⭐ Just for Fun

90% compliance sounds like a win (hint: it’s not).

The OIG's November 2025 report on dermatology modifier 25 usage found that 90 out of 100 sampled claims met Medicare requirements. The headline sounds reassuring. But when 61.5% of all dermatology E/M claims include a same-day procedure, that 10% error rate scales to an estimated $62.9 million in overpayments. 

And now payers are taking action. BCBSM just announced they'll cut modifier 25 E/M reimbursement by 50% starting May 1, 2026. Evidently, the November report was a warning shot, not an exoneration. 

The audit reviewed E/M services billed with modifier 25 alongside minor surgical procedures between October 2019 and September 2020. Of the 100 sampled claims, 10 failed to meet requirements.

The errors fell into familiar categories: inadequate documentation to support a "significant, separately identifiable" E/M service, incorrect E/M level selection, and failure to demonstrate that the evaluation went beyond what's inherent to the procedure.

The key standard hasn't changed. Per AAFP guidance, modifier 25 requires documentation proving the E/M service was distinct from the decision to perform the procedure and any pre- or post-procedure work. If you strip out everything related to the procedure, the remaining documentation must support the E/M level billed. 

That's the cross-out test. And 10% of claims failed it. 

Before you panic, consider the comparison. In May 2025, the OIG released a separate report on ophthalmology modifier 25 claims for same-day eye injections. The finding: 92% of sampled E/M services did NOT meet requirements, putting $124 million at risk. 

Dermatology's 90% compliance rate looks significantly better by that standard.

And there's historical context too. A 2005 OIG report across all specialties found a 35% error rate and $538 million in improper payments. Dermatology has improved.

But "better than ophthalmology" and "improved since 2005" won't protect you from an audit…. or from payers cutting reimbursement. Dermatology’s numbers look better in comparison—but comparisons don’t change how payers interpret risk, and they don’t reflect how dermatology is actually practiced.

Dermatology is inherently a multi issue specialty. Even visits scheduled around a single concern often expand quickly. A focused complaint becomes a full skin exam, a medication management discussion, evaluation of new or changing lesions, or the inevitable “oh by the way” that comes up once the patient is in the room. Same day procedures are not an exception in dermatology. They are often the natural outcome of appropriate clinical care.

That clinical reality helps explain why 61.5% of dermatology E M visits include a same day procedure. It does not, however, change the documentation standard.

Auditors and payers do not evaluate how medicine is practiced. They evaluate what is written. If the record does not clearly show that the E M service was significant, separately identifiable, and went beyond what is inherent to the procedure, modifier 25 will not hold up, no matter how reasonable the visit felt in real time.

This is the disconnect practices need to manage. Dermatology’s workflow makes modifier 25 common. But common usage without airtight documentation is exactly what puts the specialty on payer radar.

Blue Cross Blue Shield of Michigan announced in February 2026 that starting May 1, 2026, they'll reduce reimbursement for modifier 25 E/M services by 50% when billed same-day with procedures that have a 0, 10, or 90-day global period. 

Their rationale is that they won't pay for the practice expense component twice: once in the E/M and once in the global day code. The policy affects Blue Cross Blue Shield of Michigan, Blue Care Network, Medicare Plus Blue, BCN Advantage, and the Federal Employee Program; E/M codes 99202-99205 and 99212-99215 are included, while preventive services and ER codes are excluded. 

If BCBSM is moving, expect other Blues and commercial payers to follow. This is the pattern: OIG flags a problem → Medicare responds slowly → commercial payers act faster.

The OIG made two recommendations: continue MAC reviews of dermatology modifier 25 claims and continue educating dermatologists on requirements.

CMS disagreed. Their response claimed existing compliance promotion measures are sufficient. 

Don't read too much into that: MACs already use Targeted Probe and Educate (TPE) to flag high-error providers. Above 20% error rate? Expect a second round of review plus mandatory education. Three failed rounds? Now you get the gift of 100% prepayment review, extrapolation of overpayments, or referral to Recovery Auditors.

The OIG owes CMS an update by May 17, 2026, which happens to be the same month that BCBSM's policy takes effect. 

Don't wait for a MAC letter or a payer policy change. Here's how to assess your exposure:

Pull modifier 25 frequency by physician. Run a CPT utilization report showing what percentage of each provider's E/M claims include modifier 25. The specialty average is 61.5%. If anyone is significantly above that, they're a target. 

Apply the cross-out test. Take 10-20 recent modifier 25 claims per provider. Black out everything related to the procedure. Does the remaining documentation support the E/M level billed? If not, you have a problem. 

Check your payer mix. If you have significant BCBSM volume, model what a 50% cut to modifier 25 E/M reimbursement does to your revenue. Then check other major payers for similar policy updates. 

When you're ready for an expert to make your practice's billing bulletproof, schedule a strategy call with our team.

This one was super fun. Hope you enjoyed it too.