Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

JANET REHNQUIST 

Inspector General 

JUNE 2002 

OEI-04-99-00460 

Medicare Payments for 

Nail Debridement Services 
OFFICE OF INSPECTOR GENERAL

http://www.oig.hhs.gov/ 

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as amended, 

is to protect the integrity of the Department of Health and Human Services (HHS) programs, as well as 

the health and welfare of beneficiaries served by those programs. This statutory mission is carried out 

through a nationwide network of audits, investigations, and inspections conducted by the following 

operating components: 

Office of Audit Services 

The OIG's 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 the 

Department. 

Office of Evaluation and Inspections 

The OIG's Office of Evaluation and Inspections (OEI) conducts short-term management and program 

evaluations (called inspections) that focus on issues of concern to the Department, the Congress, and the 

public. The findings and recommendations contained in the inspection reports generate rapid, accurate, 

and up-to-date information on the efficiency, vulnerability, and effectiveness of departmental programs. 

Office of Investigations 

The OIG's 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. The OI also oversees State Medicaid fraud control units which investigate and 

prosecute fraud and patient abuse in the Medicaid program. 

Office of Counsel to the Inspector General 

The Office of Counsel to the Inspector General (OCIG) provides general legal services to OIG, rendering 

advice and opinions on HHS programs and operations and providing all legal support in OIG’s internal 

operations. The OCIG imposes program exclusions and civil monetary penalties on health care providers 

and litigates those actions within the Department. The OCIG also represents OIG in the global settlement 

of cases arising under the Civil False Claims Act, develops and monitors corporate integrity agreements, 

develops model compliance plans, renders advisory opinions on OIG sanctions to the health care 

community, and issues fraud alerts and other industry guidance. 
EXECUTIVE SUMMARY 

PURPOSE 

To determine the appropriateness of Medicare payments for nail debridement services. 

BACKGROUND 

Podiatry is classified by Medicare as a single service speciality. Generally, this means 

podiatrists can be licensed to practice medicine within the limited scope of podiatry. While 

Medicare reimburses podiatrists for several hundred different services, nail debridement is by 

far the single largest paid service. It accounted for almost one-fourth ($233 million of $1 

billion) of all Medicare payments to podiatrists in Calendar Year 2000. 

We focused this inspection on determining the appropriateness of Medicare nail debridement 

payments. In doing so, we used a medical review contractor to examine beneficiary medical 

records to assure that payment was based on documented medical need. The contractor was a 

practicing podiatrist, and an active member of the American Podiatric Medical Association. 

Nail Debridement 

Nail debridement involves removal of a diseased toenail bed or viable nail plate. This may be 

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

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

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

which is particularly prevalent in elderly people. 

FINDINGS 

Medicare Inappropriately Paid about $96.8 Million for Nail Debridement and Related 

Podiatry Services 

Almost one-fourth (22.7 percent) of our sample nail debridement claims did not have adequate 

medical justification to support Medicare payment. We estimated that Medicare 

inappropriately paid $51.2 million for nail debridements in Calendar Year 2000. 

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Medicare Payments for Nail Debridement Services OEI-04-99-00460 
Furthermore, our sample showed more than half (60 percent) of the inappropriately paid nail 

debridement claims contained related podiatry services. When a nail debridement payment is 

determined to be inappropriate, all other podiatry payments for services related to the nail 

debridement are also inappropriate. The related services would not have been performed in 

absence of the nail debridement. Medicare paid $45.6 million for such related services. 

RECOMMENDATIONS 

In about one in every four cases, the medical need for nail debridement was not documented in 

beneficiaries’ medical records. Further, more than half of the inappropriate nail debridement 

payments had other related inappropriate payments. Medicare inappropriately paid $96.8 

million for such services in Calendar Year 2000. 

Even considering the possibility of poor documentation of medical records, the extent of the 

problem indicates close scrutiny is needed. At a minimum, the problem suggests medical 

records are not documented as required for Medicare payments. More seriously, it suggests 

that Medicare paid for services not needed and services not provided. 

Accordingly, we recommend that CMS require: 

< Medicare carriers to closely scrutinize payment for nail debridement services through 

medical reviews. Carriers should require podiatrists to adequately document the 

medical need for all nail debridement services. 

