Medicare Part B Inappropriately Paid $6.7 Billion for E/M Services in 2010

by Leonardo M. Tamburello

In a recent report, the Department of Health and Human Services (DHSS) Office of Inspector General (OIG) examined whether or not Medicare Part B management (“E/M”) services in 2010 were incorrectly coded and/or lacking overall documentation.

This is the third in a series of reviews by the OIG concerning E/M services.  The first study found that from 2001 to 2010, physicians increased their billing of higher level E/M services in all visit types, and that in 2010, over 1,600 physicians consistently billed for the two highest level codes for E/M services.  The second study looked at the adoption of electronic health record (EHR) technology, finding that 57 percent of all physicians providing E/M services in 2010 used EHR technology at their primary practice location in 2011.

This most recent analysis determined that in 2010, approximately $6.7 billion in Medicare Part B claims, representing some 55 percent of claims submitted by physicians and non-physician practitioners, were incorrectly coded and/or so lacking documentation that payment should have been denied.  This sum represents over a fifth of all Medicare payments for evaluation and management (E/M) services in 2010.

Over a quarter of all claims surveyed were “upcoded,” i.e., the correct code for the services provided was lower than the code originally billed for, while nearly another 20 percent were either insufficiently documented or undocumented altogether.   In the aggregate, over 45 percent of E/M claims reviewed were either upcoded or unsupported by the medical records.  Most miscoded claims (79 percent) were upcoded or downcoded by one level; in addition, 17 percent and 4 percent of claims were upcoded and downcoded, respectively, by two levels.

In its study, the OIG identified “high-coding physicians” as those whose average code level was in the top 1 percent of their specialty and billed for the two highest E/M level codes at least 95 percent of the time.  Claims by these physicians were more likely than not to be incorrectly coded or insufficiently documented compared to physicians outside of this classification.  The overwhelming amount of coding errors (99 percent) were in the form of upcoding, resulting in an average of $15,594 inappropriately paid to each physician.

OIG made three recommendations as result of this study:  first, increased physician education concerning proper E/M coding; second, contractor encouragement to review E/M services billed by high-coding physicians; and third, follow up on claims that were paid in error that have resulted in overpayments or underpayments.

CMS agreed with the first recommendation to increase physician education on this topic.  However, it did not concur with OIG’s second recommendation based on negative return on investment after previously directing a medical review contractor to review claims by high-coding physicians.  CMS also partially agreed with OIG’s third recommendation to pursue overpayment recoveries beyond a certain threshold and to implement remedial educational requirements for physicians below this threshold.

CMS and its contractors clearly have the resources and incentive to seek recovery of overpayments.  Even though Medicare payment rates for individual E/M services are small (approximately $100 on average), the volume of claims is enormous:  physicians billed for some 370 million E/M services in 2010 that accounted for nearly 30 percent ($32.3 billion) of all Part B payments that year.

Given the substantial spending on E/M services and prevalence of error (56 percent of E/M claims by high-coding physicians, and 42 percent of E/M claims for all other physicians) it can be readily expected that physicians who regularly provide E/M services under Part B will face increased audit risk from CMS and its contractors.