Hot Topics in the 2027 Physician Fee Schedule – Modifier 25 & Overlapping Services, Part 1
On July 14, CMS released its proposed rule for the 2027 Medicare physician fee schedule (PFS). Among the more debated proposals is a policy to reduce payment when procedures are performed on the same day as an outpatient evaluation and management (E/M) service. This article introduces the proposal, presents data on the services and specialties most affected, and describes the central areas of controversy.
It has long been Medicare policy that when multiple procedures are performed on the same day, the additional procedures may be subject to a payment reduction. Based in part on data and analysis performing during the creation of the relative value unit (RVU) system, this reduction is generally accepted to be 50% of the value of the additional service. This concept is perhaps easiest to understand in the context of the operating room. If a surgeon removes a large abdominal tumor but must also perform a right colectomy because the tumor has invaded the colon, the surgeon receives credit for both the mass excision and the colectomy. However, the colectomy is not valued at its full rate because some preoperative and postoperative work overlaps, and there may be modest time savings associated with performing the procedures during the same operative session.
When a procedure is performed on the same day as a clinic visit, however, Medicare has historically paid the full value of both services as long as the clinician attests that the work associated with the E/M service is significant and separately identifiable from the procedure. The physician does this by appending modifier 25 to the E/M code.
For example (Table 1), if a patient presents to a colorectal surgeon’s office for evaluation of bright red blood per rectum, the surgeon will perform a comprehensive history and physical examination and supplement the evaluation with an anoscopy—a small scope inserted through the anus to allow more detailed visual inspection. Under the current CMS proposal, the wRVUs associated with the lesser-valued service—in this case, the anoscopy—would be reduced by half, decreasing the total valuation of the encounter from 3.14 to 2.87 wRVUs (8.6% total reduction).
Using the 2024 Medicare 5% Carrier File, we found that nearly 4,400 procedures in the Medicare PFS would be eligible for this policy, although only 1,458 would be affected based on some proportion of their utilization occurring on the same day as an office-based E/M service. While many of these services are uncommon, several procedures and specialties would be substantially affected. Table 2 presents the 20 procedures most affected by the policy based on the volume of services impacted. Table 3 presents the 25 physician specialties most affected based on overall volume, along with the three most common impacted procedures within each specialty. Dermatology would experience a disproportionate impact from the proposed change, although effects would extend broadly across many office-based specialties.
The comment period for this proposal, as well as the broader PFS rule, remains open through mid-September. Our thoughts and the common themes shared by physician and specialty organizations center around the following issues:
First, the policy could incentivize providers to separate office visits and procedures onto separate days in order to capture the full value of each service. This would be inconvenient for patients and providers alike and worse, could delay care and paradoxically increase cost to patients through the extra transportation, parking, child care, time off of work etc.
Second, the actual mechanism for implementing this policy is not clear. Currently, modifier 25 is appended to the E/M service. But CMS proposal is more complicated—to pay 50% of the lower valued service on the same day as a modifier 25. Billers/coders will have to be specifically trained on this new policy creating additional administrative burden for an already taxed workforce. There is also no discussion of how to deal with nuanced situations—for example, if multiple procedures are performed or if add-on (ZZZ) codes are also billed the same day.
Third, the issue of overlapping work is already incorporated into procedural RVU valuations. When the AMA’s Relative Value Scale Update Committee (RUC) generates recommendations for office-based procedures they use intentionally thin pre- and post-service packages to account for this issue. CMS is fully aware of this, suggesting this policy is not trying to account for redundant work, but is instead trying to devalue the procedure itself.
Fourth, is the concept itself. The hallmark of high-quality procedural care is not only the technical procedural elements, but in the comprehensive evaluation and counseling of the patient to make sure the procedure being recommended is the right procedure, for the right patient, for the right indication, and at the right time. This policy represents a de-valuation of either that shared decision making framework or the technical skill required to perform the procedure safely.
Finally, and perhaps most importantly, this policy addresses only one category of overlapping work within the PFS—overlap between procedures and E/M services. Current policies already account for overlapping work among procedures, and the proposed policy would extend this concept to procedures performed alongside E/M services. But there is a much larger area of the PFS that this new policy ignores—how should Medicare address overlapping work among multiple E/M service themselves? This issue will be the focus of the second portion of this series.
The AWV was introduced by CMS as 2 G-codes (G0438 and G0439) in 2011 to implement preventive care provisions of the Affordable Care Act. These services describe initial and subsequent AWVs that include a personalized prevention plan. Although the codes have never been formally surveyed by the AMA Relative Value Scale Update Committee (RUC), their work RVUs were updated in 2021 to maintain parity with comparable office visit valuations.
AWVs are performed almost exclusively by family physicians, internists, and advanced practice providers. In a follow-up analysis, we used the same data source and identified all claims containing an AWV code. There were just under 11 million such claims in 2024. We then examined the frequency and types of additional services billed on the same claim.
Annual wellness visits were billed alone only 37 percent of the time (Table 3). In the remaining 63 percent of claims, at least one additional service was reported, and multiple additional services were common. The most common additional services were a level 3 or 4 office visit, advanced care planning, and screening for alcohol misuse and depression.
