The upcoding firestorm: Why doctors are unfairly targeted

There was an interesting and important article in the New York Times the other day about the gradual increase in the average E/M coding levels used by doctors over the last few years. For the non-docs, med students and ER trainees out there, here is a brief summary of the way physician billing works in the ER.

During and after the patient encounter, the physician creates a medical record. This is a pretty standardized document including the history the doctor got from the patient, the exam, any tests and the medical decision-making. And, of course, the diagnosis. This gets reviewed, typically, by a professional coder who then applies Medicare’s rules to determine what level of complexity the service was, and the associated cost of that service. (In some cases, the doctors code their own charts, and some are automatically coded by a computer, but both of these are exceptions to the rule.) ER visits are coded on a 5-level scale, with a Level 1 (99281) being the simplest and a Level 5 being the most intense. These are called E/M codes because they refer to the “Evaluation and Management” of the case, as opposed to, say, a surgical procedure.

The amount Medicare pays the doctor for an E/M code in the ER ranges from about $20 to $175. (If you’ve ever received a multi-thousand-dollar ER bill, chances are good that was the hospital bill. The physician’s fees are much more modest in most cases.

Medicare, of course, tracks utilization and recently published a report (PDF link) about the recent trends in the doctors’ use of the codes. What they found is that over the last decade, we have shifted from using the lower codes and towards the higher ones:

The upcoding firestorm: Why doctors are unfairly targeted

This is where it gets interesting. The feds and some consumer watchdogs view this trend as clear evidence of fraud and abuse, that the physicians are “upcoding” the visit levels to increase their income. On the other hand, I’ve spent the last decade trying to educate physicians on how to document the patient encounter so that you can accurately capture the legitimate value of the service provided. So I look at that trend and think to myself “Job well done.”

From the perspective of a practicing physician, the rules that govern the documentation required to capture a service level are deliberately onerous and designed to produce downcodes. They require the doc to collect far more data than is actually necessary based on the actual condition of the patient. You forget to check one box, you leave out one required element, and despite the complexity, gravity and risk of a patient’s condition, you will not be paid for the service. For years, we have been losing money to these archaic rules (they date from 1995), and we have been struggling to stem the leakage of revenue from our practices.

The industry responded to these rules by developing tools to comply with them. The first thing was to have professional coders. Prior to 2000, a substantial majority of ER charts were hand-coded by the physician; now that is quite rare. Then we got templated paper records which prompted the docs to get all the required data points. Now we have EMRs which do the same thing more efficiently. It’s no surprise that as an industry we have gotten better at meeting the guidelines.

And then there is the fact that the ER is a different place than it was in 2000. Our patients are older and sicker. We do more in the ER than was true in the past. Patients are rarely directly admitted any more, but rather get the majority of their admitting workup done in the ER. I don’t know how much of the skew in the above graph is due to these factors, but they shouldn’t be disregarded.

But I don’t like where this is going. The government is desperate, understandably, to save money on healthcare expenditures. They seem to have assumed their conclusion that the increased coding levels is fraudulent and unjustified, and there seem to be few voices disagreeing with them. Furthermore, there is some inappropriate upcoding, and it’s very easy for a patient with an egregious bill or a certain physician (or group) who pushed the envelope too far to be held up as anecdotal proof that doctors are all a bunch of thieves.

The article quotes some insurers as saying that nearly half of the charges being submitted are “upcodes,” without noting that the insurers have a vested interest in not paying and may not be presenting an honest picture of the claims. We had a run-in with a certain national insurer who analyzed a few hundred claims, found that 80% of them were upcoded and demanded a couple of million dollars in restitution. We fought back, of course, defended each chart on the merits of the care, and established that in fact 97% of the time the correct, higher, code was appropriately used. That the insurers are not necessarily honest players here passes unremarked.

I think changes are coming, and it worries me. We already have one insurer saying that they simply won’t pay for cloned records — but how will they tell if a chart has been cloned? Do charts have DNA? I think what we are going to see is the carriers becoming very aggressive in arbitrarily denying payment or demanding restitution. I would love to see revised and streamlined coding rules to replace the old ones, but I suspect that if that were to happen, the new rules will be designed to be more restrictive and more burdensome.

