22 Compliance & Regulatory Practice Questions & Answers

1. 1. A physician performs a service and documents it thoroughly, yet the payer denies the claim as not reasonable and necessary. Which principle best explains that outcome?

   • A.Accurate CPT code selection controls payment, so a service coded exactly as the record describes it is a covered benefit.
   • B.Medical necessity is the overarching payment criterion, so the service must fit the patient's condition, not merely be performed.✓ Answer
   • C.Payment tracks the volume of documentation, so a note containing every required element establishes that the service was necessary.
   • D.A signed physician statement of medical necessity binds the payer, so the claim must be paid once that statement is in the chart.

   Under the Medicare Claims Processing Manual (Pub 100-04, Ch. 12, §30.6.1), medical necessity is the overarching criterion for payment in addition to the individual requirements of the CPT code. A service can be performed, correctly coded and fully documented and still be non-covered, because nothing in the record shows it was reasonable and necessary for that patient's condition.

   Source: Medicare Claims Processing Manual, Pub 100-04, Ch. 12, §30.6.1 (medical necessity as the overarching criterion for payment)Report a problem with this question

2. 2. A national coverage determination (NCD) covers a procedure, and the MAC for the practice's jurisdiction wants to apply a more restrictive local coverage determination (LCD). Which statement is correct?

   • A.An NCD is issued by CMS and binds every MAC nationwide, so a MAC may not adopt an LCD that conflicts with it.✓ Answer
   • B.An NCD is only advisory to a MAC, so the contractor may narrow it whenever its utilization data support that.
   • C.An LCD reflects local practice patterns, so within that jurisdiction the LCD controls and supersedes the NCD.
   • D.Both policies apply at once, so the practice may follow whichever document produces coverage for the patient.

   NCDs are made by CMS and are binding on all Medicare contractors nationwide. An LCD is issued by a single MAC, applies only in that contractor's jurisdiction, and may not conflict with an existing NCD; where an NCD addresses the item or service, the NCD controls.

   Source: Social Security Act §1869(f); Medicare Program Integrity Manual, Pub 100-08, Ch. 13 (LCD may not conflict with an NCD)Report a problem with this question

3. 3. An LCD lists the diagnoses that support coverage of a test, and the diagnosis documented in the record is not on that list. What should the coder do?

   • A.Report the documented diagnosis with the modifier stating policy requirements were met, since the test was ordered.
   • B.Hold the claim until a later visit produces a listed diagnosis, since the provider can add that condition at the time.
   • C.Report a listed diagnosis from the LCD that fits the patient's history, since the LCD defines the acceptable diagnoses.
   • D.Report the diagnosis the documentation supports, and take the coverage question back to the provider and the patient.✓ Answer

   A diagnosis is assigned from the provider's documentation only; changing it so the claim matches a coverage list falsifies the record. The coverage problem is handled outside the code set — by discussing the order with the provider and, for Medicare Part B, by issuing an ABN before the service so the beneficiary can knowingly accept liability.

   Source: ICD-10-CM Official Guidelines, Section IV.A; OIG Compliance Program for Individual and Small Group Physician Practices, 65 FR 59434Report a problem with this question

4. 4. A mandatory ABN (Form CMS-R-131) is required for an item Medicare is expected to deny as not reasonable and necessary. When is it delivered, and what must the beneficiary do?

   • A.Before the claim is submitted, and the beneficiary initials each listed item beside its estimated cost.
   • B.After the denial is received, and the beneficiary signs to accept financial responsibility for the item.
   • C.Before the item is furnished, and the beneficiary selects exactly one option box and signs the notice.✓ Answer
   • D.At registration each year, and the beneficiary signs one blanket notice covering all upcoming services.

   A mandatory ABN must be delivered in advance of the service, far enough ahead that the beneficiary can consider the options, and it may not be used in an emergency. The beneficiary must choose one — and only one — option box and sign and date the notice; if the notice is not properly delivered, the provider rather than the beneficiary is liable.

   Source: Medicare Claims Processing Manual, Pub 100-04, Ch. 30, §50 (ABN delivery requirements)Report a problem with this question

5. 5. A practice gives a beneficiary a voluntary ABN for an item that Medicare never covers. How does that notice differ from a mandatory ABN?

