Modifier 25 under the microscope

By Jan Bowers, contributing writer, May 1, 2021

In their relentless drive to minimize costs and maximize profits, insurers are increasingly taking aim at the use of modifier 25, pointing to what they view as excessive and/or inappropriate use. Physicians report modifier 25 when they conduct a separate evaluation and management (E/M) on the same day as a minor procedure (defined as one with a 0- or 10-day global period). “Modifier 25 has been around for a long time, and early on, there was some confusion about how to report it,” said Louis Terranova, assistant director of practice advocacy for the American Academy of Dermatology Association (AADA). “Unless there is documentation to support it, payers may perceive it as overutilized and implement excessive restrictions. Instead of saying they’ll audit its use, what some have done is assume guilt beforehand and develop policies that either eliminate or reduce payment for services reported with modifier 25. In other words, punish the good because of just a few.”

These actions hit dermatologists particularly hard, said Alexander Miller, MD, clinical professor of dermatology at the University of California Irvine and the Academy’s representative to the AMA-CPT Advisory Committee. “Dermatology is the dominant user of modifier 25 compared to other specialties; immediately we are perceived as outliers.” In a DermWorld Cracking the Code column, Dr. Miller cited a 2011 Medicare report showing “specialty-stratified claims data on modifier 25 utilization rates. The winner: dermatology, with 57.9% of claims submitted with modifier 25. Such a distinction will attract the attention of payers and claims adjudicators.”

It shouldn’t come as a surprise that dermatologists are the most frequent users of modifier 25, said Mollie MacCormack, MD, director of Mohs surgery at Solution Health. Dr. MacCormack serves as the Academy’s alternate to the AMA’s Relative Value Unit Committee (RUC), and is also incoming deputy chair of the Academy’s Patient Access and Payer Relations (PAPR) Committee. “Dermatologists practice efficient, patient-centered care,” she remarked. “We have patients who wait a long time to see a dermatologist. They typically come in with multiple concerns, so our standard has been to do as much as we can at one time, to really prioritize the best interest of our patients. The tragedy of these modifier 25 cuts is that we’re being penalized for providing the most effective and efficient services to our patients.”

How did modifier 25 become the scapegoat for payers? Where does reimbursement stand now? What can dermatologists do to ensure fair payment? DermWorld spoke with dermatologists who have engaged in the fight to oppose reductions.

Insurers fixate on “inappropriate use”

The catalyst for targeting modifier 25 payments likely occurred in 2005, when a report from the Department of Health and Human Services Office of the Inspector General concluded that 35% of claims using modifier 25 reported to Medicare didn’t meet program requirements, said Howard W. Rogers, MD, PhD, a dermatologist in private practice in Connecticut and member and former chair of the PAPR Committee. “If you take a deeper dive into that OIG report, you realize that it didn’t really hold water,” he noted. “Many of these claims were inadequately documented, or not returned with documentation when the insurer requested it.” However, the report did spur a number of specialty societies, including the AADA, to undertake “wholesale education of members about proper documentation requirements associated with billing E/M and a procedure on the same day.” 

“Modifier 25 reductions disincentivize efficient care by the penalized physicians because our dermatologists already put their busy and overburdened schedules on hold and perform unscheduled procedures on the same day that they see the patient for an E/M.”

Within a few years, more insurers turned their fire on modifier 25 reimbursement. In 2011, Harvard Pilgrim Health Care in Massachusetts introduced a policy that reduced E/M payment by 50% when billed with modifier 25. The AADA, Massachusetts Academy of Dermatology, and the Massachusetts Medical Society pushed back on this but were unsuccessful. “The policy was controversial at the time, but there was kind of a workaround where payments to some of the large physician groups increased, so it wasn’t a huge financial hit to many practices,” said Dr. MacCormack. “The downside, however, is that the policy was put on the books and then became kind of a precedent for other payers to follow down the road.” In fact, a second Massachusetts insurer, Tufts Health Plan, adopted a similar policy in 2015. Despite pushback from the AADA, the Massachusetts Academy of Dermatology, and the Massachusetts Medical Society, Tufts justified the change “based on industry precedent with Harvard Pilgrim. They also expressed concern that modifier 25 was being used inappropriately; that the E/M service being billed was not actually separate from and unrelated to the procedure being done.”

