Kusserow’s Corner: OIG Found $6.7 Billion in Improper Medicare E&M Payments

On May 28, the HHS Office of Inspector General (OIG) issued a report that found Medicare paid out $6.7 billion for health care visits that were improperly coded or lacked documentation.  It conducted a medical record review of a random sample of Part B claims for evaluation and management (E/M) services from 2010, stratifying claims from physicians who consistently billed higher-level codes for E/M services (i.e., “high-coding” physicians) and claims from other physicians. Certified professional coders determined whether the E/M service documented in the medical record for each sampled claim was correctly coded and/or sufficiently documented.

The OIG explained that E/M services are visits performed by physicians and non-physician practitioners to assess and manage a beneficiary’s health. Medicare paid $32.3 billion for E/M services in 2010, representing nearly 30 percent of Part B payments that year. In 2012, the OIG reported that physicians increased their billing of higher-level codes, which yield higher payment amounts, for E/M services in all visit types from 2001 to 2010.  That report noted that the OIG found 1,669 physicians consistently billed for the two highest-paying codes. In the new report, 56 percent of claims for those high-coding physicians were incorrect, with 99 percent of incorrect claims being up-coded in the provider’s favor, and only 1 percent of the “errors” being down-coded. Those providers alone cost $26 million in 2010 in incorrect coding.

From its review, the OIG found:

  1. In total, Medicare inappropriately paid $6.7 billion for claims for E/M services in 2010 that were incorrectly coded and/or lacking documentation.
  2. The incorrect payments represented one out of five Medicare payments for E/M services that year.
  3. Forty-two percent of claims for E/M services were incorrectly coded, which included both upcoding and downcoding (i.e., billing at levels higher and lower than warranted, respectively), and 19 percent were lacking documentation. All together, 26 percent of the claims were up-coded in favor of the provider, while 15 percent were down-coded.
  4. Claims from high-coding physicians were more likely to be incorrectly coded or insufficiently documented than claims from other physicians.

From its review, the OIG recommended the following to CMS: (1) educate physicians on coding and documentation requirements for E/M services; (2) continue to encourage contractors to review E/M services billed for by high-coding physicians; and (3) follow up on claims for E/M services that were paid for in error. CMS concurred with the first recommendation, did not concur with the second, and partially concurred with the third. CMS responded that reviewing physicians’ billing in the past “resulted in a negative return on investment.” CMS agreed to would follow up on errors if the money lost meets CMS’s “recovery threshold.”

On April 30, Gloria Jarmon, HHS’ deputy inspector general, testified before the House Way and Means Subcommittee on Health that improper payments account for $50 billion dollars a year in waste, of which $36 billion was in the fee-for-service program; and nearly $12 billion for the managed care programs of Parts C and D.  This represents a little more than 10 percent of Medicare spending, which was $554.3 billion total in 2011.

When looking at errors in claims submitted for payment, it is important to keep in mind that it is the government’s position that the provider is responsible for submitting accurate claims; in reliance upon that, the government pays those claims.  So, if the government finds errors such as noted by the OIG in the report noted above, it will only consider the overpayments.  It will not, as a rule, consider any offsets from underpayments.  Its position is that the underpayments is the providers problem, but overpayments must be returned.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2014 Strategic Management Services, LLC. Published with permission.