   • A.It is a courtesy notice, but the beneficiary must still check an option box for it to be valid.
   • B.It shifts liability only where the ordering physician countersigns beneath the beneficiary.
   • C.It is a courtesy notice, and the beneficiary is not asked to check an option box or to sign it.✓ Answer
   • D.It takes the place of the claim, and the excluded item may not be billed to the patient.

   A statutorily excluded item is never a Medicare benefit, so the beneficiary is already liable and there is no liability to transfer. The voluntary ABN is informational only, and CMS instructs that the beneficiary should not be asked to complete an option box or sign the form.

   Source: Medicare Claims Processing Manual, Pub 100-04, Ch. 30, §50.3 (voluntary ABN use)Report a problem with this question

6. 6. A Part B service is expected to be denied as not reasonable and necessary, and no ABN was obtained beforehand. Which modifier applies, and what follows from it?

   • A.GZ, and the provider absorbs the cost, because the beneficiary cannot be billed without an ABN.✓ Answer
   • B.GX, and the beneficiary can be billed, because the item lies outside the Medicare benefit entirely.
   • C.GY, and the claim pays at a reduced rate, because the service remains a covered Medicare benefit.
   • D.GA, and the beneficiary can be billed, because the modifier itself transfers liability to the patient.

   Modifier GZ reports that the provider expects a medical-necessity denial and did not obtain an ABN; the claim is denied and the beneficiary may not be held liable, so the provider absorbs the loss. GA is the modifier used when a mandatory ABN is on file, and it is the signed notice — not the modifier itself — that preserves the ability to bill the patient.

   Source: Medicare Claims Processing Manual, Pub 100-04, Ch. 30, §50.15 (GA, GX, GY, GZ modifiers)Report a problem with this question

7. 7. An NCCI procedure-to-procedure edit pairs two codes and carries modifier indicator 1. What does that indicator mean?

   • A.The edit may never be overridden, so only the Column 1 code is reportable no matter what the documentation shows.
   • B.The edit limits the units allowed per date, so any added units need a medical-necessity note in the record.
   • C.The edit has been deleted, so both codes may be reported together without a modifier or any supporting note.
   • D.The edit may be overridden with an appropriate NCCI-associated modifier when documentation shows a distinct service.✓ Answer

   NCCI PTP modifier indicators work as follows: 0 means the edit can never be bypassed, 1 means an NCCI-associated modifier may bypass it when the record supports a distinct service, and 9 means the edit has been deleted and does not apply. The indicator only says whether a modifier is permitted; documentation must still justify it. Unit caps come from MUEs, not from PTP edits.

   Source: National Correct Coding Initiative Policy Manual for Medicare Services, Ch. 1 (PTP modifier indicators 0, 1, 9)Report a problem with this question

8. 8. Two normally bundled procedures were performed on separate anatomic structures at the same session, and the payer accepts the X{EPSU} subset. Which is the best modifier choice?

   • A.59, since the X modifiers are used only after a claim with modifier 59 has been denied.
   • B.22, since operating on two structures is work beyond what a single-site procedure requires.
   • C.XS, since it names the separate structure and modifier 59 is meant to be the last resort.✓ Answer
   • D.51, since reporting more than one procedure at a single session is a multiple-procedure case.

   CMS created XE, XS, XP and XU as more selective subsets of modifier 59; where a payer recognizes them, the specific X modifier is preferred and 59 is the modifier of last resort. XS identifies a service performed on a separate organ or structure. Modifier 51 only flags multiple procedures for payment reduction and does not bypass a bundling edit.

   Source: CMS Transmittal 1422 / MLN Matters MM8863 (X{EPSU} modifiers); CPT Appendix A, modifier 59Report a problem with this question

9. 9. At an office visit the physician evaluates a new problem and decides to perform a major procedure with a 90-day global period the next morning. Which modifier goes on the E/M service?

