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On May 28, 2014, the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services issued a report on its study finding that a majority of Medicare Part B claims for evaluation and management (E/M) services in 2010 were either improperly coded or insufficiently documented.


OIG conducted the study to determine the extent of incorrect coding and lack of documentation for E/M services. E/M Current Procedural Terminology (CPT) codes cover patient visits performed by physicians and nonphysician practitioners (e.g., nurse practitioners, clinical nurse specialists, and physician assistants) to assess and manage the health of a patient. In order to qualify for reimbursement through Medicare and other payors, E/M services must be medically reasonable and necessary and must satisfy the requirements under the particular CPT code for the level of service billed. In addition, the medical record must document medical necessity and the level of care for the claim.

Findings and recommendations

Certified medical coders reviewed medical records for E/M services furnished in 2010 and reimbursed under Medicare Part B. The study found that nearly 55 percent of sampled claims for 2010 E/M services were either incorrectly coded (42 percent of claims) or lacked appropriate documentation (19 percent of claims). Nearly seven percent of claims were both incorrectly coded and insufficiently documented. Of the miscoded claims, approximately 26 percent were upcoded (billed at a higher CPT level than appropriate), 15 percent were downcoded (medical record supported billing at a higher level CPT code), and two percent had other coding errors, such as improper CPT codes or unbundling.

Furthermore, OIG determined that 21 percent of Medicare payments for E/M services in 2010 were coded incorrectly or insufficiently documented, resulting in estimated improper E/M payments of $6.7 billion. OIG also found that E/M claims by high-coding physicians are more likely than the E/M claims of other physicians to be incorrectly coded or insufficiently documented.

OIG recommended that CMS take the following three steps:

  1. Educate physicians on the components used to determine the level of an E/M service and emphasize the need for documentation in the medical record to support the level of service
  2. Encourage Medicare contractors to focus E/M medical record reviews on claims from high-coding physicians
  3. Adjust payments to account for overpayments and underpayments on sampled claims

CMS agreed with the first recommendations of physician education and need for documentation. CMS concurred with the third recommendation, requested that OIG provide claims data on overpayments identified in its samples, and stated that it will analyze each overpayment to determine which claims exceed CMS recovery thresholds and can be collected consistent with CMS’s policies and procedures.

CMS did not concur with OIG’s second recommendation that it instruct contractors to focus on high-coding physicians. CMS noted that in response to a prior OIG report on E/M coding trends, CMS directed a medical review contractor to conduct a two-phase review of high-coding physicians referred by OIG, and that the first phase resulted in a negative return on investment. CMS intends to reassess whether focusing on high-coding physicians is more effective than other approaches, such as Comparative Billing Reports.

The OIG report, Improper Payments For Evaluation and Management Services Cost Medicare Billions in 2010, is available on the OIG's website.

Action steps

OIG, CMS, and Medicare contractors, as well as other payors, can be expected to focus increasingly on E/M coding and documentation in light of these high error rates, which follow findings by CMS in 2011—that E/M services are 50 percent more likely than other Part B services to be paid in error—and by OIG in 2012—that physicians increased their billing of higher level E/M codes in connection with all types of visits. Physician practices and other healthcare providers that bill under E/M codes would be well-advised to review and update their E/M billing policies, procedures, and related training to assure that their physicians and nonphysician practitioners who furnish E/M services, as well as coding and personnel involved in E/M billing, understand E/M coding and documentation standards, and recognize the importance of compliance.

An important step in catching and correcting improper or questionable billing practices is to perform regular self-audits of coding and documentation (medical records) for a representative sample of claims. Self-audits often reveal both overpayments and underpayments, and so can be important tools not only for compliance but also for revenue cycle management.

While self-audits can be conducted by internal coders or by outside consultants, it is crucial to retain a coding specialist with appropriate expertise to address coding and related documentation for the particular specialty and services, as well as to identify vulnerabilities and educate professional and billing personnel. Other fundamental considerations include whether to conduct a self-audit prospectively (prior to the submission of claims) or retrospectively (after submission of claims), as well as whether the findings trigger self-reporting and refund obligations.

OIG warned that:

“Collectively, our findings highlight errors associated with E/M services that must be addressed to properly safeguard Medicare...Given the substantial spending on E/M services and the prevalence of error, CMS must use all of the tools at its disposal to more effectively identify and eliminate improper payments associates with E/M services.”