News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

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News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel
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Issue does not directly affect clinical laboratories and pathology groups, but puts spotlight on some hospitals and physicians who frequently use these codes.

Could increased use of electronic health records (EHR) systems be causing more hospitals and physicians to commit fraud because of upcoding? That’s the assertion of certain federal health officials. They attribute the increased proportion of Medicare claims for more complex and more expensive services by some providers to be, in some part, acts of fraud.

Most pathologists and clinical laboratory managers will notice the irony in these allegations that providers are upcoding services to Medicare patients in fraudulent ways. After all, the federal government is currently paying billions of dollars in financial incentives to encourage providers to implement and use certified EHR systems with the goal of lowering healthcare costs, while improving patient outcomes.

OIG Audit Findings Are Source of Fraud Allegations

Insinuations of provider fraud came after the public learned of findings of an audit done by Health and Human Services’ Office of Inspector General (OIG). The OIG determined that payments for more complex Level 5 E/M services increased by 21% between 2001 and 2010. During that same period, payments for medium-complexity patient services decreased by 11%.

For all of 2010, the Centers for Medicare and Medicaid Services (CMS) paid out $33.5 billion for E/M billings. This was about one-third of Medicare Part B payments for physician services. These numbers were part of a story  published in Modern Healthcare.


Now that much larger numbers of physicians and hospitals are using electronic health record (EHR) systems, Medicare has noticed a steady increase in the proportion of claims submitted at higher and more complex codes, increasing reimbursement. In response to one federal government audit, Kathleen Sebellius, Secretary of Health and Human Services (r) and Attorney General Eric Holder (l) held a joint press conference to announce to healthcare providers that there would be stricter audits of providers who are using billing codes for complex patient visits with greater frequency. (Photo by Manuel Balce Ceneta, copyright Associated Press.)

Study Shows Increased Use of EHRs by Physicians

The Center for Public Integrity (CPI) conducted its own study, which it called the “Cracking the Codes” investigation. CPI’s study determined that more than half of physicians billing for patient visits in 2011 used electronic health records. The Center said that its study of questionable Medicare billings found that doctors and other medical professionals steadily billed higher rates for treating elderly patients over the last decade, adding $11 billion to their fees.

Indications of electronic billing abuse provoked Attorney General Eric Holder and HHS Secretary Kathleen Sebellius to send a sternly-worded letter to five major hospital trade organizations. They are:

American Hospital Association

Federation of American Hospitals

Association of Academic Health Centers

Association of American Medical Colleges

National Association of Public Hospitals and Health Systems

In its story, The New York Times explained how the letter warned that federal regulators are intensifying efforts to investigate Medicare fraud. CMS auditors are also directed to take a close look at billings coded through EHRs.

At Modern Healthcare, reporter Joe Carlson suggested that those hospitals and doctors consistently billing Medicare for the most expensive levels of E/M services should heed this warning. An OIG study attributed as much as $100 million of the increase in Medicare reimbursements for E/M services to just 1,700 of the nation’s 440,000 doctors! Specialists in family practice, internal medicine, and emergency care represent the lion’s share of these doctors.

The letter was sent a couple days after a front-page New York Times article reported that CMS reimbursements to hospitals increased by $1 billion in 2010, compared with 2005. In part, this was because hospital emergency rooms had changed billing codes assigned to patients so as to obtain reimbursements for higher levels of care than were actually provided.

The Modern Healthcare article pointed out that, in 2010 for example, hospitals received an average of $61 for each Medicare patient seen in the emergency room and coded for a medium, level 3, complexity. But each time the hospital could document the patient as a “high” complexity-of-care case, hospitals could assign a level 5 code to bump the payout to $173.

Emphasizing that Medicare fraud will not be tolerated, the letter’s message underscored the Obama Administration’s resolve to prevent and prosecute health-care fraud. “There are troubling indications that some providers are using this technology to game the system, possibly to obtain payments to which they are not entitled,” stated the letter. It cited indications of ‘cloning’ of medical records in order to inflate what providers get paid and ‘upcoding’ of the intensity of care or severity of a patient’s condition to profit without providing commensurate care.

The letter warned that auditors have been instructed to scrutinize electronic billings for E/M services, and federal law enforcement agencies have been directed to pursue providers who misuse electronic health records to bill for services never provided and take action where warranted.

The Modern Health Care report noted EHRs were sold to hospitals on the promise of increased revenues for better documentation, but rapid growth in high-priced E/M services has raised eyebrows. EHR users, however, contend that the technology has increased revenues by allowing providers to do more work during visits with patients with complex conditions and better document services provided.

“When you roll out an EHR, you are not trying to just replicate what you do on paper,” stated Lyle Berkowitz, M.D., a primary-care doctor and associate medical chief for innovation at Northwestern Memorial Hospital in Chicago in the Modern Health Care. “It is really an opportunity for process improvement. In the past, a busy doctor may not have been able to document everything he could bill for,” he pointed out.

Berkowitz admitted that efficiencies provided by EHR technology make it easier to upcode or clone medical records. However, he contended, “It’s not clear what effect any warning or enhanced government investigation could have, given the high degree of scrutiny already at work.”

Industry professionals also say the CMS is partially at fault for not providing guidelines to professionals developing EHR software or clarity to providers about what is or is not allowed, noted a story in The New York Times. “We’ve gone from the horse and buggy to the Model T, and we don’t know the rules of the road,” stated Lynne Thomas Gordon. She is Chief Executive for the American Health Information Management Association and was quoted by The Times.

An area causing contention is the use of templates with limited documentation space, checklists, and predefined answers, noted an article by FierceEMR. CMS has instructed review contractors that “progress notes created with limited space templates in the absence of other acceptable medical record entries do not constitute sufficient documentation of a face-to-face visit and medical examination.”

Report author Marla Durben Hirsch noted that CMS has not formally informed providers about this change, and there has been very little press about it. The new regulations are buried on the CMS Website under Regulations and Guidance. They warn providers that templates designed to gather only “selected information primarily for reimbursement purposes” won’t cut the mustard, she said. Meanwhile, the agency has instructed CMS review contractors to deny claims submitted in templates that do not meet these guidelines.

The message here for medical laboratory professionals is the need to understand what is and is not acceptable by CMS when submitting their own Medicare claims. Further, clinical laboratories and pathology groups may want to review the laboratory test algorithms they often provide to ordering physicians. The goal would be to ensure that well-documented, evidence-based medicine supports each of those algorithms and do not encourage physicians to order tests that would be considered medically unnecessary.

—Patricia Kirk

Related Information:

Department of Health and Human Services, Office of Inspector General CODING TRENDS OF MEDICARE EVALUATION AND MANAGEMENT SERVICES

Warning Bell

Letter From Obama Administration on Hospital Billing

EHR templates could cost providers reimbursement dollars

Cracking the Codes

Medicare Bills Rise as Records Turn Electronic