Supplier Wins $ 2 Million Call to ALJ for Modifier 25, Random Sample | Healthcare Compliance Association (HCCA)


Medicare Compliance Report 30, no. 11 (March 22, 2021)

A cancer center has won its $ 2 million medicare denial appeal in a case involving modifier 25 and the extrapolation of an overpayment. Problems with the random sample underlying the extrapolation helped prevail, according to the March 2 ruling by an administrative law judge (ALJ).

“This is a big win for the oncology group,” said its lawyer, Myla Reizen, of K&L Gates in Miami, Florida. The ALJ decision reinforces the fact that providers can charge for chemotherapy administration services and assessment and management (E / M) services provided to patients on the same day, with the modifier 25, as long as certain criteria are met, she said. “Documentation is the key,” she noted. The ruling also shows how the extrapolation can be challenged, although there are limitations built into the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003.

Medicare does not pay physicians or other providers for E / M services (for example, 99213-99215) performed on the same patient on the same day as a procedure, unless the E / M services are significant and separately identifiable. When the services are important and separately identifiable, providers add modifier 25 and receive an additional reimbursement. Misunderstanding and / or misuse of the modifier has made it an area of ​​billing compliance risk. Modifier 25 has been at the heart of several False Claims Law and Civil Monetary Penalties (CMP) regulations and is the subject of a CMS Comparative Billing Report. For example, Memorial Hermann Health System in Houston agreed to pay $ 6.4 million to settle a CMP case[1] on claims which included codes for history and physique and modifier 25.

According to the ALJ decision, however, the cancer center was on a solid footing in its use of the modifier 25. The decision arose out of an audit performed by a Zone Program Integrity Contractor (ZPIC). The cancer center, which preferred not to be identified, appealed the refusals and received partially favorable decisions upon redetermination and reconsideration. The unfavorable findings were appealed to the ALJ.

“There is sufficient evidence to support Medicare coverage for E / M services, hydration therapy, injections provided to all beneficiaries. The services provided were medically reasonable and necessary… Therefore, the appellant is entitled to reimbursement under Medicare Part B, ”said ALJ. Further, she said, “ZPIC did not use a random sample” and therefore any extrapolation from that sample is invalid under the Health Insurance Program Integrity Manual (ch. 8. § 8.4.2).[2]

For example, a patient with breast cancer presented to her doctor’s office for follow-up. Previously, she had undergone a mastectomy and several years of chemotherapy, but the cancer came back and she began treatment with a new drug. The doctor reviewed the findings and impressions, which were breast cancer metastatic to the bone.

In the decision, the ALJ noted that the recipient received chemotherapy on the same day as E / M services “because she needed monthly disease assessments due to the progression of her disease.” When the patient was in the doctor’s office, she was assessed for bone pain and a urinary tract infection which were treated with antibiotics. Its drugs have been tested for drug interactions with chemotherapy. The ALJ concluded that the evaluations were for conditions identifiable separately from the chemotherapy administered. Therefore, modifier 25 has been correctly appended to claim.

The sample approved by ALJ was not statistically valid

The cancer center also challenged the ZPIC sampling and extrapolation. Although the ALJ ultimately rescinded the extrapolation, its reasoning was complicated.

The MMA only allows extrapolation of overpayments based on statistical sampling when there is “a determination of a sustained or high level of payment error, or documentation indicating that the intervention educational institution failed to correct the payment error ”, according to the Health Insurance Program Integrity Manual.

ZPIC had reopened its initial findings and said it found good reasons for statistical sampling. “Based on the alleged high level of payment errors in the sample, ZPIC determined that it was also allowed to use the extrapolation,” the ruling says. But the ALJ noted that this was outside its jurisdiction because the MMA states that “by law, the determination that there is a sustained or high level of payment error is not subject to administrative review or judicial “, as the manual explains.

The validity of the sample was another story. According to the expert used by the cancer center for statistical sampling and extrapolation, a sample was not selected “in a statistically valid random manner, making it impossible to extrapolate correctly”. ALJ agreed, saying ZPIC did not use consistent formulas for estimation and extrapolation. As a result, the sample was not statistically valid.

The ALJ noted that “at the review stage, the contractor sent the appellant inaccurate and conflicting information, including numerous review notes and correction letters. The number of errors made in the early stages of this appeal calls into question the accuracy and validity of the overpayment amount. There is clear evidence that the methodology for sampling and extrapolating entrepreneurs is hopelessly flawed. Beyond the obvious problems of due process created by the incomplete file, and beyond the numerous calculation errors of the contractor already identified during this appeal process, the real statistical validity of the sample such as it was drawn and performed demonstrates actual errors in methodology that affect the amount of the overpayment.

1 Nina Youngstrom, “Health System Pays $ 6.4 Million to Fix Preoperative H&P Case; The CoP is not billable ”, Medicare Compliance Report 28, no. 41 (November 18, 2019),
2 CMS, “Chapter 8 – Administrative actions and penalties and statistical sampling for estimating overpayments”, Health Insurance Program Integrity Manual, Ed. 100-08, revised October 9, 2020,

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