Conflicting state versus federal incentives confuse doctors

Conflicting state versus federal incentives confuse doctors

I get paid by Medicaid to see patients. How much?

Exactly $52.28 if it is an easy patient issue, like a cold, and $78.54 for a harder one, like a kidney stone. Who decides when the issue is easy and when it is hard? I do. But I have to follow some complex rules when deciding whether to bill a 99213 (a level 3, or easier visit) vs a 99214 (a level 4, or harder visit). If I can bill a level 4 instead of a level 3, I get paid $26.26 (about 50%) more, so it is in my interest to turn simple problems into harder ones.

The rules I must follow state that the more problems I address, the more tests I order, and the more medications I prescribe, the more likely I can bill a level 4. These guidelines were put out by the federal government, specifically the Centers for Medicare & Medicaid Services. These rules are followed by Medicare (a national program), Medicaid (a state program), and every private insurance company. This system was intended to pay more when you do more complicated work, but over time it has evolved into a backwards game of doing more complicated work in order to get paid more. Of course the government has hired folks to chase doctors who are flagrantly upcoding.

This is not a few rogue doctors trying to get rich, it is a systemic effort of every doctor and hospital to make more money. In the past 10 years, the proportion of level 4s billed has almost doubled. One local ER provider told me that they are under constant pressure to order tests in order to bill higher. For example, most back pain patients do not need an MRI, and really only need some stretching, but if I order an MRI and prescribe medications, I can bill a level 4. If I order an MRI, the imaging facility gets paid $374.48 (code 72148) by Colorado Medicaid, and I get paid an extra $26.26.

Actually my incentive isn’t just $26, it is also that the MRI places bring me cookies. Big bags of hot chocolate chip cookies. At one point we had cookies so often that I begged them to stop. I was gaining weight, and asked them to please bring some vegetables instead. Have you checked out a waiting room of an MRI facility recently? Free cookies are just the beginning.

This is the health care over utilization that you hear about, how doctors and hospitals are incentivized by the amount of visits, tests, prescriptions, and procedures, rather than by the quality of care. In the last few years, there have been many initiatives to reform this system. In Colorado Medicaid, the initiatives are called the accountable care collaborative (ACC). In the ACC, I am the primary doctor of about 800 Medicaid patients, and my office gets a monthly bonus of $3 per person ($2,400 per month) just for participating in the program.

The ACC goals are to reduce the number of ER visits, reduce the number of people who leave the hospital and return a few days later (readmissions), reduce the number of CT scans and MRIs, and increase the number of annual child checkups. Each of these goals are proxies for reducing health care spending. If I can achieve all of these goals to some extent, then my $3 bonus goes up to $4, and my office gets about $800 more per month.

In case that wasn’t clear: The state government is incentivizing me to do less MRIs, and the federal government is incentivizing me to do more MRIs.

Which one wins? Monetarily, the federal incentives do, by far. Ordering more tests and drugs to create level 4s brings in much more money than does the ACC’s extra buck, and it is way easier to just write more prescriptions, than to keep hundreds of people out of the ER and hospital. Plus, I like cookies.

Of course I will offer the disclaimer that I rarely order MRIs: I’ve requested maybe five in the last year, and we even have an on-site yoga program for our back pain patients. My track record of level 4s is pretty close to the mean. I believe that my work is not influenced by incentives, and that I do the proper thing for the patient regardless of reimbursement, but I’m sure all other doctors would say the same. A modern Hippocratic Oath would read, “I treat all patients the same regardless of monetary incentives or cookies.”

Of course if I do the right thing regardless of incentives, then that entirely negates the utility of incentives in the burgeoning accountable care programs, such as Colorado’s ACC.

How to straighten out these incentives? My first recommendation would be to either make the incentives in the Colorado ACC much larger than $4 (this is unlikely given the cost), or make the whole $4 an incentive, rather than just $1 of the $4. A second idea would be that accountable care program such as the ACC must apply to all Medicaid members to make them meaningful. And a third idea, on a federal level, would be to change the evaluation and management guidelines so they aren’t based on number of tests or medications. Maybe keep the parts regarding number of problems addressed, or time spent.

If those changes were made, then I may stop ordering MRIs, although I might miss the cookies.

P.J. Parmar is a family doctor at Ardas Family Medicine and blogs at P.J.! Parmar.

