The Center for Public Integrity

Top federal officials are stepping up scrutiny  for doctors and hospitals that may be cheating Medicare by using electronic health records to improperly bill the health plan for more complex and costly services than they deliver.

U.S. Health and Human Services Secretary Kathleen Sebelius and Attorney General Eric Holder notified five medical groups of their intention to ramp up investigative oversight, including possible criminal prosecutions, by letter on Monday.

The government action follows The Center for Public Integrity’s “Cracking the Codes”  series,  published last week. The year-long investigation found that thousands of medical professionals have steadily billed higher rates for treating seniors on Medicare over the last decade — adding $11 billion or more to their fees.

The Center’s probe uncovered a broad range of costly billing errors and abuses that have plagued Medicare for years—from confusion over how to pick proper payment codes to outright overcharges. The findings indicated that Medicare billing problems are worsening as doctors and hospitals switch to electronic health records.

 “There are troubling indications that some providers are using this technology to game the system, possibly to obtain payments to which they are not entitled,” the letter states, adding: “There are also reports that some hospitals may be using electronic health records to facilitate ‘upcoding’ of the intensity of care or severity of patients’ condition as a means to profit with no commensurate improvements in the quality of care.”

Medical professionals who cheat Medicare by billing for more complex and costly services than they deliver threaten to drain the elderly health-care program’s already shaky finances, Sen. Charles Grassley said Thursday.

The Iowa Republican’s comments came in reaction to The Center for Public Integrity’s “Cracking the Codes”  series published this week. The investigation found that thousands of medical professionals have steadily billed higher rates for treating seniors on Medicare over the last decade — adding $11 billion or more to their fees.

Grassley called the findings “disturbing,” though “not surprising” because any time Medicare creates a new payment structure, “a cottage industry develops to teach providers how to maximize revenue in the system.” 

The Center’s year-long examination  uncovered a variety of costly billing errors and abuses that have plagued Medicare for years—from confusion over how to pick proper payment codes to outright overcharges. The findings also suggest the problems are worsening as doctors and hospitals switch to electronic health records.

 Medicare pays doctors for office visits using five escalating payment codes, which range from a minimal visit of about five minutes time for about $20 to about $140 paid for more complex treatments that generally take 40 minutes or more of face-to-face time with the doctor. Federal officials expect a medical practice to report a range of the five codes because some patients require more time and effort to treat than others. Medicare uses the scales to pay for more than 200 million office visits each year and other doctor services that cost taxpayers more than $33 billion.

Eleven years ago, Dr. Kathryn Locatell’s testimony at a U.S. Senate hearing on alleged Medicare billing abuses generated a rush of media coverage, but little lasting reform.

Locatell, a California physician, helped expose medical billing consultants who made a living teaching doctors how to use the billing system to reel in higher fees.

The techniques ranged from billing for medical treatments that weren’t needed to packing a patient’s file with irrelevant details as a means to justify higher, more lucrative, Medicare billing codes.

“The information presented to us at the seminars did not include any method of … ensuring that the services billed for were medically necessary,” Locatell testified at the June 2001 Senate Finance Committee hearing.

Despite much legislative hand-wringing and media attention — CBS Evening News told her story prominently — little changed in the aftermath of the congressional probe.

More than a decade later, federal officials are still struggling to make sure doctors code accurately and charge Medicare only for treatments that are medically necessary, a Center for Public Integrity investigation has found.

The Center’s analysis of Medicare billing records found that more than 7,500 doctors billed the two top paying codes for three out of four office visits, a sharp rise from the start of the decade. Government records also show medical professionals billing billions of dollars in suspect payments in recent years through coding errors.

The “Cracking the Codes” stories are but the latest in a series of Center pieces that illuminate questionable Medicare practices and policies by marrying traditional shoe-leather reporting with rigorous data analysis.

