Medicare Billing Guide: Appeals, Edits, NPI and More

This guide covers eleven Medicare billing topics: appeals, duplicate claim rules, EHR and PQRS incentives, incident to services, Local Coverage Determinations, Medically Unlikely Edits, the National Provider Identifier, prepayment review of E/M services, remittance advice terms, sequestration and the global surgical package.

Section 1: Appeals

If you have received a claim denial from your Medicare contractor, you have the right to submit an appeal. If you do not take assignment on the claim, your appeal rights can be limited.

When an appeal is not needed, see “Clerical reopening” at the end of this section.

First level of appeal: Redetermination

A redetermination is an examination of a claim by fiscal intermediary (FI), carrier or MAC personnel who are different from the personnel who made the initial claim determination. The appellant (the individual filing the appeal) has 120 days from the date of receipt of the initial claim determination to file an appeal. A redetermination must be requested in writing. A minimum monetary threshold is not required to request a redetermination.

Second level of appeal: Reconsideration

A party to the redetermination may request a reconsideration if dissatisfied with the redetermination decision. A qualified independent contractor (QIC) conducts the reconsideration. The QIC reconsideration process allows for an independent review of medical necessity issues by a panel of physicians or other health care professionals. A minimum monetary threshold is not required to request a reconsideration.

Third level of appeal: Hearing by an administrative law judge (ALJ)

If at least $140 remains in controversy following the QIC’s decision, a party to the reconsideration may request an administrative law judge (ALJ) hearing within 60 days of receipt of the reconsideration decision. Appellants must send notice of the ALJ hearing request to all parties to the QIC reconsideration. ALJ hearings are conducted by the Office of Medicare Hearings and Appeals (OMHA).

Fourth level of appeal: Review by the Medicare Appeals Council

If a party to an ALJ hearing is dissatisfied with the ALJ’s decision, the party may request a review by the Medicare Appeals Council. There are no requirements regarding the amount of money in controversy. The request for Medicare Appeals Council review must be submitted in writing within 60 days of receipt of the ALJ’s decision, and must specify the issues and findings that are being contested.

Fifth level of appeal: Judicial review

If $1,400 or more is still in controversy following the Medicare Appeals Council’s decision, a party may request judicial review before a Federal District Court judge. The appellant must request a Federal District Court hearing within 60 days of receipt of the Medicare Appeals Council’s decision.

The Medicare Appeals Council’s decision will contain information about the procedures for requesting judicial review.

Additional resources

The CMS websites have information on the five levels of the Part A and Part B appeals process:

CMS appeals web resources
CMS appeals process flowchart
MLN brochure: The Medicare Appeals Process

CMS Internet-Only Manual, Publication 100-04 (Medicare Claims Processing Manual):

Clerical reopening

Minor errors or omissions on some Part B claims can be corrected for reprocessing through the clerical reopening process. There are two ways to start this process:

By telephone. The interactive voice response (IVR) system lets providers request telephone reopenings on certain claims.
In writing. Use your contractor’s clerical reopening request form.

Common clerical errors include:

Mathematical or computational mistakes
Transposed procedure or diagnosis codes
Inaccurate data entry
Misapplication of a fee schedule
Computer errors
Claims denied as duplicates that the party believes were incorrectly identified as duplicates
Incorrect data items, such as provider number, modifier or date of service

Section 2: Duplicate Claim Rules

Each Medicare claims processing system contains criteria to evaluate all claims received for potential duplication. The claims fall into two categories: exact duplicate or suspect duplicate. The Medicare contractor processes each category differently.

CMS has recently updated the Medicare Claims Processing Manual, Chapter 1, Section 120, “Detection of Duplicate Claims,” based on change request (CR) 8121.

The claims processing system automatically denies or rejects an exact duplicate claim, for example when applicable modifiers are missing.

For exact duplicate denials, professional providers have appeal rights, but institutional and DME providers do not.

If the initial system review deems a claim a suspect duplicate, the claim is suspended for further review by the Medicare contractor.