< CMS carriers to collect the overpayment we found in our sample. 

< CMS Regional Offices and carriers to educate podiatrists on Medicare policy for 

payment of nail debridement claims. 

AGENCY COMMENTS 

The Centers for Medicare & Medicaid Services (CMS) commented on our draft report. They 

concurred with all recommendations. Specifically, CMS will continue to require contractors to 

maximize the effectiveness of their medical review strategy. CMS will also collect the 

overpayments identified in our sample, and educate podiatrists on Medicare policy for payment 

of nail debridement claims. 

The full text of CMS’ comments on our report are in Appendix B. 

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Medicare Payments for Nail Debridement Services OEI-04-99-00460 
TABLE OF CONTENTS 

EXECUTIVE SUMMARY ..................................................... 1

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

FINDINGS

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

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

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

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

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

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

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Medicare Payments for Nail Debridement Services OEI-04-99-00460 
INTRODUCTION 

PURPOSE 

To determine the appropriateness of Medicare payments for nail debridement services. 

BACKGROUND 

Medicare is a Federal health insurance program for individuals age 65 and older, and for 

certain categories of disabled people. Medicare was authorized in 1965 by Title XVIII of the 

Social Security Act. The Centers for Medicare & Medicaid Services (CMS) administers 

Medicare, the nation's largest health insurance program, covering approximately 39 million 

beneficiaries. 

Under Medicare, podiatry is classified as a single service speciality. Generally, this means 

podiatrists can be licensed to practice medicine within the limited scope of podiatry. Some of 

the services that podiatrists may receive Medicare reimbursement for include nail debridement, 

surgical excision of affected nails, and topical treatment of the nail. Podiatry services performed 

within the scope of applicable State licenses are generally reimbursable under the Medicare 

program. 

Nail Debridement 

Nail debridement involves the removal of a diseased toenail bed or viable nail plate. This may

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

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

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

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

demonstrated by one or more of the following conditions:

< nail hypertrophy - thickening of nail, 

< discoloration of nail,

< subungual debris - situated under the nail, or

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

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Medicare Payments for Nail Debridement Services OEI-04-99-00460 
Medicare Coverage of Nail Debridement 

Medicare covers nail debridement when at least one of the following three conditions exists: 

< Medicare covers nail debridement for beneficiaries with systemic conditions involving 

neurological or vascular diseases. Such conditions can cause severe circulatory 

problems or diminished sensation in the legs or feet. 

< Medicare covers nail debridement for ambulatory beneficiaries with clinical evidence of 

mycosis of the toenail, marked limitation of ambulation, and pain. Additionally, 

ambulatory beneficiaries with a secondary infection resulting from one or more mycotic 

toenails may be covered. 

< Medicare covers nail debridement for non-ambulatory beneficiaries with clinical 

evidence of pain or a secondary infection resulting from one or more mycotic toenails. 

Medicare Cost for Nail Debridement 

Over the past 5 years, podiatry services have been among the top 25 Medicare reimbursable 

services. In Calendar Year 2000, Medicare payments to podiatrists exceeded $1 billion, 

making them the highest reimbursed non-physician single service specialty group. This was 

more than double the reimbursements received by the second highest reimbursed group --

chiropractors. 

Medicare reimburses podiatrists for several hundred different services, however nail 

debridement was by far the largest paid single service. In Calendar Year 2000, Medicare paid 

$233 million for nail debridement services, accounting for almost one-fourth of about $1 billion 

in total Medicare payments to podiatrists. 

METHODOLOGY 

Scope 

We evaluated the medical necessity of nail debridement services in Calendar Year 2000. We 

contracted with a Podiatrist to review medical records for 110 randomly sampled nail 

debridement claims. The contractor also reviewed all other podiatry services that were 

performed on the same date as the nail debridement service to determine if they were related to 

the nail debridement. 

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Medicare Payments for Nail Debridement Services OEI-04-99-00460 
Sample Selection 

We used the CMS 1 percent National Claims History File to identify Medicare nail 

debridement claims (CPT code 11720 and 11721) paid during the first quarter of Calendar 

Year 2000 (January 1, 2000 to March 31, 2000).1 From this universe of 14,893 nail 

debridement claims, we selected a simple random sample of 120 claims for medical review. 

