Doctors, others billing Medicare at higher rates

September 15, 2012

Thousands of doctors and other medical professionals have billed Medicare for increasingly complicated and costly treatments over the past decade, adding $11 billion or more to their fees — and signaling a possible rise in medical billing abuse, according to an investigation by the Center for Public Integrity.

Between 2001 and 2010, doctors increasingly moved to higher-paying codes for billing Medicare for office visits while cutting back on lower-paying ones, according to a year-long examination of about 362 million claims. In 2001, the two highest codes were listed on about 25 percent of the doctor-visit claims; in 2010, they were on 40 percent.

Similarly, hospitals sharply stepped up the use of the highest codes for emergency room visits while cutting back on the lowest codes.

Medical groups say the shift to higher codes reflects the fact that seniors have gotten older and sicker, requiring more complex care. “I rarely have a person who comes to me for a cold,” said Brantley B. Pace, who has practiced family medicine for more than a half-century in Monticello, Miss., and whose bills were among the highest in the sample of claims.

Although patients at individual practices such as Pace’s may be older and sicker, many health-care experts say the age and health of Medicare beneficiaries as a group has not changed, and research supports that contention.

The Center for Public Integrity’s analysis shows no increase in the average age of patients during the decade. Medicare billing data do not indicate that patients are getting more infirm, as their reasons for visiting their doctors were essentially unchanged over time. And annual surveys by the federal Centers for Disease Control and Prevention have found little increase in the amount of time physicians spend with patients.

That suggests that at least part of the shift to higher codes is due to “upcoding” — also known as “code creep” — a form of bill-padding in which doctors and others bill Medicare for more expensive services than were actually delivered, according to health experts and the data analysis by the center.

“This is an urgent problem,” said Mark B. McClellan, a physician who ran the federal Centers for Medicare and Medicaid Services during the George W. Bush administration. He said that CMS should demonstrate it “won’t stand by and do nothing” as payments climb.

Doctors, hospital emergency rooms and many other providers are paid by Medicare based on a series of billing codes that are designed to reflect the complexity of the treatments delivered and the time required. For doctor visits, the lowest code, which pays about $20, is for minimal problems requiring a few minutes’ time. The highest code, which pays about $140, is for more serious cases that typically require
40 minutes of face-to-face contact.

Providers could be deliberately inflating their bills, or simply doing their best to comply with a complicated system. Either way, the aggressive push to electronic medical records is likely fueling the trend toward higher codes, analysts say.

Medicare, which covers 49 million elderly and disabled people and spent more than $500 billion in 2011, has emerged as a potent campaign issue, with both parties vowing to tame its spending growth while protecting seniors. But there’s little talk about some of the arcane factors such as billing practices that drive up costs, even though they hurt both seniors, whose co-pays rise along with higher bills, and taxpayers.

Medicare fraud is nothing new, and the Obama administration has trumpeted its stepped-up efforts to fight it. But the center’s investigation underscores the difficulty of cracking down on coding inflation. Not only is it hard to prove, but pursuing it might not be cost-effective.

The average overcharge costs Medicare about $43, according to federal estimates. But reviewing a medical claim costs the government $30 to $55.

To conduct its analysis, the center examined a representative 5 percent sample of Medicare patients and their claims submitted by more than 400,000 medical practitioners and 7,000 hospitals and clinics, starting with 2001. It found that the move up the coding scale by doctors and other medical professionals cost Medicare $11 billion, adjusted for inflation.

More than half of that
$11 billion stems from doctor visits. The rest is from other services, including treatment in nursing homes and hospitals. From 2001 to 2008, the number of doctors who billed at least half of their office visits at one of the two top codes more than doubled to at least 17,000 practitioners, the center’s analysis showed. Those who stopped using the two least expensive codes rose 63 percent, to more than 13,000 in 2008.

Medicare officials don’t generally review the billing codes before reimbursing providers. While the Department of Health and Human Services inspector general said in a report in May that the coding system was “vulnerable to fraud and abuse,” it’s impossible to determine the precise extent of the problem without examining patient records for each of the 370 million claims Medicare pays annually.

Medicare officials declined numerous requests for interviews. However, in an e-mail response to written questions, officials said that while they believe most doctors and hospitals are “honest and try to bill Medicare correctly,” they are also “keenly aware that certain Medicare providers and suppliers seek to defraud the program.”