If a suspect duplicate is denied after review, all providers have the right to appeal. See Section 1: Appeals.

Due to the nature of the service, some claims may only appear to be duplicates. Proper coding of the service with the applicable condition codes or modifiers identifies the claim as a separate payable service, not a duplicate. An example is modifiers LT and RT for bilateral procedures.

Advanced medical practice management billing software like Iridium Suite from Medical Business Systems prevents duplicate claim submissions. A configurable claim scrubber, like the one in Iridium Suite, checks each service entered and alerts the user immediately if the same service is already on record. The user can then decide whether the service is a true duplicate or qualifies for an appropriate modifier.

The table below shows how Medicare identifies duplicate claims.

Provider of service	Exact duplicate: the claim matches identically on	Suspect duplicate
Institutional	1. Health insurance claim (HIC) number; 2. Type of bill; 3. Provider identification number; 4. From date of service; 5. Through date of service; 6. Total charges (on the line or on the bill); 7. HCPCS, CPT-4 or procedure code and modifiers	The claim matches on: 1. Beneficiary information; 2. Provider identification; 3. Same or overlapping dates of service
Professional	1. HIC number; 2. Provider number; 3. From date of service; 4. Through date of service; 5. Type of service; 6. Procedure code; 7. Place of service; 8. Billed amount	The criteria for identifying suspect duplicate claims from physicians and other suppliers vary by the type of billing entity, the type of item or service billed, and other relevant criteria.
DME	1. HIC number; 2. From date of service; 3. Through date of service; 4. Place of service; 5. HCPCS; 6. Type of service; 7. Billed amount; 8. Supplier	The criteria for identifying suspect duplicate claims from physicians and other suppliers vary by the type of billing entity, the type of item or service billed, and other relevant criteria.

CMS issued the official instruction, CR 8121, to fiscal intermediaries, carriers, A/B MACs, RHHIs and DME MACs.

Section 3: Incentives for EHR and PQRS

Ideally, a physician’s only responsibility is to provide the best care to patients. But medicine is also a business, so reimbursement is always a concern.

Providers of Part B services paid under the Medicare Physician Fee Schedule (MPFS) can increase reimbursement and avoid future penalties by taking part in the Medicare incentive programs for EHR and PQRS reporting. Below is guidance on both programs.

PQRS

To qualify for Medicare PQRS incentive payments, eligible professionals (EPs) must sufficiently report on the applicable quality measures. The 2013 PQRS program has several hundred measures.

To work through this process, start with the “Getting Started” page of the CMS PQRS website.

Advanced practice management software like Iridium Suite has an integrated PQRS claim scrubber. The practice can configure the billing system to prompt the physician to set up PQRS measures for each patient. The claim scrubber also recognizes which billing codes are potential PQRS denominators and suggests the PQRS numerator codes to add to the claim. The biller accepts these suggestions, and the claim scrubber adds the proper PQRS charge codes to the claim.

EHR incentive program

To qualify for Medicare EHR incentive payments, EPs must use certified EHR technology in a meaningful way. EPs demonstrate meaningful use by reporting clinical quality measures (CQMs) as well as the meaningful use measures.

Providers who want to purchase certified EHR software can find a list of options on the CMS website.

In 2013, EPs may satisfy the meaningful use objective to report CQMs to CMS in either of two ways:

Through the Medicare and Medicaid EHR Incentive Programs’ web-based Registration and Attestation System. EPs who report CQMs this way must still report individual quality measures or measure groups through one of the four PQRS reporting options to also take part in PQRS.
Through the PQRS-Medicare EHR Incentive Pilot, which uses the 2013 PQRS EHR measure specifications. EPs in the pilot may submit their meaningful use objectives through the CMS Attestation System, then complete a single submission of CQMs to receive credit for both programs.

EPs who successfully take part in PQRS and the EHR program can receive an incentive in 2013 and avoid the 2015 payment adjustment for both programs.