When insurers aren’t relying on competitive pressure to justify their efforts around modifier 25, they frequently lean on the charge of “inappropriate use” or “work overlap.” The overlap argument is “specious,” said Dr. MacCormack, because the AMA RUC “has already reduced the code valuation of procedures that are typically performed with an associated E/M service. Such codes are reduced both in physician time and practice supplies, and that reduction applies whether or not you bill a concurrent E/M.” Dr. MacCormack and other PAPR Committee members have invested countless hours in face-to-face meetings with insurers, “going through the education we provide to our members, asking for documentation of their claims regarding inappropriate use, asking them to demonstrate where they see work overlap that has not already been addressed. We have often been successful — but not always.” 

While reductions to modifier 25 reimbursement may help boost insurers’ bottom line in a competitive environment, the AADA, in its advocacy efforts, points out the downside to patients and physicians. “Modifier 25 reductions disincentivize efficient care by the penalized physicians because our dermatologists already put their busy and overburdened schedules on hold and perform unscheduled procedures on the same day that they see the patient for an E/M,” said Dr. Rogers. “That avoids excess patient wait time to reschedule appointments. It accommodates patients with urgent problems, and it reduces patient co-pays. It helps ensure that medically necessary procedures and care are being done.” While some modifier 25 denials will be paid on appeal, the burden of filing appeals adds to the administrative costs that weigh on practices. “It does get to a point where it becomes financially unsustainable, and it’s also the principal of the thing,” insisted Dr. MacCormack. “They’re really not following national coding guidelines.”

Successes and setbacks

AADA advocacy has been focused in part on working one-on-one with payers to identify and address their issues around modifier 25, said Terranova. “It involves clarification, education, and an offer to collaborate with payers to find out their true concerns while still advocating on behalf of our members,” he explained. “Sometimes it may be a misunderstanding or misinterpretation of the intent of the code set or how it specifically applies. The nature of what we try to do in payer advocacy is to develop relationships and educate payers, particularly on the unique aspects of dermatology.” 

Often that approach works well, he noted, as when the AADA worked with the Oregon Dermatology Society to successfully oppose a Health Net Medicare Advantage policy in 2020 that would have reduced payment to E/M codes with modifier 25 appended by 50%. But “unfortunately, Blue Cross Blue Shield of Massachusetts went ahead with their policy [effective March 1, 2021] of reducing payment by 50% for either the procedure or the E/M service, whichever is lower,” Terranova said. “They admitted that a key factor in their decision is because some of their competitors have implemented this policy.”

Two major policy wins for the AADA occurred in part due to broad collaboration within the house of medicine. When Anthem, Inc. announced in 2017 that it planned to reduce reimbursement by 50% for services billed with modifier 25, “we understood the existential threat to dermatology associated with this,” said Dr. Rogers. “If Anthem was allowed to do this modifier 25 reduction, because of its national reach, the policy would spread to basically every other insurer across the country. We had to fight this.” The AADA reached out to other specialties that would be severely affected, such as ENT, podiatry, and rheumatology. “We assembled a coalition of 18 affected specialties to sign on to letters to insurers opposing the modifier 25 reduction policy. This coincided very nicely with a meeting of the AMA House of Delegates, and at that point, with 18 specialties saying that the AMA needed to do something about this, the AADA was able to introduce language for a House of Delegates resolution opposing modifier 25 reductions.” 

“As we’re coming out of the pandemic, we’re going to see payers revisit a lot of cost-cutting measures that had been put on the shelf.”

The AMA then went a step further, inviting Dr. Rogers and dermatologist Jack Resneck Jr., MD, (now on the AMA Board of Trustees) to meet with top Anthem executives at AMA headquarters in Chicago, where “we had a long meeting and countered all their arguments in terms of overlapping value and overutilization.” In addition, every state dermatologic society wrote to and met with Anthem, he noted. “We organized and galvanized support, and Anthem reversed course.” In 2019 Anthem did, however, begin denying reimbursement when E/M services are billed with a modifier 25 on the day of a related procedure when there is a recent service or procedure for the same or similar diagnosis on record.

Additionally, a 2018 CMS proposal to overhaul the structure of E/M payments included a reduction in Medicare payments for E/M visits billed with a procedure. The AADA took the lead in appealing directly to HHS and urging CMS to drop this policy. As part of a multi-pronged strategy, the AADA convinced other specialty societies and the AMA to collaborate and ask CMS to delay implementation of their proposed “draconian changes,” said Dr. Miller. CMS agreed to collaborate with a work group established by the AMA CPT committee to work through modification of the E/M coding paradigms. “Dermatology had a representative on that work group, which was huge for us, and we also provided feedback as representatives from the Academy and other dermatology societies on the CPT editorial advisory panel,” noted Dr. Miller. 