   • A.58, because the E/M is a staged service planned ahead of the surgical work.
   • B.24, because the E/M is unrelated to a procedure that carries a global period.
   • C.25, because the E/M was significant and separately identifiable that same day.
   • D.57, because this is the visit at which the decision for major surgery was made.✓ Answer

   Modifier 57 identifies the E/M service at which the decision for surgery was made, and it is used with procedures carrying a 90-day global period. Modifier 25 belongs on an E/M performed the same day as a minor (000- or 010-day) procedure, and modifier 24 is for an unrelated E/M furnished during an existing postoperative period.

   Source: CPT Appendix A, modifiers 24, 25, 57 and 58Report a problem with this question

10. 10. A physician-office note concludes: 'chest pain; rule out gastroesophageal reflux disease.' How is that encounter coded?

    • A.Code the reflux disease as unconfirmed, since the note shows the workup for it is still in progress.
    • B.Code the chest pain, since an outpatient condition qualified as 'rule out' is not coded as if it existed.✓ Answer
    • C.Code both, sequencing the reflux disease first because it is the more specific of the two diagnoses.
    • D.Code the reflux disease, since a documented rule-out condition is coded as though it were established.

    Section IV.H of the ICD-10-CM Official Guidelines forbids coding a condition documented as probable, suspected, questionable, rule out, compatible with or working diagnosis in the outpatient and physician-office setting; the coder assigns the signs, symptoms or reason for the visit instead. The opposite instruction, in Section III.C, applies only to inpatient records.

    Source: ICD-10-CM Official Guidelines for Coding and Reporting, Section IV.H (uncertain diagnosis, outpatient)Report a problem with this question

11. 11. A chest x-ray was ordered for a cough, and the radiologist's signed final report reads 'right lower lobe pneumonia.' What is reported for that encounter?

    • A.The pneumonia alone, since a confirmed interpretation takes the place of the sign that prompted it.✓ Answer
    • B.The cough first and the pneumonia second, since the reason for the order is always sequenced first.
    • C.The pneumonia and the cough, since signs present at the time of the study are reported additionally.
    • D.The cough alone, since the ordering diagnosis is what establishes medical necessity for the study.

    Section IV.K provides that when the physician has interpreted a diagnostic test and the final report is available, the confirmed diagnosis from that interpretation is coded and the related signs and symptoms are not coded additionally. This outpatient rule differs from the inpatient handling of abnormal findings.

    Source: ICD-10-CM Official Guidelines for Coding and Reporting, Section IV.K (diagnostic services only)Report a problem with this question

12. 12. The tabular entry for the code being assigned carries an Excludes2 note. What does that note direct?

    • A.Only one code may be reported, because Excludes2 means the two conditions never occur in one patient.
    • B.Neither code is reported, because Excludes2 points the coder to a combination code covering both.
    • C.Both codes may be reported together, because Excludes2 means the other condition is not included here.✓ Answer
    • D.The excluded code is sequenced first, because Excludes2 signals an etiology-and-manifestation pair.

    Excludes1 is a pure exclusion: the two codes are mutually exclusive and are not reported together. Excludes2 means 'not included here' — the excluded condition is not part of the code being assigned, but a patient may have both conditions, so both codes may be reported when the documentation supports them.

    Source: ICD-10-CM Official Guidelines for Coding and Reporting, Section I.A.12.a-b (Excludes1 and Excludes2)Report a problem with this question

13. 13. In a pre-bill review a coder finds an encounter note with no provider signature and no electronic authentication. What is the correct handling?

    • A.Bill it with a reduced-services modifier, since an unauthenticated note supports only part of the service performed.
    • B.Return it to the provider for authentication before billing, since an unsigned note does not support a claim.✓ Answer
    • C.Bill it and file a memo describing the review, since the coder verified that the content of the note is complete.
    • D.Have the practice manager sign for the provider, since staff attestation satisfies the authentication requirement.

    Medicare requires that services be authenticated by the author of the entry, and a reviewer may treat an unsigned or unauthenticated note as unsupported and deny the claim. The remedy is authentication by the treating provider before the claim goes out — never a signature by another person and never a modifier.

    Source: Medicare Program Integrity Manual, Pub 100-08, Ch. 3, §3.3.2.4 (signature requirements)Report a problem with this question

14. 14. Two days after an encounter a provider needs to add information to the note. What makes that addendum compliant?