Additionally, we determined that nail debridement claims paid by Medicare during Calendar 

Year 2000 were uniformly distributed among the four quarters. Therefore, the number of 

claims paid in the first quarter was typical of claims paid in each of the following three quarters. 

We based our determination of claims distribution on CMS data in the 100 percent National 

Claims History (NCH) file for Calendar Year 1999, and the 1 percent NCH file for Calendar 

Year 2000. 

Because 99 percent of all Medicare nail debridement services are performed by podiatrists2, 

our sample resulted in only claims that had been submitted by podiatrists. However, several 

other types of physicians perform nail debridements. 

Data Collection 

For the 120 sample claims, we requested podiatrists to furnish appropriate medical justification 

from patient medical records. Specifically, for the period July 1999 through June 2000, we 

requested: 

1. Initial history and physical examination information, 

2. All interim history and physical examinations, 

3. Beneficiary evaluation or assessments, 

4. Physician/consultation notes, 

5. Medication and service order sheets, and 

6. Nurses notes. 

We reduced our sample by 2 claims (from 120 to 118) because the provider’s identity was not 

readily apparent. The provider did not include a Unique Provider Identification Number 

(UPIN) on the claim. 

1

Includes all claims processed as of June 30, 2000. 

2

CMS Part B Extract and Summary System (BESS). 

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Medicare Payments for Nail Debridement Services OEI-04-99-00460 
We further reduced our sample by 8 claims (from 118 to 110) because we could not verify that 

podiatrists actually received our request for beneficiary medical records. Attempting to assure 

that the podiatrists received our request, we mailed three separate requests. Receiving no 

response, we then attempted to request the patient records by telephone. However, the 

addresses shown in CMS files were either incorrect or no longer valid. In a final attempt, we 

searched for the podiatrists’ telephone numbers by using various Internet search engines. 

Table 1 summarizes our adjusted sample. 

Table 1 

Sample of Nail Debridement Claims 

Number 

Simple Random Sample 120 

Claims Excluded: 

Unable to verify provider -- no UPIN on claim 

Unable to verify provider received medical record request 

2 

8 

Claims Reviewed 110 

Normally, CMS carriers should deny claims that do not have a UPIN, and claims for providers 

who fail to furnish requested medical documentation. While we are concerned about the 

validity of such claims, we did not, however, count the 10 that appear in our sample as an 

inappropriate payment. We simply excluded them from our analysis. This approach provides a 

more conservative estimate of inappropriate payments for nail debridement services. 

Of the 110 podiatrists we contacted, 107 (97.3 percent) responded by providing the 

appropriate medical records. One of the podiatrists who did not provide the medical 

documentation told us that he could not find it. The remaining two did not respond to our 

request at all. Since we verified by telephone that our medical review request had in fact been 

received by the two podiatrists we considered their claims inappropriate for Medicare 

payment. 

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Medicare Payments for Nail Debridement Services OEI-04-99-00460 
Data Analysis 

To determine the medical necessity of the 110 nail debridement claims, we used a medical 

review contractor. The contractor was a practicing podiatrist, and an active member of the 

American Podiatric Medical Association. The medical review contractor determined if the 

Medicare payments were appropriate. This determination was based on the medical necessity 

for nail debridement documented in the claim and in the medical records obtained from 

podiatrists. In making the determination of medical necessity, the contractor used CMS policy 

as criteria for allowed nail debridement service. 

Additionally, for nail debridement claims that were determined to be inappropriately paid, the 

contractor reviewed all other podiatry services billed on the same date of service. The 

contractor determined whether or not the other services were related to, or independent of, the 

nail debridement service. If the service was related to the nail debridement, it would not have 

been performed if the nail debridement had not been performed. Therefore, given that the nail 

debridement service was inappropriately paid, any related podiatry services were also 

determined to be inappropriately paid. 

We summarized the number of sampled claims that our medical review contractor determined 

to lack medical justification, and were therefore inappropriate for Medicare payment. We then 

projected this finding to all nail debridement payments by Medicare during the first quarter 

(January 1 through March 31) of Calendar Year 2000. 

Next, we summarized the extent of related nail debridement services that our medical review 

contractor determined to be inappropriate based on a lack of medical justification for nail 

debridement. We then projected that finding to all nail debridement claims during the first 

quarter of Calendar Year 2000. 