CMS is simplifying participation in both programs for 2014 and beyond by aligning several key components.

Changes to PQRS and EHR in 2014

PQRS and the EHR program will align on the same set of eCQMs (64 total) and the same electronic specifications.
All Medicare EPs beyond their first year of demonstrating meaningful use will be required to report their CQM data to CMS electronically for the EHR program.
Submitting data electronically with 2014 certified EHR technology will meet the standards for both the EHR and PQRS programs.
Participating EPs will have the option to submit patient-level data (QRDA I) or aggregate data (QRDA III) through the same electronic reporting mechanism for both programs.

Section 4: Incident to Services

Many terms in the rules for medical billing seem to belong in a law book more than a billing guide.

That is how I feel when reading about billing “Services and Supplies Furnished Incident to a Physician’s/NPP’s Professional Service.” To make it clearer for myself, and I hope for you, I have pulled out the basics from about 10 pages in section 60 of Chapter 15, “Covered Medical and Other Health Services,” of the Medicare Benefit Policy Manual.

Let’s start with an easy concept. An incident to service or supply is a service or supply not covered in one of the other benefit categories. The other benefit categories are:

Drugs and biologicals
Sleep disorder clinics
Diagnostic X-ray, diagnostic laboratory and other diagnostic tests
X-ray, radium and radioactive isotope therapy
Surgical dressings, splints, casts and other devices used for reductions of fractures and dislocations
Durable medical equipment
Prosthetic devices
Leg, arm, back and neck braces, trusses, and artificial legs, arms and eyes
Therapeutic shoes for individuals with diabetes
Dental services
Clinical psychologist services
Clinical social worker (CSW) services
Nurse midwife (CNM) services
Physician assistant (PA) services
Nurse practitioner (NP) services
Clinical nurse specialist (CNS) services
Outpatient rehabilitation therapy services (physical therapy, occupational therapy and speech-language pathology services) under medical insurance

The details of the services in these benefit categories are in Chapter 15 of the CMS Medicare Benefit Policy Manual.

That narrows things down quite a bit. Now let’s look at what makes a service or supply “incident to.” It is:

Integral to the performance of the physician’s* professional service
Commonly rendered without a separate physician* fee and furnished in physician’s* offices or clinics
- Supplies commonly considered “incident to” include gauze, ointments, bandages and oxygen.
Furnished by the physician or by auxiliary personnel** under the physician’s* direct supervision***
- Services of auxiliary personnel are considered incidental to a physician service when they assist in rendering the service and the charge is included in the physician’s bill. This also applies when auxiliary personnel perform a later service as part of a course of treatment the supervising physician started.

*Physician includes physician, physician assistant, nurse practitioner, clinical nurse specialist, nurse midwife and clinical psychologist.

**Auxiliary personnel are personnel, whether employee, leased employee or independent contractor, who act under the supervision of a physician. They may include non-physician practitioners: certified nurse midwives, clinical psychologists, clinical social workers, physician assistants, nurse practitioners and clinical nurse specialists.

***Direct supervision means the physician must be present in the office suite and immediately available to assist the auxiliary personnel in performing the service.

Special rules for homebound patients and incident to services

In medically underserved areas, the shortage of medical personnel to provide certain services to homebound patients allows an exception to the direct supervision rule. In these circumstances, nurses, technicians and other physician extenders may provide these services under general supervision* instead of direct physician supervision.

*General supervision means the physician is not physically present at the place of residence when the service is performed, but the service is under the physician’s overall supervision and control.

Services that can be covered incident to under general supervision include injections, venipuncture, EKGs, therapeutic exercises, insertion and irrigation of a sterile catheter, changing of catheters and collection of catheterized specimens for urinalysis and culture, dressing changes, replacement or insertion of nasogastric tubes, removal of fecal impaction, sputum collection for stain and culture, paraffin bath therapy for hands or feet, teaching and training the patient to care for a colostomy, ileostomy or tracheostomy, urine testing, care of diabetic feet, and blood pressure monitoring.