    • A.It is signed and dated back to the encounter, so the note reads as a single entry made on that same day.
    • B.It overwrites the original text in the record, so that only the corrected, complete version remains on file.
    • C.It is entered by the coder from the provider's verbal report, so the added detail reaches the claim in time.
    • D.It is signed and dated the day it is written, labeled an addendum, with the original entry left readable.✓ Answer

    A late entry or addendum must be clearly identified as such, must carry the date and signature of the day it was actually made, and must leave the original entry legible and intact. Backdating an entry or deleting the original text is falsification of the record rather than a permissible correction.

    Source: Medicare Program Integrity Manual, Pub 100-08, Ch. 3, §3.3.2.5 (amendments, corrections and delayed entries)Report a problem with this question

15. 15. Successive visit notes for one patient contain the same history, examination and assessment text carried forward at each encounter. Why is that a compliance exposure?

    • A.The record no longer shows what was done on each date, so the visits can be denied as unsupported.✓ Answer
    • B.The later claims need a repeat-service modifier, so adding that modifier resolves the whole concern.
    • C.The physician has not signed each separate note, so signing every note resolves the whole concern.
    • D.The record falls below the length payers require, so the visits drop to the lowest reportable level.

    Cloned or copy-forward documentation makes every encounter look alike, so the record fails to demonstrate the work actually performed and the medical necessity of each separate visit; auditors treat such notes as not supporting the service billed. Neither a signature nor a modifier cures the underlying defect, which is that the note does not describe that day's care.

    Source: CMS/OIG guidance on cloned documentation; Medicare Program Integrity Manual, Pub 100-08, Ch. 3, §3.3.2Report a problem with this question

16. 16. Which physician query would be considered non-compliant?

    • A.One naming a single diagnosis to confirm and noting the extra payment it would bring.✓ Answer
    • B.One quoting the conflicting entries in the record and asking the provider to clarify them.
    • C.One citing the abnormal findings in the note and asking whether they represent a diagnosis.
    • D.One listing several clinically supportable options plus 'other' and 'unable to determine'.

    A compliant query presents the clinical indicators found in the record and lets the provider draw the conclusion. A query is leading when it suggests a single answer, when it offers only one option to confirm, or when it mentions the reimbursement impact — each of those steers the documentation toward a result instead of clarifying it.

    Source: AHIMA/ACDIS, 'Guidelines for Achieving a Compliant Query Practice'Report a problem with this question

17. 17. Under accepted query practice, when is a query to the physician warranted?

    • A.When the documented diagnosis is missing from the payer's list of conditions for coverage.
    • B.When a more specific code exists that the physician did not use at the earlier encounters.
    • C.When the documentation is conflicting, ambiguous, incomplete, imprecise or inconsistent.✓ Answer
    • D.When a claim has been denied and a different diagnosis would reverse that denial on appeal.

    Queries exist to clarify the record and are appropriate when documentation is conflicting, ambiguous, incomplete, imprecise, illegible or inconsistent. A query driven by reimbursement — to obtain a covered diagnosis, to overturn a denial, or to reach the code the coder prefers — is not a clarification and is itself a compliance risk.

    Source: AHIMA/ACDIS, 'Guidelines for Achieving a Compliant Query Practice'Report a problem with this question

18. 18. A practice reports the component codes of a comprehensive procedure separately so the combined payment exceeds that of the single code. What is that practice called?

    • A.Upcoding, because the claim reports a service at a level above what the record supports.
    • B.Unbundling, because one comprehensive service was split into separately billed parts.✓ Answer
    • C.Duplicate billing, because the same service was submitted twice for one date of service.
    • D.Downcoding, because each component pays less than the comprehensive code it came from.

    Unbundling is billing separately for services that are already included in a single comprehensive code, and the NCCI procedure-to-procedure edits exist largely to detect it. Upcoding is a different error — reporting a higher-level or more complex service than the documentation supports.