Jeremy A. Lazarus, president of the American Medical Association, which developed the codes, acknowledged in a written statement that doctors are using more high-reimbursing codes. But the “contributing factors are unclear,” he said, adding that more analysis is needed.

Many doctors and hospitals say that computerized medical records encourage the move to higher codes because the software makes it easier for providers to quickly create documentation for charges. One electronic medical records company predicts on its Web site that its product will result in an increase of one coding level for each patient visit, potentially adding $225,000 in new revenue in a year.

More than half the doctors who treat Medicare patients now use electronic records, according to HHS, and more are expected to follow. The federal government is spending billions of dollars to encourage the switch, hoping to cut costs and reduce medical errors and waste.

Thomas Weida, a family physician in Hershey, Pa., said that as a result of his switch to electronic records, he typically spends an additional five minutes with patients reviewing their medical information and prescribing treatments. That alone could justify higher billing codes in many instances, said Weida, a medical coding expert for the American Academy of Family Physicians.

The codes at issue are called Evaluation and Management codes, and while they were developed for and by physicians, they also are used by hospitals for Medicare emergency room visits and other outpatient services.

Like doctors, hospitals have moved to higher-paying codes, bolstering revenue in the process. From 2001 through 2008, the use of the two most-expensive codes for Medicare ER visits nearly doubled to 45 percent. That increase added at least $1 billion to Medicare’s costs, according to the center’s analysis.

Medicare has not developed uniform standards on how hospitals should use the codes. Instead, the program relies on hospitals to set their own rules.

Donald M. Berwick, an Obama appointee who headed CMS until December 2011, said he believes that only a small portion of the upswing in coding is the result of fraud. In most cases, he said, the hospitals have learned “how to play the game,” and are targeting the vulnerabilities of the Medicare payment system.

“If you create a payment system in which there is a premium for increasing the number of things you do or the recording of what you do, well, that’s what you’ll get,” Berwick said.

In 2008, nearly 500 hospitals, or roughly 10 percent of the nation’s total, used the two most-expensive codes to bill for 60 percent or more of their ER claims for Medicare patients, according to the center’s analysis.Some went well beyond that. In 2008, Baylor Medical Center in Irving, Tex., billed the government at the two highest-paying codes for 80 percent of the patients it treated and released from its ER.

Baylor Irving’s president, Cindy Schamp, said in a written response to questions that the hospital’s billing “did not align with industry trends,” but added that the hospital voluntarily reined in its charges in 2009. Schamp said the Medicare agency never questioned the hospital’s billing and the hospital concluded that it did not overcharge.

By 2001, members of a government panel were so fed up with the payment codes because of billing mistakes and other factors that they recommended junking them. Two years later, Congress passed legislation that called for studies to consider alternatives. But Medicare officials could not get an agreement with medical professionals on how to improve them, so they stuck with the existing codes.

Today, high rates of billing mistakes persist, according to Medicare audits. Medicare contractor Trailblazer, which audited office visits in early 2010 in Virginia, found mistakes in half the records it reviewed. A similar audit in Colorado, New Mexico, Oklahoma and Texas reported errors in
91 percent of the billings sampled.

In a critical review of Texas and Oklahoma hospital ERs in March, Medicare auditors concluded that $45.14 of every $100 billed “was paid in error.”

Medicare officials don’t appear to have an aggressive strategy for cutting down on medical coding abuses.

CMS acting Administrator Marilyn Tavenner said in a May report that the agency planned to contact as many as 5,000 doctors who have been identified as billing outside normal ranges, but said that it might cost the agency more to investigate suspicious claims than it could collect. The agency, Tavenner wrote, “must take into account” the “return on investment of medical review activities.”

Hospitals, like doctors, say some of the rise in reimbursements could be the result of treating sicker patients in their ERs.

But Dr. Stephen Pitts, an ER physician who has studied the issue, disputes that. Pitts, an associate professor in the Emory University School of Medicine, examined data from the CDC’s National Hospital Ambulatory Medical Care Survey, a well-established nationally representative survey of emergency department visits. He found that between 2001 and 2008, emergency patients did not appear to be getting sicker.

“It’s total nonsense,” he said of hospital claims that the patients were sicker.

The Center for Public Integrity is a nonprofit, independent investigative news outlet. For more of its articles on this topic, visit publicintegrity.org/health/medicare/cracking-codes.

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