The specific criteria for “Services Incident to a Physician’s Service to Homebound Patients under General Physician Supervision” are:

The patient is homebound*.
The service is an integral part of the physician’s service to the patient and is done under general physician supervision.
The physician orders the service, maintains contact with the employee and keeps all responsibility for the service.
The physician or clinic has an associated expense, and its bill includes the fee for the service.
The service is medically necessary and reasonable and is not available from a home health agency.

*A patient is considered homebound if the patient has a normal inability to leave home, so that leaving home would require a considerable and taxing effort.

Section 5: Local Coverage Determinations (LCDs)

Each fiscal intermediary (FI) has the authority to produce its own Local Coverage Determination (LCD), based on national guidelines. The LCD defines the circumstances under which a procedure is covered under the patient’s Medicare benefits. As new procedures are developed, the FI creates an LCD for them. The FI also reviews existing LCDs to see whether changes are needed based on treatment advances, statistical data, industry standards and other factors.

How do LCDs affect you? If a procedure is planned but the criteria of the LCD are not met, the claim will be denied quickly, and appeals can take months. If you know the parameters of the LCD, you may be able to avoid the denial, or at least have the exact medical documentation that addresses the specific reason for the potential denial. Most LCDs contain a “medically necessary” clause. If your documentation proves that the case is an exception to the rule and the procedure is medically necessary, you will likely win your appeal.

The websites for all FIs include an LCD search. Enter a CPT or HCPCS code to get the most recent version of the LCD. You can often sign up for automated email updates on new or changing LCDs. This also lets you take part in creating and changing LCDs, because the FI offers comment periods before an LCD becomes active.

At the time of writing, these contractors published LCDs on their own websites:

Cahaba Government Benefit Administrators
First Coast Service Options
National Government Services
NHIC
Noridian Administrative Services
Novitas Solutions
Palmetto GBA (J1)
Palmetto GBA (J11)
Trailblazer Health
Wisconsin Physicians Service (J5)
Wisconsin Physicians Service (J8)
Wisconsin Physicians Service (legacy)

Section 6: Medically Unlikely Edits (MUEs)

Medical billing uses a large number of acronyms. One of the less common ones is MUE, the Medically Unlikely Edit.

An MUE is an automated claim processing edit. It compares the number of units submitted for a procedure code against the maximum units typically reported for that code on the vast majority of appropriately reported claims.

The edit applies to services billed by a single provider or supplier to a single beneficiary on the same date of service.

CMS developed the MUE program to reduce the paid claims error rate for Medicare claims. These errors come from causes such as:

Clerical entries
Incorrect coding based on:
- Anatomic considerations
- Procedure code descriptors
- Procedure coding instructions
- Established CMS policies
- The nature of a service or procedure
- Unlikely clinical treatment

A listing of most MUE values is on the CMS website.

CMS does not publish MUE values for some codes. Some MUE values are confidential.
CMS fiscal intermediaries and Part A/Part B Medicare administrative contractors (A/B MACs) process claims with the fiscal intermediary shared system (FISS). They apply MUEs to each line of a claim rather than to the entire claim. If a procedure code is reported on more than one line, each line with that code is checked against the MUE separately. The contractor denies the entire claim line if the units of service (UOS) on the line exceed the MUE value for the procedure code on that line.
- For example, CPT code 77300 is submitted on one service line for 11 units. If the MUE is 10, all 11 units are denied, not just the one unit over the limit.

When you need to report medically reasonable and necessary units of service above an MUE value, you can report the same code on separate lines of the claim with modifiers. These modifiers serve this purpose:

76: Repeat procedure by the same physician
77: Repeat procedure by another physician
Anatomic modifiers (for example RT, LT, F1, F2 and 50)
91: Repeat clinical diagnostic laboratory test
59: Distinct procedural service (use modifier 59 only if no other modifier describes the service)

Effective April 1, 2013, CMS converted some claim line MUEs to date of service (DOS) MUEs. The total UOS from all claim lines for a HCPCS or CPT code with the same date of service are added together and compared to the MUE value. Claims denied based on DOS MUEs may be appealed through processes similar to those for claim line MUE denials. CMS does not publish which codes have DOS MUEs. Because all UOS for a code on all claim lines with the same date of service are added together, reporting additional UOS on separate lines with a modifier will not result in payment of UOS above the MUE value.

