The KX Modifier Trap

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By:  Kelly Grahovac

For the past two years, we at The van Halem Group have written articles and spoke at various events warning DMEPOS suppliers about CMS’ “KX Modifier Trap”: improperly billing claims to Medicare with the KX modifier could potentially result in a False Claims Act (FCA) violation. On June 29, 2016, the U.S. Department of Justice confirmed that penalties for FCA violations will increase substantially, nearly doubling the current per violation penalty. As a supplier, this means an even larger growing increase in your risk to do business with the federal government and the Medicare program.

The KX modifier is going to become a prominent tool in CMS’ arsenal to combat fraud, waste and abuse. It is an attestation you put on a claim for payment to the federal government. It is very serious. In most cases where the modifier applies, the policy states, “Suppliers must add a KX modifier to [procedure code] only if all of the criteria in the ‘Indications and Limitations of Coverage and/or Medical Necessity’ section of this policy have been met.” In some cases, it also adds that evidence of such is kept in the supplier’s files.

The reality is that physicians do not know what those indications and limitations of coverage are unless we have educated them. Even if they do know, that certainly doesn’t mean they have documented that clearly. Therefore, in a majority of cases, the documentation is not there to specifically address that the patient qualifies. One might be able to infer this information, but that’s not what the attestation above states.

Why is this a trap?

It’s a trap because you will not receive reimbursement for the claim unless you use the KX modifier. Right now, in an audit situation, if you do not have the documentation to support the KX modifier, it will result in a claim denial or overpayment that you can fight through the administrative appeals process. If a federal auditor requests documentation from you on a claim with a KX modifier and you either do not have it or it doesn’t show the indications and limitation of coverage from the Local Coverage Determination have been met, they can reasonably accuse you of violating the False Claims Act.

The False Claims Act makes it a federal crime for anyone knowingly presenting or causing to be presented a false claim for payment or approval. The penalties for violating the FCA can be severe. In these instances, they could easily result in civil monetary penalties. With the recent Department of Justice increase in penalties, each violation can result in a minimum penalty of $10,781 (up from $5,500) to a maximum penalty of $21,563 (up from $11,000). These penalties can be assessed on a per violation basis. Translation? Each line item on a submitted claim has the potential to be considered a violation.

Establish a Two-tier Line of Defense

Many in the industry believe that the FCA increases will further entice whistleblower cases and out-of-court settlements. As a supplier, you must adopt a two-tier approach to greater protect yourself from this potentially crippling audit risk. The first line of defense lies within your billing practices. Revisit the LCDs for the equipment you provide, paying close attention to the “Indications and/or Limitations of Coverage and/or Medical Necessity” section. Compare this to your clinical documentation to determine the documentation supports that your patient qualifies for the particular piece of equipment. Be sure your billing staff is educated on the KX modifier and what it really means to append the KX to a code. Often billers add modifiers to facilitate claims payment but have no clear understanding of the consequences should that code be audited.

Your second line of defense lies in a good compliance program. As mentioned earlier, the increase in FCA violation penalties could increase whistleblower cases. A proper compliance program addresses all employee concerns, investigates them appropriately and, if an error is identified, handles the issues accordingly. The employee should not feel any risk of retaliation and should be made aware of the findings and resolution. Mishandling an employee’s concerns could have a negative impact on the supplier, considering the high-dollar penalties facing a FCA violation.

The van Halem Group is Ready to Help

Audit risk continues to increase in our industry, and the increase in penalties furthers the need for suppliers to be diligent, proactive and selective in submitting claims with a KX modifier. Make it company practice to request documentation up front, and review it to ensure it supports the criteria before making a decision to append that modifier to the claim. Revisit your company’s compliance program, and have confidence that you are properly handling employee concerns. Should the federal government decide to pursue false claim violations in the DMEPOS industry, the impact would be devastating.

If you need help, The van Halem Group is here! We provide a wide range of services from audits to compliance. Check out our website at www.vanHalemGroup.com, or give us a call for more information!