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Race to electronic health records may come with a price Date: 11/27/12

Fred Schulte
Fred Schulte

By Fred Schulte

The Obama administration’s bold plan to spend $30 billion or more in stimulus money helping doctors and hospitals convert from paper to electronic medical records enjoyed strong bipartisan support in late 2009 when the Huffington Post Investigative Fund hired me to cover the issue.

In those days, former Democratic Sen. Tom Daschle, then a top Obama health care adviser, joined former Republican House Speaker Newt Gingrich in public forums where both men heaped praised on the campaign to bring medicine into the 21st century. It was about the only thing they could agree on.

Many top experts in health information technology were tapped to serve on technical panels that set standards for assuring the digital revolution would cut health care costs by, among other things, reducing medical errors and waste from duplicative medical tests.

But amid all the enthusiasm, politicians and policy makers paid little attention to the implications of a gold rush sparked when billions of taxpayers’ dollars suddenly came up for grabs. Hundreds of medical technology companies scrambled to sell digital systems — often by promising doctors and hospitals they could boost revenues by billing higher rates to Medicare and other health insurers.

The fallout from those early decisions could be coming back to haunt taxpayers, according to our three-part investigative series, "Cracking the Codes," which we began publishing on Sept. 15 in The Washington Post. A longer version ran on the Center for Public Integrity's website.

The series documented that thousands of medical professionals steadily billed Medicare for more complex and costly health care over the past decade — adding $11 billion or more to their fees — despite little evidence that elderly patients required more treatment.

The series also exposed a wide range of costly billing errors and abuses that have plagued Medicare for years — from confusion over how to pick proper payment codes to apparent overcharges in medical offices and hospital emergency rooms — and strongly suggested these problems have worsened with the rapid growth in the use of electronic medical records and billing software.

Patterns among billing codes

The story came about after the Huffington Post Investigative Fund merged into the Center for Public Integrity in late 2010. I was asked to take a look at Medicare billing data CPI had obtained by suing the Centers for Medicare and Medicaid Services. The massive database contained more than 362 million doctor and hospital bills spread over a decade.

CPI Data Editor David Donald summarized the changes in thousands of billing codes over that time and I reviewed that lengthy list to identify patterns. One that caught my eye: The number of patient visits that required little time with doctors and paid small fees had fallen off precipitously over the years while more complex and time-consuming services that paid higher fees had jumped sharply. The pattern was strikingly consistent across a broad range of physician services, from patients treated in private offices to those cared for in nursing homes and hospitals, particularly hospital emergency rooms.

These doctor pay scales, which were developed by the American Medical Association, are called evaluation and management codes. For each office visit, doctors choose one of five escalating billing codes that best reflects the care rendered. The idea is to compensate them for the “thinking” part of medicine, or their skill in diagnosing and treating illness.

Coding levels range from a simple visit that may take five minutes or less and pay about $20 to a more complex encounter expected to take 40 minutes face-to-face with a patient and pay the doctor about $140. Medicare expects doctors to submit a range of billing codes because not all patients require the same amount of time and degree of effort. Hospitals also use these codes to bill for emergency room and outpatient services and other fees.

We spent months trying to understand how billing codes could be going up so sharply without anyone taking notice. Medicare was paying some doctors at the highest possible coding level for almost every patient visit in our data sample — sometimes for years at a time. Very few researchers had approached this topic using Medicare billing data, especially over such a long period of time, and so there wasn’t any roadmap to help guide us.

CMS offered little help and declined numerous interview requests. The agency eventually accepted written questions, but took months to respond and did so mostly with broad generalities that shed little light on the situation. In the end, CMS didn’t challenge the findings.

Justifications for rising costs

Physician and hospital groups also didn’t dispute that coding had risen sharply. But they insisted the fee hikes were justified because patients were sicker and older and their care had become more time consuming and difficult to manage over time.

We also heard over and over — from doctors and hospitals nationwide — that electronic health records were a big factor in rising coding levels. In some cases, we could see in our data that billing rose after installation of electronic systems. In their defense, many doctors and hospitals said they had “undercoded” in the past by failing to write down on paper all the services they provided. The digital systems, they argued, were allowing them to recoup money that in the past had been “left on the table.”

Not everyone agreed, though. One Minnesota physician who filed a “whistleblower” lawsuit alleging upcoding at a clinic where he practiced said he believed some doctors viewed inflating a few service codes as a relatively harmless way to help defray rising office expenses — or to silently protest what they regard as stingy pay from Medicare.

