A review of Medicare Part B claims for evaluation and management (E/M) services conducted by the Office of the Inspector General (OIG) has found that the program paid $6.7 billion in improper payments in 2010.[1] This figure represents 21 percent of all E/M payments for the year; E/M payments, generally, accounted for nearly 30 percent of all Part B payments.

Evaluation and management (E/M) services refer to visits at which providers assess and manage a Medicare beneficiary’s health. CMS has previously found that E/M services are 50 percent more likely than other Part B services to be paid for in error. The OIG study focused on two sources of error: insufficient documentation (19 percent of E/M claims) and incorrect coding (42 percent of E/M claims).

Incorrect coding is inclusive of both upcoding and downcoding. The level of an E/M service is based on seven components including: patient history, physical examination, medical decisionmaking, counseling, care coordination, the nature of the patient’s problem(s), and time. Physicians, notes the study, are responsible for ensuring that billing levels on claims submitted accurately reflect the E/M services provided.

An additional finding is that claims submitted by “high-coding physicians”—physicians whose average code was in the top 1 percent of their specialty and who billed for the two highest levels at least 95 percent of the time—were more likely to be incorrectly coded. Ninety-nine percent of miscoded claims among this subset of physicians were upcoded.

What might this information mean for providers?

The OIG has recommended that CMS:

• Educate physicians on coding and documentation requirements;
• Consider making E/M claims submitted by high-coding physicians a priority in medical review strategies; and
• Follow up miscoded claims identified in the sample with payment adjustments, as appropriate.

CMS, however, only fully concurred with the first recommendation. CMS rejected the second recommendation at this time, referencing a similarly directed review and its negative return on investment in phase one. CMS will reassess the effectiveness of reviewing claims by high-coding physicians upon completion of phase two of that review. Finally, CMS only partially concurred with the third recommendation. The agency will collect from overpayments exceeding its recovery threshold, as per CMS policies and procedures.

Looking at the gaps between the OIG recommendations and the CMS response, physician groups would be right to wonder about whether to read this latest review as foretelling greater anti-fraud enforcement activity in the near term by OIG or, perhaps more likely, that the split in response may defer a more aggressive enforcement program against high-coding physicians until completion of the phase two review.

[1] The report, Improper Payments for Evaluation and Management Services Cost Medicare Billions in 2010, is available here. A memorandum of CMS’ comments is appended.