“Shadowfax” is an emergency physician who blogs at Movin’ Meat.

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  • Mary Pat Whaley

    This is an excellent article! I take great exception the conclusions drawn by some that the Medicare data means doctors are upcoding, as opposed to doing a better job coding the services they actually provided. I had planned to write a post about it but you’ve said everything I intended to, and said it better. I know of many physicians who would rather downcode a record rather than run the risk of potentially upcoding in error.

    Thanks for writing about this topic.

    Mary Pat Whaley

  • Homeless

    One of the reasons the healthcare system uses these codes is because the AMA gets lots of money. If we got rid of the codes and doctors either received an hourly wage or a yearly salary, we could get rid of the problem and all the associated costs. Of course, the AMA lobbies against this and we have this nightmare of a payment system.

    • azmd

      Actually, most of the doctors who are being accused up “upcoding,” are already salaried hospital employees who, as pointed out above, do almost none of their own coding.

      • Homeless

        If patients or Medicare or insurance companies paid an hourly fee or a yearly salary, there would be no codes to upcode. Some hospitals and some doctors are upcoding because that is how they maximize revenue. Some doctors who don’t participate end up not making the money needed to run a viable practice.

        You seem defensive about my statement. I said nothing about doctors upcoding. Do you really like the coding system? Or are you part of the AMA and get a kickback from the codes?

        • azmd

          I don’t think you understood my response. I was pointing out that paying physicians a salary would do nothing to change whether upcoding happens or not, since it is done at the hospital level not the doctor level. Obviously there is no way we can get rid of the coding system at all under our present healthcare system. Unfortunately.

          • Homeless

            Because of the AMA…a physician’s organization.

            There are lots of models that would get rid of the need for coding. Most of them are better for front line doctors. I get voted down for suggesting something different. Typical.

    • NewMexicoRam

      Most doctors don’t even belong to the AMA. Also, with the Medicare fee schedule freezes over the last 12 years, doctors either have to squeeze in more patients per day to keep up with inflation, or code smarter for the work they do, or both. Medicare has gone up 7% for me over the last 12 years. Inflation is close to 30% over that time period. And Medicare patients are 70% of my practice. I code appropriately for the work done (our practice does spot audits), averaging 90-95% correct on my coding audits. If insurers want healthier patients, then they should give refunds to their clients for good health behaviors and charge penalties for bad behaviors.

      • buzzkillersmith

        Medicare is 70% of your practice? Ouch. I applaud you for staying at your job.

      • southerndoc1

        And every one of those Medicare patients is now a professional bounty hunter. They always go after the good guys first.

  • Deep Ramachandran

    Great article, a good illustration of what sits on the other side of all the talk about cutting out “waste and abuse”. Not all of it is wasteful and abusive, much of it is really just the medical industry getting better at coding. When I finished residency there was hardly any training about coding, for years we have been under-billing. Now coding training is so common I can hardly go to a conference where there isn’t a primer on how to code effectively, and I get mail weekly on programs that promise to improve my coding abilities.
    The increasing threat of audits is a big reason hospitals increasingly admit patients to observation areas. They take the reduced payments of an observation status for the reduced risk of losing money in an audit. Insurance likes it because it costs less. The patients hate it because it’s treated like an outpatient visit, so their usual outpatient co-pays and deductibles still apply, in other words, the costs gets passed on to them.

  • Killroy71

    Thanks for that perspective – in the vaccuum of info, it is tempting to think hospitals are upcoding to increase their revenue, especially in the face of declining use during the recession. But I’m all for being accurate about what it takes to get the job done right, because that’s the only way we can see what needs to happen. Insurers, too, have to know what’s going on because they are getting pressure for rising premiums and stopping actual fraud. Which, as you noted, does exist, including doctors. Hold their feet to the fire, but give them the benefit of honorable intentions, too.

  • Dale Coy

    Sad doctors have become villains. Those interested read Morton’s Fork.

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