Section 7: National Provider Identifier (NPI)

What is the NPI and how is it used?

The NPI is a Health Insurance Portability and Accountability Act (HIPAA) Administrative Simplification Standard. It is a unique identification number for covered health care providers. Covered health care providers and all health plans and health care clearinghouses must use the NPI in the administrative and financial transactions adopted under HIPAA. This means all individual health care providers, health care groups and health care facilities must apply for an NPI to use on all their transactions with health care payers.

How do I apply for an NPI?

There are three ways to apply:

Online at the NPPES website.
On paper, with Form CMS-10114. You can also request the form from the NPI Enumerator by calling (800) 465-3203, by emailing customerservice@npienumerator.com, or by writing to NPI Enumerator, P.O. Box 6059, Fargo, ND 58108-6059.
Through Electronic File Interchange (EFI). You may agree to have an EFI Organization (EFIO) submit application data for you (a bulk enumeration process) if an EFIO asks permission to do so.

What is the difference between an NPI and these other numbers?

Tax ID or EIN. The Tax ID or EIN is the number issued to a business for tax purposes. Multiple NPIs can be linked to one Tax ID. For example, in a medical practice with 3 providers, each provider and the practice entity will have an NPI, for a total of 4, but the IRS issues only one Tax ID.

UPIN. The UPIN (Unique Physician Identification Number) was a six-character alphanumeric identifier Medicare used to identify doctors in the United States before the NPI. UPINs were discontinued in June 2007, so they have no role in any health care transaction today.

PIN or PTAN. A PIN (Provider Identification Number) is a unique number a specific payer, such as Medicaid or Blue Cross Blue Shield, issues to identify a health care provider, group or facility. PINs are becoming obsolete in many cases, and the NPI has replaced them on health care transactions. A PTAN (Provider Transaction Access Number) is an identification number used only by Medicare. The individual and the group each receive a PTAN when they apply to a Medicare contractor. Only the NPI can be submitted on claims, but the PTAN is directly linked to the provider’s or supplier’s NPI. You need both the PTAN and the NPI when you contact the Medicare contractor about claims, enrollment issues and similar matters.

Where can I look up NPI numbers?

You can search the complete NPI Registry. It lets you search for both individual and organizational providers by name, address, or NPI if you already know it. This is a public website, so anyone can search for NPI numbers. They are not private or confidential.

What is the difference between a group NPI and an individual NPI?

When an individual provider is not a sole practitioner, the individual NPI must be linked to the group NPI along with the other providers in the practice. When services are rendered, payment goes to the group, not the individual. Specific fields on the HCFA 1500 form show this. Under the 5010 standard, field 24J contains the NPI of the rendering individual provider and field 33 contains the NPI of the billing group.

For more information, see the National Provider Identifier Standard (NPI) page on the CMS website, the Medicare Learning Network (MLN) booklet “The National Provider Identifier (NPI): What You Need to Know,” and Chapter 10 of the Medicare Program Integrity Manual (Publication 100-08) in the CMS Internet-Only Manuals.

Section 8: Prepayment Review of Evaluation and Management Services

Evaluation and management (E/M) services are the most commonly provided services and the most likely to be miscoded. CMS and individual MACs have published many guides, fact sheets and even an interactive coding tool to help providers select the proper level of E/M service. These resources were helpful at the time:

Documentation Guidelines for Evaluation and Management (E/M) Services (CMS)
Evaluation and Management Services Guide (CMS)
E/M Review Checklist and Score Sheet Tool (Palmetto GBA)

Palmetto GBA, one of the MACs, published the results of its prepayment reviews of E/M codes 99204 and 99205. This made me ask whether other MACs were reviewing the same or similar services in their jurisdictions. Some providers may not know they are under prepayment review when they pass their charge codes to office staff. So I researched each MAC website and compiled a list of locations and procedures. These procedures are performed at high volume and have a high error rate. By reviewing the criteria for these codes, a provider can make sure he or she is compliant when choosing a code.

