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How doctors and hospitals have collected billions in questionable Medicare fees

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By Fred Schulte and David Donald


Thousands of doctors and other medical professionals have steadily billed higher rates for treating elderly patients on Medicare over the last decade -- adding $11 billion or more to their fees and signaling a possible rise in medical billing abuse, an investigation by the Center for Public Integrity has found.

Medical groups argue that the fee hikes are justified because treating seniors has grown more complex and time-consuming, both due to new technology and declining health status. The rise in fees may also be a reaction, they say, to years of under-charging, and reflect more accurate billing. The fees are based on a system of billing codes that is structured to make higher payments for treatments that take more time and effort.

But the Center's analysis of Medicare claims from 2001 through 2010 shows that over time, thousands of providers turned to more expensive Medicare billing codes, while spurning use of cheaper ones. They did so despite little evidence that Medicare patients as a whole are older or sicker than in past years, or that the amount of time doctors spent treating them on average was rising.

While it's impossible to know precisely why doctors and hospitals moved to better-paying codes in recent years, it's likely that the trend in part reflects "upcoding," -- the practice of charging for more extensive and costly services than delivered, according to Medicare experts, analysis of the data and a review of government audits.

And Medicare regulators worry that the coding levels may be accelerating in part because of increased use of electronic health records, which make it easy to create detailed patient files with just a few mouse clicks.

Many health policy experts have long believed that billing errors and abuses, from confusion over how to pick proper payment codes to outright overcharges, are common in Medicare. But the Center's year-long examination has outlined their scope in an unprecedented manner, uncovering a range of costly medical coding mistakes and abuses that have plagued the government-paid health care plan for years and are worsening amid lax federal oversight.

"This is an urgent problem," said Dr. Mark McClellan, who directs the Engelberg Center for Health Care Reform at the Brookings Institution in Washington. McClellan, a former director of the Centers for Medicare and Medicaid Services, or CMS, said the agency must send a message that it "won't stand by and do nothing ... that they are paying attention to this."

Among the investigation's key findings:

  • Doctors steadily billed Medicare for longer and more complex office visits between 2001 and the end of the decade even though there's little hard evidence they spent more time with patients or that their patients were sicker and required more complicated -- and time-consuming -- care.  The higher codes for routine office visits alone cost taxpayers an estimated $6.6 billion over the decade.
  • More than 7,500 physicians billed the two top paying codes for three out of four office visits in 2008, a sharp rise from the numbers of doctors who did so at the start of the decade. Officials said such changes in billing can signal overcharges occurring on a broad scale. Medical groups deny that.
  • The most lucrative codes are billed two to three times more often in some cities than in others, costly variations government officials said they could not explain or justify. In some instances, higher billing rates appear to be associated with the burgeoning use of electronic medical records and billing software.
  • Medicare administrators have struggled for more than a decade to crack down on medical coding errors and abuses, often in the face of opposition from medical groups including the American Medical Association, which helped design, and now controls the codes. Whether they make honest mistakes or engage in willful misconduct, there's little chance doctors who pad their charges will face any serious penalties.

CMS officials declined numerous interview requests. However, in an e-mail response to written questions, officials said while they believe most doctors and hospitals are "honest and try to bill Medicare correctly," the agency also "is keenly aware that certain Medicare providers and suppliers seek to defraud the program."

Dr. Robert Berenson, a former vice chairman of a federal commission that recommends Medicare payment strategies to Congress, called the Center's findings "clearly significant," and said they indicate an urgent need to revamp the pay scales.

"It is really time to deal with this issue. There are so many perverse outcomes, including spending for taxpayers," Berenson said.

Continue this story and read more investigations at The Center for Public Integrity