Insurers to crack down on providers performing unscheduled procedures

By Nona Tepper / August 9, 2022

Health insurance companies are increasingly pressing doctors for more information when they perform unscheduled, minor procedures such as drawing blood, performing skin biopsies or conducting electrocardiograms on patients the same day as visits for other reasons. 

Insurers are zeroing in on providers evaluation and management claims that include modifier 25. Providers use evaluation and management codes on claims for assessing or controlling patient health, such as when they have office visits or perform surgical procedures. They add a modifier 25 when they provide significant and separately identifiable services during the same patient visits, such as removing a mole. 

Insurers have previously paid out massive settlements because they denied payments for modifier 25, and their new policies set them up for more lawsuits, said Ed Gaines, vice president of regulatory affairs and industry liaison at Zotec Partners, a revenue cycle management company. 

“This is history repeating itself,” said Gaines, who sits on the American College of Emergency Physicians’ reimbursement committee and participated in legal challenges to similar practices in the past.

Horizon Blue Cross Blue Shield of New Jersey is mulling a plan to halve pay for all claims that include modifier 25 starting Nov. 1, according to a notice sent to providers. The not-for-profit insurer was originally set to enact the policy at the start of August. The company credited the reimbursement cut to revisions made by Change Healthcare in its ClaimsXten claims editing software, according to the notice. 

Change Healthcare and Horizon, the largest carrier in New Jersey with more than 3.8 million members, didn’t respond to interview requests. 

“These modifiers just take into account real life,” said Larry Downs, CEO and general counsel at the Medical Society of New Jersey. “This is what happens. Patients come in, and they need additional services.” 

The physician group sent a letter to Horizon asking the insurer to reconsider the policy last month. Standard coding practices operate under a theory of "multiple procedure logic," which reduces payment for additional care provided during a patient encounter to avoid double paying for services such as anesthesia and facility fees, Downs said. Under this theory, modifier 25 claims are already discounted, he said. Cutting payment for these modifiers will increase healthcare costs by forcing patients to schedule separate appointments and delay needed care, he said. 

“We push back on cuts to those services because they're already discounted, and they take into effect that the patient's already in place. You've already got the patient there,” Downs said. “These kinds of policy changes are just trying to grab more of the money off the table and pay physicians less for the services that they're providing for patients.” 

Cigna also postponed but will eventually move forward with a plan to require providers to submit patient medical records every time modifier 25 appears on claims. The insurer initially planned to deny payment to all providers who did not fax them supporting medical documentation beginning Aug. 13. 

“We have delayed the implementation of this policy to ensure that the claims process will be as seamless as possible for providers, and are committed to moving forward with it to make sure that providers that submit claims with these modifiers appropriately get paid in full,” a Cigna spokesperson wrote in an email. Cigna clarified that the proposed policy would not have applied to new patients. 

The health insurance company did not specify in letters to providers why it was increasing scrutiny of modifier 25 claims. Cigna employees routinely review its coverage policies and consider evidence-based medicine, professional society recommendations, Centers for Medicare and Medicaid Services guidance, industry standards and other existing policies when developing guidelines, according to a notice the insurer sent to providers in May.

If enacted, Cigna’s policy would add a $3.30 charge to every claim providers submit with modifier 25, according to the California Medical Association. “This is just an administrative hassle to try to get the physician not to do what they're supposed to do, and entitled to,” said Dr. Ted Mazer, an otolaryngologist in San Diego and former president of the California physicians' organization. 

The American Medical Association pledged to aggressively advocate that providers be paid in full for claims with modifier 25, a spokesperson wrote in an email. 

Health insurance companies may, however, be confronting a real problem. In 2002, 35% of Medicare claims that included modifier 25 either used it improperly or lacked substantiating documentation, according to a Health and Human Services Department Office of Inspector General report published in 2005. The OIG also found that 62% of private insurers had conducted reviews of physician use of modifier 25 within the past four years, and that 41% found high rates of improper use. 

And CMS warned just last year that modifier 25 can be a vehicle for upcoding claims to maximize Medicare payments. "Upcoding occurs when a provider uses modifier 25 to claim payment for a medically unnecessary [evaluation and management] service, an E/M service not distinctly separate from the procedure, or other service provided or an E/M service not above and beyond the care usually associated with the procedure," the agency wrote in a notice to providers. Massachusetts Eye and Ear in Boston settled a lawsuit alleging upcoding with modifier 25 last year and agreed to pay the federal government $2.6 million.

On the other side, providers have successfully challenged insurance companies that allegedly withheld reimbursements for claims with modifer 25.

In 2007, 24 member companies of the Blue Cross and Blue Shield Association, including Horizon, agreed to pay $130 million to settle allegations from 700,000 providers that they inappropriately delayed, diminished or denied payments for medically necessary services, including by systematically cutting payments for modifier 25. 

The lawsuit alleged that insurers programmed their McKesson ClaimCheck editing software to automatically deny modifier 25 claims. Change Healthcare merged with McKesson’s information technology unit in 2017 and adopted the ClaimsXten name for its claims editing software.

“Their software allows them to target claims with the 25 modifier and it facilitates their completely inappropriate request for medical records or downcoding of the service without basis,” Gaines said. 

As part of the settlement, each Blues plan agreed to publicly disclose how its billing practices related to modifier 25 differ from its standard procedures. Blues plans also agreed not to routinely require providers to submit clinical information to substantiate bills for certain claims, establish a physician advisory committees to discuss providers' issues and create an external billing dispute review processes. 

CVS Health’s Aetna, Cigna, Humana and Elevance Health agreed to separate settlements with doctors in 2006 and agreed to publish information on their websites if their billing for modifier 25 differs from standard practices. 

Most insurers conduct audits of providers based on how frequently they bill for modifier 25, said John Gwin, CEO of Auctus Group, a revenue cycle management company. If a provider is billing with modifier 25 above the industry average, insurers will request medical documentation to substantiate the claims, he said. 

“There is a valid argument that modifier 25 may be misused or papered on to every evaluation and management claim and billed improperly,” Gwin said. “I'm sure that happens. But to say, ‘I'm going to require medical records on every single time this modifier is used for every single provider everywhere in the country' is a pretty drastic reaction to that accusation.”