MAC	Jurisdiction and states	CPT codes	Specific provider types affected
Cahaba Government Benefit Administrators	J10: Alabama, Georgia, Tennessee	99214-99215, 99223, 99233	Unspecified
Cigna Government Services	J15: Ohio	99310	Unspecified
First Coast Service Options	J9: Florida	99201-99205 and 99211-99215 when billed with modifier 24	Unspecified
First Coast Service Options	J9: Florida	99215	General practice, optometry, osteopathic manipulative medicine, pediatric medicine, podiatry
National Government Services	J6: Illinois, Minnesota, Wisconsin	99205, 99215, 99223, 99233	Unspecified
National Government Services	J13: Connecticut, New York	99223; 99233; 99215	99223: general surgery. 99233: cardiology and gastroenterology. 99215: hematology/oncology
Palmetto GBA	J1: Northern California	99204; 99205	99204: family practice and ophthalmology. 99205: internal medicine and neurology
Palmetto GBA	J1: Southern California	99204; 99205	99204: otolaryngology. 99205: internal medicine and neurology
Palmetto GBA	J11: North Carolina, South Carolina, Virginia, West Virginia	99233	Unspecified
Wisconsin Physicians Service Insurance Corp.	J8: Indiana	99233	Unspecified

Section 9: Remittance Advice Terminology

This guide helps you read a Medicare remittance advice, also known as an explanation of benefits (EOB), so you can correctly apply the payment, the contractual write-off and the patient responsibility.

Medicare term	Definition	Terms used by other payers
Remittance Advice or Notice	The title of the report the payer issues summarizing how the claim was processed.	Explanation of Benefits, Explanation of Payment, Remittance Advice, Statement of Payments
Billed / Billed Amt	The fee charged for the services.	Charge Amount, Charges, Requested Amount, Submitted Expenses
Allowed / Allowed Amt	The amount of the fee allowed under the contracted rate with the payer.	Eligible Expense or Amount, Approved, Covered Charges
Deductible / Deductible Amt	Shows whether any of the allowed fee was applied to an outstanding deductible on the patient’s policy.	Annual Deductible
Coins / Coins Amt	The amount of the allowed fee the patient must pay under the policy terms.	Customer or Patient Liability, Out of Pocket Amount (OOP). Commercial payers may also show a copayment on a service, which is a flat rate charged regardless of the fee.
Grp/RC-Amt / Total RC Amt	Grp stands for group and RC for reason code. These codes give the reason for any amount the payer did not pay. See the section below for details.	Remark Codes, Adjustment Group and Reason Code, Not Covered Reason, Payment Codes
Prov Pd / Prov Pd Amt	The amount paid for the claim.	Amount Paid, Payment, Benefits Paid, Pay Amount, Net $, Total Benefit, Policy Pays
HIC	The patient’s health insurance identification number.	Subscriber ID, Member Number, Policy Number
ICN	The Internal Control Number the payer assigns to the claim when it is processed. The payer uses it for internal tracking.	Claim Number, Payer Claim Control Number
Pt Resp	The amount the patient can be billed for the services on the claim.	Customer or Patient Liability, Out of Pocket Amount (OOP). This is typically the total of the deductible, coinsurance and copayment amounts applied to the services.
Prov Adj (Prev Pd, Interest, Late Filing Charge)	Used when the payer applies additional adjustments to the provider’s portion of the payment. It may increase the base payment, as when interest is paid. It decreases the base payment if part of the service was previously paid on another ICN.	Penalty, Recoupment

Claim adjustment group codes

A claim adjustment group code is two letters that assign responsibility for a claim adjustment on the insurance explanation of benefits.