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  • RuralEMdoc

    I have to admit that your characterization of ED billing is incorrect.

    Chart coding takes into account three elements, the History, the Physical Exam, and the Medical Decision making (MDM). These three elements are all coded separately and the entire chart is then coded (and billed) at the lowest level of the three. For example, If your history is a 3, your physical is a 4, and your MDM is a 4, the whole chart gets coded a 3.

    That being said, certain ICD – 9 codes will only allow a certain level of coding. While interpreting an MRI would fall into the third category (MDM), it still would not allow me to bill a simple lumbago as a level 4 or 5. On another note, I can count the number of MRI’s I’ve ordered from the ED on one hand. ( CT’s however………!)

    Most of the time, the chart gets downcoded because of missing history information. It isn’t that I didn’t illicit that history, or speak to EMS and family members, it’s that I forgot to mention it in my charting.

    The increase in coding is likely a result of the fact that doctors groups, hospitals, and administrators are increasingly aware that we are terrible about documenting all the care we provide. We are often doing things as part of our job,like calling the pharmacist, which constitutes a higher level of care and can be appropriately billed for, but we were never billing for it. Now we are.

    • Dr. Drake Ramoray

      I agree 100%. One of TV smarted things I ever did and some of the best money I ever spent was taking a course and becoming a certified Endocrine coder. Within the first week of work at my new practice I found a 1/2 dozen thugs that the current did were under coding and not billing correctly. I also caught some other misbehavior that resulted in the termination of the office manager. Most docs don’t even code diabetes correctly let alone bill correctly although as a whole we are getting better about the latter

    • pjp

      EandM university (free, online) has a thorough treatment of billing and charting. The rules of the game are indeed much more complex than I suggest here.

  • Margalit Gur-Arie

    In defense of CMS, the E&M coding scheme was intended to assess the visit and pay more for more complex or lengthier work. They could have just decided to pay a flat fee for each visit instead, but that would have been an incentive to under-treat and cherry-pick, just like the ACO payments are.
    We can certainly debate the methodology CMS chose to evaluate a visit’s complexity, of which test ordering is just one component (and not a big one), but somehow I find it more honest to try and pay people more for more work, than to pay them special incentives for doing less work.

    The party line saying that the new ACO models are paying more for doing the “right” work, implies that someone not present during the visit knows better than the participants what the “right” work is. I doubt that very much.

    Every payment scheme, for every good or service, can be inappropriately manipulated. For health care services, the only questions are who is in a position to manipulate things now, how much latitude there is to manipulate things, and if the controlling entity is more or less inclined to be immoral than any given doctor.

    • doc99

      If physicians were paid for their time, as are other professionals, instead of arcane codes, this issue would be soon relegated to the dustbin of history.

      • Margalit Gur-Arie

        Precisely…. but then they’ll need to come up with a different pretext to make you report on every word said during a visit…

    • pjp

      agreed. coming up with a payment structure is tough, and my compare/contrast here is meant for a novel analysis of the incentives, to keep stimulating discussion.

  • PamelaWibleMD

    Nice piece PJ! I have asked for carrot juice bribes rather than cookies too.
    I opted out of Medicare long ago and bypass much of this (see how here):

  • QQQ

    These guidelines were put out by the federal government, specifically
    the Centers for Medicare & Medicaid Services. These rules are
    followed by Medicare (a national program), Medicaid (a state program),


    This is just an expansion of Medicaid at the taxpayers expense. 87% of
    the US population had medical insurance before the ACA fiasco – no we are
    up to about 90% but at what cost ? This is going to nail the middle
    class twice – your going to get hit with higher premiums outside of ACA
    and 100′s of billions in taxes will go to support the people who don’t pay.

    The interesting part – the only people who will maintain the insurance
    after 1-2 years is the medicaid recipients – when peoples premiums go up
    50% and subsidies go away – everyone but the medicaid subscribers wont
    be able to afford the insurance. There was NOTHING done to control the
    cost before they tried to dump another 40MM people into a broken system.
    Many of the really costly things wont happen until those leave
    office – can hardly wait to see how this turns out

  • Robert Steed

    The best part of the E&M guidelines is that there are two of them (the 1995 and 1997 versions), and they are different. After over 15 years, they can’t be harmonized?

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