The nail debridement claims paid by Medicare during Calendar Year 2000 were uniformly 

distributed among the four quarters. Therefore, we estimated inappropriate Medicare 

payments for nail debridement services for the entire Calendar Year 2000. We did so by 

multiplying our first quarter results by four. Likewise, we estimated inappropriate payments for 

5 years (Calendar Years 2000 through 2004) by multiplying our first quarter results by twenty. 

All calculations were computed using software for the Statistical Analysis of Correlated Data 

(SUDAAN) and SAS software. 

We conducted this inspection in accordance with the Quality Standards for Inspections 

issued by the President’s Council on Integrity and Efficiency. We conducted our review from 

June 2000 to October 2001. 

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Medicare Payments for Nail Debridement Services OEI-04-99-00460 
FINDINGS 

Medicare Inappropriately Paid about $96.8 Million for Nail Debridement and Related 

Podiatry Services 

Almost one-fourth of our sample nail debridement claims did not have adequate medical 

justification. Additionally, more than half of the nail debridement claims lacking adequate 

medical justification had related services that were inappropriately paid. 

Medicare inappropriately paid $51.2 million for nail debridement services in Calendar 

Year 2000 

Almost 23 percent (25 of 110) of our sampled nail debridement claims did not have adequate 

medical justification to support Medicare payment. 

Table 2 shows the number of nail debridement claims for which beneficiary medical records 

lacked medical justification. 

Table 2 

Nail Debridement Claims That Should Not Have Been Paid 

Reason for Denying Payment Claims Percent 

Claims Reviewed 110 100.0% 

Medical Records Did Not Support Claim 

No Record That Service Was Provided 

Medical Records Not Provided to Justify Claim 

19 

3 

3 

17.3% 

2.7% 

2.7% 

Claims Inappropriately Paid 25 22.7% 

Of the 25 claims inappropriately paid, 19 (17.3 percent) were not medically justified because 

they did not contain sufficient documentation to demonstrate that the services were necessary. 

For example, several claims lacked a clinical description of the nails condition, while other 

claims lacked a diagnosis of mycosis. 

Additionally, the medical records for three claims (2.7 percent) had no indication that nail 

debridement services were performed on the date claimed. 

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Medicare Payments for Nail Debridement Services OEI-04-99-00460 
Finally, podiatrists did not furnish requested medical records to support another three nail 

debridement claims (2.7 percent). One of the three podiatrists said they could not find the 

beneficiary’s medical record. The other two podiatrists did not respond to our requests. 

We projected the inappropriate claims (22.7 percent) in our random sample to the 1,503,024 

Medicare nail debridement claims submitted from January 1, 2000 through March 31, 2000.3 

Our projection showed that 341,186 claims totaling $12.8 million were inappropriately paid 

during the 3-month period. 

Since the number of nail debridement claims submitted in the second quarter of Calendar Year 

2000 (1,503,024) was consistent with those submitted for the rest of the year4, we estimated 

that Medicare inappropriately paid $51.2 million in Calendar Year 2000 for nail debridement 

claims. For a 5-year period (2000-2004), such inappropriate nail debridement payments 

would cost the Medicare Trust Fund $256 million. See Appendix A for point estimates, 

confidence intervals, and cost estimates. 

Medicare inappropriately paid $45.6 million for related podiatry services in Calendar 

Year 2000 

Our medical review identified 25 inappropriately paid related podiatry services. Fifteen 

inappropriately paid nail debridement claims contained the 25 related podiatry services. 

Related podiatry services are other billable Medicare services associated with nail debridement. 

Related services conducted as a part of nail debridement services include debridement of skin -

- full thickness, paring or cutting lesions, and topical treatment of nails. 

When payment for nail debridement is determined to be inappropriate, all other payments for 

services related to that nail debridement are also inappropriate. Related services would not be 

performed unless nail debridement was performed. Conversely, appropriate support of the 

need for nail debridement would also support the need for related services. 

We projected the 25 inappropriate payments for related podiatry services from our sample of 

110 claims to the 1,503,024 Medicare nail debridement claims submitted from January 1, 2000 

through March 31, 2000. Our projection showed inappropriate Medicare payments of $11.4 

million for the 3-month period. 