Code	Full description	Indicated action
CO	Contractual Obligation	The amount of the fee that must be written off as uncollectable under the provider’s agreement with the payer. It most commonly shows the amount billed over the payer’s allowed fee schedule amount. A contracted provider cannot pass contractual obligation amounts on to the patient.
CR	Corrections and Reversal	Mainly used to show that the payer has reprocessed a service. It applies when a denial was overturned and additional payment was sent. It can also be used when the payer reverses an original payment, which tells the provider about an overpayment on the service.
OA	Other Adjustment	A “miscellaneous” category. The attached reason code is the key to understanding the effect of this adjustment and how to process it. It is typically seen on a secondary payer EOB to show the amount the primary payer paid and how that affected the payment issued.
PI	Payer Initiated Reductions	A payer may use this code to explain money withheld from the claim payment. If a provider owes the payer a refund, the payer can withhold payments on new services.
PR	Patient Responsibility	Probably the most logical of the codes. Any amount to be passed on to the patient, or in some cases to a secondary payer, has this indicator. It applies to deductible, copayment and coinsurance.

Claim adjustment reason codes and remark codes

Group codes are combined with claim adjustment reason codes, which can be numeric or alphanumeric and range from 1 to W2. Claim adjustment reason codes communicate an adjustment. That means they must explain why a claim or service line was paid differently than it was billed. If there is no adjustment to a claim or line, there is no adjustment reason code.

Washington Publishing Company published the complete list of claim adjustment reason codes on its website.

Each remark code corresponds either to a standard message in the Remittance Advice Remark Code list or to a payer-specific message shown on the EOB.

Washington Publishing Company also published the complete list of remark codes.

Section 10: Sequestration

Here are five things you should know about sequestration.

What is sequestration?

It is the mandatory 2% payment reduction in the Medicare fee-for-service (FFS) program required by the Budget Control Act of 2011.

Who does it affect?

All providers of medical services reimbursed under the Medicare FFS program (Part A and Part B) are subject to the 2% reduction. This includes entities that bill for durable medical equipment (DME), prosthetics, orthotics and supplies.

When does it begin?

It applies to Medicare FFS claims with dates of service or dates of discharge on or after April 1, 2013. Reduced claim payments for DME, prosthetics, orthotics and supplies are based on whether the date of service, or the start date for rental equipment or multi-day supplies, is on or after April 1, 2013.

How is the 2% calculated?

The reduction is taken from the calculated payment amount, after the approved amount is determined and the deductible and coinsurance are applied. For example:

A provider bills a service with an approved amount of $100.00.
Medicare normally would pay 80 percent of the approved amount ($100.00 x 80 percent = $80.00).
The patient is responsible for the remaining 20 percent coinsurance amount of $20.00 ($100.00 - $80.00 = $20.00).
Because of the sequestration reduction, 2 percent of the $80.00 calculated payment amount is not paid ($80.00 x 2 percent = $1.60), so the payment is $78.40 instead of $80.00.

The 2% reduction currently appears on the remittance as claim adjustment reason code (CARC) 223. CARC 223 is the adjustment code for a mandated federal, state or local law or regulation that is not already covered by another code and is mandated before a new code can be created. CMS has developed a new CARC for payment reductions due to sequestration: 253, “Sequestration - Reduction in Federal Spending.” This code will be implemented January 6, 2014.

Where do I get more information?

Contact your Medicare Administrative Contractor for more information. CMS issued documentation on sequestration on March 8, 2013.

Section 11: The Global Surgical Package and E/M Services

A global surgical package is the CMS payment policy that may “bundle” payment for a related evaluation and management service into the payment for a surgical procedure. The reason for the bundling is simple: the E/M service is a necessary part of the larger surgical service.

