by Charles Ornstein, ProPublica
May 29, 2014

Medicare spent $6.7 billion too much for office visits and other patient evaluations in 2010, according to a new report from the inspector general of the U.S. Department of Health and Human Services.

But in its reply to the findings, the Centers for Medicare and Medicaid Services, which runs Medicare, said it doesn’t plan to review the billings of doctors who almost always charge for the most-expensive visits because it isn’t cost effective to do so.

The inspector general’s report, released today, estimates that overpayments account for 21 percent of the $32.3 billion spent on evaluation and management (E&M) services in 2010. The E&M category includes office visits, emergency room assessments and inpatient hospital evaluations.

This is the second time that the inspector general has singled out this area for more scrutiny. In 2012, the watchdog said physicians had increasingly billed Medicare for more intense — and more expensive — office visits over time. But that didn’t prove the claims were improper.

“The natural question that comes out of this is: Are these physicians billing appropriately?” said Dwayne Grant, regional inspector general for evaluation and inspections in the Atlanta region, who oversaw the new report. “We don’t want to pay them too much but we don’t want to pay them too little either.”

For this review, the inspector general gathered the medical records associated with 657 Medicare claims and asked professional coders to see whether the records justified the rates charged.

Overall, more than half of the claims were billed at the wrong rate or lacked documentation to justify the service. Sometimes physicians billed for a lower-cost service than the one they delivered, but more often they billed for a higher-cost one. The inspector general extrapolated from its sample to estimate the amount Medicare overpaid on all 2010 E&M claims.

“We have to do a better job of curbing improper payments and protecting taxpayer dollars,” Sen. Bill Nelson (D-Florida), chairman of the U.S. Senate Special Committee on Aging, said in a statement.

The inspector general’s findings complement a recent review by ProPublica of data recently released by Medicare on payments to individual health professionals for services in its Part B program. We found that in 2012, more than 1,800 doctors and other health professionals almost exclusively billed Medicare for the most complicated and expensive office visits for their established patients.

Office visits are the most common services provided in the program.

While most providers had a tiny percentage of visits for which they charged the highest rate, known as level five, more than 1,200 billed exclusively at that level. Another 600 did it more than 90 percent of the time. About 20,000 health professionals billed only at the top two levels, four and five.

Experts we consulted said that these billing patterns were highly implausible and could indicate fraud. Some doctors, however, said that their patients were sicker than those of their peers and required more time and attention.

ProPublica also launched a new tool called Treatment Tracker that lets users look up their doctors and see how they compare with peers on office visits and other measures.

In its report, the inspector general’s office recommended that CMS educate doctors about proper billing practices. It also suggested that Medicare pursue doctors who consistently billed for higher-level services than they actually delivered, a practice known as upcoding.

While CMS agreed with the need for education, it disagreed with the recommendation to review the physicians’ billings. It said one of its contractors recently reviewed 5,200 medical claims of high-coding physicians and the process cost more money than it caught in overpayments.

CMS said a second phase of the review — of 13,500 claims — was nearing completion. “Based on the results of this effort, CMS will reassess the effectiveness of reviewing claims for high-coding physicians” versus other efforts, such as sending these doctors reports that compare their billings with their peers.

Grant, of the inspector general’s Atlanta office, said that while the individual E&M services do not cost much, they add up — and that if CMS declares that it won’t review outliers, it could send the wrong message.

“The challenge that CMS is trying to figure out is what is the best way to get at this,” Grant said. “We see the advantage of continuing to look at these high billers. Not only are they billing high now; it could have an impact on future billings … This is not just free rein to bill whatever you want.”