3

 CMS’ 100 percent National Claims History File, as of June 30, 2000. 

4

 CMS’ 1 percent National Claims History File data for Calendar Year 2000. 

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Medicare Payments for Nail Debridement Services OEI-04-99-00460 
Since the number of nail debridement claims submitted in the first quarter of Calendar Year 

2000 were consistent with those submitted for the rest of the year, we estimated that Medicare 

inappropriately paid $45.6 million for related podiatry services in Calendar Year 2000. For a 

5-year period (2000-2004), inappropriate related service payments would cost the Medicare 

Trust Fund $228 million. See Appendix A for point estimates, confidence intervals, and cost 

estimates. 

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Medicare Payments for Nail Debridement Services OEI-04-99-00460 
CC RECOMMENDATIONS 

In about one in every four cases, the medical need for nail debridement was not documented in 

beneficiaries’ medical records. Further, more than half of the inappropriate nail debridement 

payments had other related inappropriate payments. Medicare inappropriately paid about 

$96.8 million for such services in Calendar Year 2000. 

Even considering the possibility of poor documentation of medical records, the extent of the 

problem indicates close scrutiny is warranted. At a minimum, the problem suggests medical 

records are not documented as required for Medicare payments. More seriously, it suggests 

that Medicare paid for services not needed and services not provided. 

Accordingly, we recommend that CMS require: 

< Medicare carriers to closely scrutinize payment for nail debridement services through 

medical reviews. Carriers should require podiatrists to adequately document the 

medical need for all nail debridement services. 

< CMS carriers to collect the overpayment we found in our sample. 

< CMS Regional Offices and carriers to educate podiatrists on Medicare policy for 

payment of nail debridement claims. 

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Medicare Payments for Nail Debridement Services OEI-04-99-00460 
AGENCY COMMENTS 

The Centers for Medicare & Medicaid Services (CMS) commented on our draft report. They 

concurred with all recommendations. 

CMS is taking a proactive approach in addressing the recommendations in our report. 

Specifically, they highlighted three initiatives they are implementing: 

< CMS will share this report with the contractors in their next vulnerability report. In 

addition, CMS will work with their contractors and the podiatry community to ensure 

that podiatrists understand Medicare’s documentation requirements for nail 

debridement services. 

< CMS will direct the appropriate Medicare carriers to recover overpayments for the nail 

debridement services mentioned in our report. 

< CMS will issue a standard article on Medicare nail debridement payment policy and 

post the article on contractor and CMS Web sites. 

The full text of CMS’ comments on our report are in Appendix B. 

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Medicare Payments for Nail Debridement Services OEI-04-99-00460 
APPENDIX A 

Estimated Inappropriate Medicare Payments 

Period Nail Related Total 

Jan - Mar 2000 

Projection $12.8 million $11.4 million $24.2 million 

January - March 2000 

Point Estimate and Confidence Intervals 

Point Lower 95% Upper 95% 

Nail Debridement $12.8 million $8.3 million $17.3 million 

Related Services $11.4 million $5.8 million $17.1 million 

Total $24.2 million $14.1 million $34.4 million 

Annual Estimate $51.2 million $45.6 million $96.8 million 

5 Year Estimate $256.0 million $228.0 million $484.0 million 

*Projections and estimates are based on a medical review of 110 podiatry claims 

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Medicare Payments for Nail Debridement Services OEI-04-99-00460 
APPENDIX B 

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Medicare Payments for Nail Debridement Services OEI-04-99-00460 
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Medicare Payments for Nail Debridement Services OEI-04-99-00460 
ACKNOWLEDGMENTS 

This report was prepared under the direction of Jesse J. Flowers, Regional Inspector General for 

Evaluation and Inspections in the Atlanta Regional Office and Graham D. Rawsthorn, Assistant 

Regional Inspector General. Other principal Office of Evaluation and Inspections staff who contributed 

include: 

Region 

Rodney Holliman, Lead Analyst 

Dwayne Grant, Team Leader 

Robert Gibbons, Program Analyst 

Gerius Patterson, Program Analyst 

Medicare Payments for Nail Debridement Services 

Headquarters

Stuart Wright, Program Specialist

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OEI-04-99-00460