The foundation of these pieces is the Center’s access to about two terabytes of Medicare claims data — data that was obtained by the Center in 2010 as the result of a settlement from litigation against the Centers for Medicare and Medicaid Services.   

Delving deeply into this data has now helped us expose one of medicine’s dirty little secrets: medical providers garnering extra Medicare fees by “upcoding,” or billing for more extensive care than had actually been delivered. But it wasn’t easy. “Cracking the Codes” is the result of almost 20 months of often-tedious work.

That work began in early 2011, with preliminary analysis by data editor David Donald that summarized changes in hundreds of codes used by doctors and hospitals to bill Medicare over much of the past decade. Center investigative reporter Fred Schulte spent hours sifting those findings for story ideas, and subsequently discovered sharp spikes in higher-cost Medicare billing codes for routine patient visits to doctors. The code patterns indicated that short office visits paying doctors modest amounts had dropped off precipitously, while lengthier and higher-paid visits were rising dramatically. The trends ran counter to much of the medical research; the differences were costing taxpayers billions of dollars. 

Under Donald’s direction, former Center data analyst Elizabeth Lucas then embarked on a six-month journey through millions of Medicare records to determine the extent of the billing anomalies and  quantify the cost to taxpayers. The database was daunting indeed, consisting of scores of tables and thousands of columns, totaling more than 700 million claims.

For this series, the Center for Public Integrity and Palantir Technologies analyzed Medicare claims data obtained from the Centers for Medicare and Medicaid Services (CMS).

For privacy purposes and other reasons, the Center was limited to a 5 percent sample of national Medicare Part B data that contain claims for medical procedures, such as doctor office visits and emergency room procedures, and used mainly by researchers and consultants. Over and above the limitations of sampling, the data have only the quarter in which a procedure was performed, not actual dates. And a permanent federal injunction against the Department of Health and Human Services prevents data users from naming individual doctors who received payment for the claims. Some physicians subsequently contacted by the Center agreed to discuss their billing practices.

For the upcoding analysis, the Center and Palantir used a subset of the data submitted by physicians, hospitals and clinics from 1999 to 2008, the last year available at the time the data were acquired. The year 2002 was not included in the data, and any results for that year are imputed based on averaging 2001 and 2003 data. In addition, the Center and Palantir used CMS formulas for facility fees and co-payments, as CMS publishes formulas and modifier values to determine reimbursement amounts. Finally, Medicare Utilization reports published by CMS were used to look at specific billing codes for 2009 and 2010.

There simply weren’t enough hours in the day to justify the fees Dr. Angel S. Martin collected from Medicare.

On fifty-three separate days, the Newton, Iowa, general surgeon billed the government health plan for the elderly and other insurers for medical services that would have taken him more than 24 hours to complete, according to federal prosecutors.

The hours made the case a slam dunk for prosecutors. But they weren’t Martin’s only problem. Many patients recalled the briefest of visits with the doctor, even though Martin routinely billed Medicare for long, complicated treatments.

Every year, Medicare pays doctors more than $30 billion for treating patients. For office visits, doctors must choose one of five escalating billing scales — called Evaluation and Management codes — that most closely reflect the complexity of the treatment and the time it takes. The fees range from about $20 to about $140.

Medical groups argue that most doctors take pains to bill accurately. If anything, doctors tend to pick codes that pay them less than they deserve out of concern that they might otherwise get audited and face financial penalties, these groups say.

But cases such as Martin’s reveal what can happen when doctors are tempted to game Medicare by “upcoding” — billing for more extensive care than actually delivered. Raising the code by a single level on two patients a day can increase a doctor’s income by more than $15,000 over the course of a year and is not likely to raise suspicions, experts said.

Upcoding “is a big problem,” said Charlene Frizzera, a consultant who spent three decades at the federal Centers for Medicare and Medicaid Services and served as its acting administrator in the early months of the Obama administration.

Indeed. A jury convicted Martin on 31 counts of health care fraud for manipulating the Medicare pay scales.