Medicare zeroes in on E&M coding as key source of payment mistakes

Washington -- If physicians are able to gain a better understanding of one of Medicare's most frustrating administrative requirements, there may be hundreds of millions of dollars in it for them.

That's the message that the Centers for Medicare & Medicaid Services gave the American Medical Association last month, when the agency released its report on improper Medicare payment rates for fiscal year 2004.

Confusion about which codes to use for services contributed to estimated overpayments of more than $20 billion to various program participants.

But nearly $1 billion stayed in the federal coffers when it should have gone to medical professionals, and the agency suspects that the same coding confusion could be largely to blame. A special investigation of underpayments found that the vast majority of the reimbursement shortfalls to physicians alone could be linked to a familiar administrative headache: the evaluation and management code. Studies from past years had focused only on overpayments.

In part because of this discovery, CMS is asking the AMA to collaborate on a new effort to give physicians and carriers better guidance on E&M codes, which have been used since 1992 for some of the most common services that doctors provide. The agency last updated its written set of guidelines for the Association-owned system in 1997.

The AMA Current Procedural Terminology Editorial Panel, which is responsible for drafting changes to the coding structure, welcomed the chance to take another swing at improving a system that has left so many doctors perplexed and dissatisfied.

"The CPT Editorial Panel works to produce an up-to-date and accurate code set that physicians and payers can apply with confidence," said Tracy R. Gordy, MD, chair of the committee. "To increase the understanding, application and review of E&M codes among physicians and payers, we will work with CMS to analyze the [error report] data and make improvements to the E&M code instructions and educational material."

Federal officials have not established a final goal for the new initiative beyond reducing the amount of overpayments and making sure that doctors are fairly compensated for their services.

The solution that Medicare officials seek could involve making a better differentiation between the intensity score, measured using either three or five levels, that the system assigns to each E&M service.

One of the most common upcoding and downcoding mistakes that physicians made last year involved a one-level error, such as billing for a full, level-five office visit when they should have billed instead for a level-four service.

But fixing this problem is easier said than done, according to CMS.

"Published studies suggest that under certain circumstances, experienced reviewers may disagree on the most appropriate code to describe a particular service," the study says. "This may explain some of the incorrect coding errors in this report."

A familiar effort

So if the overpayments and underpayments attributable to physicians are largely due not to errors but to honest differences in clinical judgment, is there any set of guidelines that could solve the problem?

The AMA, medical specialty societies and Medicare officials have been attempting to make the system work better for more than a decade.

Numerous attempts to update the 1997 CMS instructions have ended in a stalemate when one or more of the stakeholders determined that the proposals offered no improvement over the most current version or risked the potential of confusing doctors even more.

Levels of physician frustration with the current CMS guidance led the Dept. of Health and Human Services' own regulatory reform advisory panel to recommend in 2002 that the agency drop the instructions altogether.

At the AMA Interim Meeting in Atlanta last month, delegates approved a resolution renewing Association support for CMS pilot studies to determine whether adoption of new real-world clinical examples would enable doctors to understand what codes to use in particular situations.

Federal officials unveiled a new set of such examples in 2000 that were arranged according to medical specialty, but an ensuing uproar from the physician community over the complexity of the offering prompted HHS to scuttle the plan.

The authors of the Medicare report acknowledge that simply implementing better education for physicians on the guidelines that exist today might be a good place to start. Responsibility for this would not fall solely on Medicare officials and the AMA, but on the program's contractors as well.

"CMS will encourage carriers to remind physicians about the importance of billing correctly to avoid upcoding and undercoding," the study says.

Meanwhile, Interim Meeting delegates said, unwieldy requirements for supplementing E&M codes with medical records and other certification mean that physicians worried about possible carrier audits are receiving inadequate federal compensation. "Physicians have been conditioned to downcode, in part, because documentation under the guidelines is too cumbersome, and there is a strong 'fear factor,' " wrote the Florida delegation, authors of the approved resolution.

While CMS started to investigate the likely causes of underpayments for the first time in the fiscal year 2004 error rate report, the agency is still focused mainly on the cases in which Medicare participants are being paid too much.

Focus on the overpayments

Under the current method of measuring errors, overpayments appear to be the much larger problem for the federal government. Carriers who administer payments for physician treatments along with laboratory and ambulance services, for example, processed roughly $6.7 billion in overpayments during the year but only about $200 million in underpayments.

Lawmakers also continue to exert pressure on CMS to stamp out more of the overage that is due in part to purposeful upcoding and other attempts to defraud the Medicare system. Senate Finance Committee Chair Charles Grassley (R, Iowa) is one of Capitol Hill's most prominent watchdogs on this issue.

"CMS must work even more aggressively to stem the tide of this error rate and work closely with the Justice Dept. and the [HHS] inspector general in the pursuit of waste, fraud and abuse," Grassley said. "Improper payments jeopardize Medicare's ability to treat a growing population of beneficiaries. They have to stop."