

also negotiates and monitors corporate integrity agreements. OCIG renders advisory 

opinions, issues compliance program guidance, publishes fraud alerts, and provides other 

guidance to the health care industry concerning the anti-kickback statute and other OIG 

enforcement authorities.