“CMS participated in the process, and the culmination of that was the revamped office and outpatient E/M services coding and billing structure that took effect in January 2021. The reduction in modifier 25 payments was not implemented. That’s a huge win for dermatology,” said Dr. Miller. “It’s also a direct consequence of the Academy’s dedication to working with all their other house of medicine brethren, and the Academy’s effectiveness within the AMA.” In tandem with the AMA collaboration, the AADA urged members to contact CMS directly with their objections to the proposal; more than 1,500 Academy members submitted comments of concern.

Grassroots efforts

Despite notching some big victories, dermatologists face an ongoing struggle to defeat insurers’ attempts at slashing modifier 25 reimbursement. Although Blue Cross Blue Shield carriers are separate financial entities, “word gets around, so the reality is that particularly in the northeast, where you have a lot of competing plans in a relatively small space, now all the major private insurers in Massachusetts and Rhode Island are modifier 25 reduction plans,” said Dr. Rogers. “Of course, the medical directors of those plans go to industry conferences and they talk. So, if something is successful at saving money, then it will keep on expanding.” Terranova agreed that BCBS plans across the U.S. are likely to take a hard look at modifier 25 reductions, based on their successful implementation in the northeast. In addition, “As we’re coming out of the pandemic, we’re going to see payers revisit a lot of cost-cutting measures that had been put on the shelf. In my opinion, because payers have expanded their reimbursement for telehealth services, they’re going to be looking at other areas where they can contain medical expenses.”

As in the case of the CMS proposal, dermatologists at the grassroots level can have a powerful voice in pushing back against modifier 25 reduction policies. “Complain at multiple levels to the medical director, write letters to the insurance commissioner and to your local legislators,” urged Dr. Rogers. “Bring this policy that insurers would love to institute rather quietly to the fore and make them explain why it is that they’re trying to make care less value-based and less convenient for their constituents and their patients.” Any Academy member can enlist the help of the AADA’s “great team of advocates who understand the code valuation process,” Dr. Rogers added. “I consider us to be like firemen. We’re available all the time to meet with medical directors and to help explain to them that there’s no overlapping value that they’re paying for.” 

Terranova emphasized the need for dermatologists to be vigilant, “to be aware of any changes in payer payment policies. There should be a notification period that gives you some lead time, but make sure that whoever in the practice is responsible for monitoring policy updates is aware of any change coming down the pike so you can advocate against it.” Terranova pointed out a new Academy tool that members can use to report concerns about payers, “so that our Patient Access and Payer Relations Committee can be aware of what’s happening and shape a response.”

Getting modifier 25 right

In order to be reimbursed properly, dermatologists need to use modifier 25 appropriately and supply adequate documentation. However, according to Dr. Miller, the single most common error dermatologists make with modifier 25 is forgetting to apply it at all. “That’s getting harder to do, because at least some of the practice management systems will prompt you to append a modifier,” he pointed out. “But it demonstrates the importance of having someone in the practice who will look out for unpaid and improperly paid claims, ferret out the cause, and resubmit the bill properly.”

For its part, the Academy has offered its members “a decade of intensive education pertaining to modifier 25, to the point where I think the vast majority of dermatologists are using it appropriately,” said Dr. MacCormack. In addition to webinars and presentations at its annual and summer meetings, the Academy provides an extensive array of resources through its website. The Coding Resource Center includes a brief video that serves as an overview to CPT coding, as well as practical tips, quizzes, and tools. A section devoted to modifiers offers a new, downloadable modifier 25 educational tool that explores appropriate and inappropriate use of the modifier, while a link to the Academy coding community allows members to query experts about specific scenarios.

Repeated denials of appropriate, well-documented claims using modifier 25 should prompt action from the dermatologist, said Dr. Miller. “It may be a matter of appealing and calling attention to one’s state or national dermatology society concerning a broad trend of inappropriate payment. Or it may come to a decision of whether the physician or the practice should remain contracted with that particular insurer.” If dermatologists do nothing to push back, “we’re providing inappropriate reassuring feedback to the insurer that what they’re doing is acceptable. It actually behooves us to contest these policies. We may or may not win, but if we do nothing, it doesn’t help us.”

Additional DermWorld Resources