OIG: Medicare Overpaid $6.7B in 2010 for Diagnostics, Assessments

Medicare in 2010 paid out $6.7 billion in reimbursements for diagnostic and assessment visits that were improperly coded or did not have proper documentation, according to a report released Thursday by the HHS Office of Inspector General, USA Today reports (Kennedy, USA Today, 5/29).

For the report, OIG deployed professional coders to analyze records on 657 Medicare claims and determine whether the rates that were charged were justified (Ornstein, ProPublica, 5/29).

According to USA Today, The codes are based on:

• How far back a physician must go into a patient's medical history;
• How intensely a physician must physically examine a patient; and
• How complex a physician's diagnosis is (USA Today, 5/29).

The analysis found that more than 50% of the Medicare claims had been billed at an incorrect rate or lacked the documentation to justify the rate charged (ProPublica, 5/29). Specifically, 42% of the diagnostic and assessment claims were not coded properly, and 19% were not correctly documented (USA Today, 5/29).

According to OIG, the $6.7 billion in overpayments represents about 21% of the $32.3 billion that was spent in 2010 on evaluation and management services, which includes:

• Emergency department assessments;
• Inpatient hospital evaluations; and
• Office visits.

According to ProPublica, some physicians occasionally billed Medicare for a lower-cost service than the one they delivered, but the majority of the incorrect bills were related to a higher-cost service (ProPublica, 5/29).

Recommendations, CMS Response

OIG called on CMS to review the services and resulting improper payments. OIG also recommended that physicians undergo better training on coding and suggested that contractors review the billings for physicians who have been identified as frequently "up-coding" their claims.

In response to the report, CMS noted that such post-payment reviews of overbillings in the past have not been cost effective (USA Today, 5/29). As a result, the agency said it would not conduct the recommended review. However, CMS agreed that physicians need better education on how to correctly code and bill Medicare (ProPublica, 5/29).