The global period has 7 designations. Each relates to the specific surgical service performed, and each is shown in the Medicare Physician Fee Schedule Database (MPFSDB). You can search by a single HCPCS code, a list of up to five codes, or a range of codes. When you download the results to an Excel spreadsheet, the global period indicator is in column AL.

The 7 categories are:

3 numeric indicators: 0, 10 or 90 days, which set the post-operative timeline considered the “global period.” CMS gives these details for each period:

000: Endoscopic or minor procedure with related preoperative and postoperative relative values on the day of the procedure only included in the fee schedule payment amount. E/M services on the day of the procedure are generally not payable.
010: Minor procedure with preoperative relative values on the day of the procedure and postoperative relative values during a 10-day postoperative period included in the fee schedule amount. E/M services on the day of the procedure and during the 10-day postoperative period are generally not payable.
- Calculate the global period by counting the day of surgery and the 10 days after it, for a total of 11 days.
090: Major surgery with a 1-day preoperative period and a 90-day postoperative period included in the fee schedule payment amount.
- Calculate the global period by counting the day before surgery, the day of surgery and the 90 days after it, for a total of 92 days.

4 alphabetic codes: MMM, XXX, YYY and ZZZ, which give additional information about the status of surgical codes under the CMS global surgery payment guidelines:

MMM: Maternity codes. The usual global period does not apply.
XXX: The global concept does not apply.
YYY: The carrier determines whether the global concept applies and sets the postoperative period, if appropriate, at the time of pricing.
- Each FI or MAC sets its own rules.
ZZZ: The code is related to another service and is always included in the global period of the other service.
- This is used for codes typically called “add-on” codes, which are always billed with another service.

This section is a starting point for understanding the global surgery rules that affect billing for evaluation and management services. To learn more, see the CMS MLN booklet on global surgery and Chapter 12 of the Medicare Claims Processing Manual.

What has changed since this was written

Fiscal intermediaries and carriers are gone. Medicare Administrative Contractors (MACs) now process all Part A and Part B claims, and several contractors named here, such as Cahaba, NHIC and Trailblazer, no longer hold Part B jurisdictions. LCDs for every contractor are now searched in the CMS Medicare Coverage Database. See how LCDs affect you.
Appeal dollar thresholds change every year. The $140 ALJ and $1,400 judicial review amounts were 2013 figures. Check the current amounts on the CMS appeals pages and in our guide to appealing a Medicare denial.
HIC numbers were replaced by MBIs. Medicare replaced the Social Security-based HIC number with the 11-character Medicare Beneficiary Identifier between 2018 and 2020. See HIC number, MBI and ICN.
PQRS and the EHR Incentive Program became MIPS. PQRS ended after 2016, and since 2017 quality reporting and EHR use (now called Promoting Interoperability) are part of the Merit-based Incentive Payment System. See MIPS 2026 for radiation oncology.
Direct supervision can be virtual. Starting January 1, 2026, CMS allows direct supervision for most incident to services through real-time audio and video. See incident to billing.
CMS now publishes how each MUE is applied. The MUE tables list an adjudication indicator (MAI 1, 2 or 3) that shows whether an edit is a claim line edit or a date of service edit. See medically unlikely edits.
Modifier 59 has more specific alternatives. Since January 1, 2015, modifiers XE, XS, XP and XU can be used in place of 59 to describe a distinct service. See CMS says modifier 59 needs an assist.
E/M code selection changed. Since January 1, 2021, office and outpatient E/M levels are chosen by medical decision making or total time, and 99201 was deleted. The prepayment review lists in Section 8 are historical.
The paper claim is the CMS-1500 (02/12). Field 24J still holds the rendering NPI and field 33 the billing NPI. See the CMS-1500 form box by box and NPI numbers in medical billing.
Sequestration continued, with a pause. It was suspended from May 1, 2020 to March 31, 2022, and has been back at 2 percent since July 1, 2022. It appears on the remittance as CO-253. See Medicare sequestration.
Code lists moved to X12. Claim adjustment reason codes and remark codes are now published by X12. See remark codes and GRP/RC-AMT.

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