    Source: OIG Compliance Program for Individual and Small Group Physician Practices, 65 FR 59434 (coding and billing risk areas)Report a problem with this question

19. 19. A billing manager submits claims without any accuracy checks and ignores repeated internal warnings about coding errors. Which statement about the False Claims Act is correct?

    • A.Liability can attach, because 'knowing' reaches reckless disregard and needs no intent to defraud.✓ Answer
    • B.Liability cannot attach, because the civil statute requires proof of a specific intent to defraud.
    • C.Liability attaches only for criminal acts, because the statute reaches falsified records alone.
    • D.Liability attaches only if a whistleblower sues, because a qui tam filing is what creates the case.

    Under 31 U.S.C. §3729(b)(1), 'knowing' and 'knowingly' include actual knowledge, deliberate ignorance of the truth or falsity of the information, and reckless disregard of that truth or falsity; no proof of specific intent to defraud is required. Qui tam suits are an enforcement mechanism, not a precondition of liability.

    Source: 31 U.S.C. §3729(b)(1) (False Claims Act definition of 'knowing' and 'knowingly')Report a problem with this question

20. 20. How does the physician self-referral law (Stark) differ from the Anti-Kickback Statute?

    • A.Stark covers only referrals to a hospital, while the kickback statute covers those inside an office.
    • B.Stark reaches the party paying remuneration, while the kickback statute reaches only the receiver.
    • C.Stark is criminal and requires proof of intent, while the kickback statute creates civil liability only.
    • D.Stark is civil and strict liability, while the kickback statute requires knowing and willful conduct.✓ Answer

    Stark bars a physician from referring designated health services to an entity with which the physician or an immediate family member has a financial relationship unless an exception is met; it is civil and strict liability, so intent is irrelevant. The Anti-Kickback Statute is criminal, requires that remuneration be offered, paid, solicited or received knowingly and willfully to induce or reward referrals, and reaches both sides of the transaction.

    Source: 42 U.S.C. §1395nn (Stark physician self-referral law); 42 U.S.C. §1320a-7b(b) (Anti-Kickback Statute)Report a problem with this question

21. 21. Which disclosure of protected health information is exempt from the HIPAA minimum-necessary standard?

    • A.A disclosure to another treating provider for the patient's care.✓ Answer
    • B.A disclosure to a health plan for a utilization review request.
    • C.A use by practice staff for an internal quality-review project.
    • D.A disclosure to the practice's billing vendor for claims work.

    45 CFR §164.502(b)(2) exempts disclosures to, and requests by, a health care provider for treatment purposes from the minimum-necessary standard so that clinical care is not impeded. Payment and health care operations uses must still be limited to the minimum necessary, even though none of these uses requires patient authorization.

    Source: 45 CFR §164.502(b)(2) (minimum necessary; treatment exception)Report a problem with this question

22. 22. A supervisor tells a coder to report a higher-level E/M service than the record supports. What is the coder's proper course of action?

    • A.Report the level as instructed, and document the disagreement, since billing authority rests above.
    • B.Escalate to the payer's fraud unit first, since internal reporting would tip off the practice.
    • C.Decline, and raise it through the practice's compliance channel, which must be free of retaliation.✓ Answer
    • D.Report a level below what the record supports, since downcoding cannot create an overpayment.

    An effective compliance program requires open lines of communication and a way to report concerns without fear of retaliation, so internal escalation is the first step. Billing a level the documentation does not support is an overpayment exposure whether the coder or the supervisor chose it, and deliberate downcoding is equally improper because the claim still misrepresents the service.

    Source: OIG Compliance Program for Individual and Small Group Physician Practices, 65 FR 59434 (open lines of communication; non-retaliation)Report a problem with this question

Practice questions based on the ICD-10-CM Official Guidelines for Coding and Reporting, the AMA CPT guidelines, the CMS HCPCS Level II system, and federal healthcare compliance law. CPC is a mark of the AAPC and CPT is a mark of the American Medical Association; this site is not affiliated with or endorsed by either. ICD-10-CM, CPT, and HCPCS Level II are revised every year, so these questions test coding rules and conventions rather than code values — always verify actual code selection against the current code books and your payer's published policy. Nothing here is medical, legal, or billing advice. About the CPC exam →