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Medical coding driving costs up

A post last week addressed the influence of medical coding changes on billing practices and costs – net was providers are being paid more due to more sophisticated coding.

The care isn’t different, the patients aren’t sicker, it’s just the way the providers are coding their services.

Th NYTimes just published a piece that provides a lot more detail on the issue.  Here are a few of the findings of their rather extensive analysis.

– Hospitals received $1 billion more in Medicare reimbursements in 2010 than they did five years earlier, at least in part by changing the billing codes they assign to patients in emergency rooms

– 1,700 of the more than 440,000 doctors in the country — cost Medicare as much as $100 million in 2010 alone, federal regulators said in a recent report, noting that the largest share of those doctors specialized in family practice, internal medicine and emergency care.

There are two drivers behind the issue – for hospitals it is CMS’ switch to MS-DRGs from DRGS a couple years back.  By adjusting reimbursement based on severity, the new payment methodology encouraged hospitals to more accurately, or as some would suggest – more creatively code and bill.  CMS determined total costs went up around four percent due to the change, so they reduced reimbursements by about the same amount.

The other driver is CMS’ ongoing effort to get physicians to use electronic medical records (EMR).  While this will drive administrative costs down and provide much more accurate data for analysis and development of outcomes data, over the near term EMR vendors are selling their software in part on its ability to increase billing and reimbursement. As the NYT reported, “In an online demonstration, one vendor, Praxis EMR, promises that it “plays the level-of-service game on your behalf and beats them at their own game using their own rules.”

That’s not exactly…consistent with what actually happens. Turns out that some of these applications allow docs to simply check boxes indicating services were delivered without verifying the services actually WERE delivered.

As a result, payers – and yes, that includes you – are getting bills for services that did not occur.

So, what do you do about it?

First, look at your data to identify the providers whose billing has changed significantly at some point over the last couple years. Next, identify that inflection point, and find out if that occurred when they changed billing software/vendors. Third, look carefully at a few of the providers’ bills before and after the inflection point, figure out what’s happened, and then sit back and discuss next steps.

These could include:

  • call to the provider asking what’s going on
  • claim file audit
  • referral to internal fraud and abuse
  • onsite visit to provider
  • flagging of provider’s future bills for special review

5 thoughts on “Medical coding driving costs up”

  1. Joe,

    I actually witnessed and noted this anamoly when my Primary Care Physician (his practice was purchased by the Hospital of the University of Pennsylvania a few years back) went to using an electronic medical record back in August. The first time he used it for a visit with me he was very frustrated by the method in which the program forced him to address each aspect of the visit in a predetermined order and enter his findings before moving on to the next issue to be addressed in the visit. This was a routine periodic follow up visit. In the past these visits have been coded by the physician using a multicopy form filled out by hand and the code has always been 99213-which is appropriate. For the new electronic process the visit form prints out in the exam room at the end of the visit and the CPT code was 99214. 99214 requires at least 2 of the following three activities. They are; a detaied history (He’s been my PCP for over 30 years so no history done), a detailed examination, or medical decision making of moderate complexity. I’ll agree that he performed a detailed exam. All the appropriate poking, prodding, and listening was done. However, There were no changes on my condition, no new prescriptions were written and I would challenge the “medical decision making of modeate complexity.” I’m glad to see that investigators are challenging the use of the required new Electronic Medical Record to “play the level of service game.”

  2. As I commented earlier – this is a big deal – and based on my experience with Taft Hartley plans (which are not for profit and not insurance companies) this is a much more widespread and prevalent issue than even the recent stories and posts have revealed. But the good news is that it is now coming to public attention. We can only hope that policy makers will have the courage to look at this problem – billions of dollars are at stake.

  3. Wow! “payers – and yes, that includes you – are getting bills for services that did not occur.” I have to take exception here. Yes, there are providers who overcode. (Unfortunately, that’s nothing new). However, by using the EMR software there are also many, many providers who are now coding CORRECTLY after having UNDERCODED from many years. First CMS tell physicians that they have to move to Electronic Records. Then the Medicare RACs start auditing the physicians because notes are so similar (the EMRs force physicians into using templates, so yes, notes will be similar for similar levels of care). Most Physician offices have certified coders who review billing before it’s submitted to payers and alert the physician if documentation does not support the level of service billed. EMRs can be a wonderful tool, and once we are able to universally exchange health data electronically it will be even better. The answer to the coding problem is to get away from fee for service care. Let’s stop beating up the docs.

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Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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