But the repeated mention of electronic health records as a potential driver of rising fees persuaded me we were on the track of a major and largely unreported story. For starters, none of the expert panels whose lengthy meetings I recalled sitting through in Washington had mentioned this might happen. I also knew from previous reporting that digital medicine’s many friends in Congress expected the stimulus investment to pay off by slashing the nation’s overall health care bill. So any suggestion that it could backfire by raising Medicare costs was classic journalistic “man bites dog.”

At this point, I roughed out a plan for a three-part series. I focused on doctors and electronic health records while CPI health reporter Joe Eaton took on hospitals. Data editor Donald oversaw the months-long billing analysis, which was later replicated and rigorously fact-checked by Palantir Technologies, a Palo Alto software and data firm. We ended up publishing short pieces explaining how the series was done as well as a detailed methodology.

We started to peel away at the medical community’s justifications for rising codes. Our billing data indicated that the average ages of patients and their reasons for visiting the doctor hadn’t changed much over the decade. Searches of medical journal articles and our review of Centers for Disease Control and Prevention statistics also lent little support to the notion that Medicare patients have grown more infirm or that the amount of time doctors spent treating them had shot up over the decade. So both these explanations seemed suspect.

By contrast, we found lots of evidence pointing toward “upcoding,” which Medicare has struggled for years to stamp out. These records included: Health and Human Services Inspector General audits, Medicare carrier audits, Government Accountability Office reports, Congressional hearing testimony and state and federal court records. Court cases showed that doctors caught siphoning off extra tax dollars by upcoding often paid few penalties. Transcripts of hearings also showed that Congress would periodically investigate, but enacted few lasting reforms.

We also closely examined “error rate” data from audits conducted by CMS Medicare contractors across the country. These eye-opening reviews typically uncover billing mistakes in half the records reviewed or more, often because the coding levels are too high. Medicare calls this program Comprehensive Error Rate Testing or CERT.

These state-by-state audits, which can be found on Medicare carrier websites, tend to debunk the assertion that doctors typically bill too low. For example, federal auditors projected that Medicare overpaid nearly $658 million in 2010 for office visits wrongly billed at the second-highest code. The audit pegged Medicare underpayments for that service at just $6.1 million.

Experts express frustration

Human sources also proved invaluable. Though many experts strongly support the drive to wire up American medicine, others have warned for years of “unintended consequences,” including a torrent of inflated billings. Several discussed their work and their frustration that nobody was paying attention. In one key interview, a former top government health information technology official confirmed that policy makers had brushed off concerns over billing abuse in the rush to get the program off the ground.

Though CMS wouldn’t talk, other government officials did — and said they were struggling to rein in a surge in aggressive billing related to electronic health records. They noted that the systems are programmed to allow doctors to cut and paste records from prior visits and use templates that spit out documentation that can trigger higher billing codes.

After the series was published, HHS Secretary Kathleen Sebelius and Attorney General Eric Holder threatened possible criminal prosecutions of doctors and hospitals using electronic health records to bill for more complex and costly services than they actually delivered.

The administration’s top health information technology officer, Dr. Farzad Mostashari, launched an internal review to determine if digital systems are prompting overbilling — and several key Republicans in the House and Senate began asking if the program is wasting tax dollars. House Republicans also called for a suspension of payments to doctors who purchase electronic health records and use them to improve the quality of medical care. The HHS Office of Inspector General also will focus on possible billing fraud and abuse associated with electronic health records in its audits.

It’s hard to say at this point whether the strong political support for electronic health records will erode. But as officials struggle to slash soaring Medicare costs, the program may face new pressure to demonstrate it can achieve its goals. That seems fair enough.

Fred Schulte is a four-time Pulitzer Prize finalist, most recently in 2007 for a series on Baltimore’s arcane ground rent system. Schulte’s other projects exposed excessive heart surgery death rates in veterans’ hospitals, substandard care by health insurance plans treating low-income people and the hidden dangers of cosmetic surgery in medical offices. He spent much of his career at The Baltimore Sun and the South Florida Sun-Sentinel. Schulte has received the George Polk Award, two Investigative Reporters and Editors awards, three Gerald Loeb Awards for business writing and two Worth Bingham Prizes for investigative reporting. The University of Virginia graduate is the author of Fleeced!, an exposé of telemarketing scams. Schulte can be reached at or 202-481-1210.