Coding Trends of Medicare Evaluation and Management Services

May 29, 2012

In May 2012, the Department of Health and Human Services Office of Inspector General (OIG) issued a report entitled “Coding Trends of Medicare Evaluation and Management Services.” This study was conducted because between 2001 and 2010, Medicare payments for Part B goods and services increased by 43 percent, from $77 billion to $110 billion. During this same time, Medicare payments for evaluation and management (E/M) services increased by 48 percent, from $22.7 billion to $33.5 billion.

E/M services have been vulnerable to fraud and abuse. It has been long known that in tough reimbursement and economic times, some physicians have a tendency to “game the system” when it comes to visit coding. It has also been well known that physicians make coding mistakes due to a lack of coding and documentation education.

Most E/M services are billed using CPT codes that define the complexity level of the service. The level of an E/M service corresponds to the amount of skill, effort, time, responsibility, and medical knowledge required for the physician to deliver the service to the patient. To accurately determine the appropriate complexity level of an E/M service, physicians must use the following three key components: patient history, physical examination, and medical decision making.

Physicians are responsible for billing the appropriate E/M code they bill to Medicare. It is inappropriate for a physician to bill a higher level, more expensive code when a lower level, less expensive code is warranted. Physicians must also accurately and thoroughly document that the E/M service was reasonable and necessary.

So for this study, the OIG analyzed E/M services provided to beneficiaries to determine coding trends from 2001 to 2010. Using Part B Medicare claims data, the OIG analyzed physicians’ E/M claims to identify physicians who consistently billed higher level (i.e., more complex and more expensive) E/M codes in 2010.

What did the Study find? From 2001 to 2010, physicians increased their billing of higher level E/M codes in all types of E/M services. Among these physicians, the OIG identified approximately 1,700 who consistently billed higher level E/M codes in 2010. Although these physicians differed from others in their billing of E/M codes, they practiced in nearly all States and represented similar specialties. The physicians who consistently billed higher level E/M codes also treated beneficiaries of similar ages and with similar diagnoses as those treated by other physicians.

As a result of the study, the Office of Inspector General has recommend the following to the Centers for Medicare & Medicaid Services (CMS):

Continue To Educate Physicians on Proper Billing for E/M Services

CMS should continue to provide educational outreach on E/M services to physicians. These efforts should focus on how to determine the appropriate E/M code for the service provided and the criteria used in making that determination, particularly for visit types that experienced shifts in billing.

Outreach can include letters that describe inappropriate billing practices, face-to-face meetings, telephone conferences, seminars, and workshops.

Encourage Its Contractor To Review Physicians’ Billing for E/M Services

CMS should encourage its contractors to review physicians’ billing for E/M services and produce comparative billing reports. Such reports provide a documented analysis of a physician’s billing pattern compared to those of a physician’s his or her peers. These reports provide helpful insights into physicians’ billing patterns to avoid improper Medicare payments. CMS may also find these reports helpful for identifying and monitoring physicians who consistently bill higher level E/M codes.

Review Physicians Who Bill Higher Level E/M Codes for Appropriate Action

CMS should conduct additional reviews of physicians who consistently bill higher level E/M codes to ensure that their claims are appropriate. If CMS determines that inappropriate claims have been paid, it should take steps to recover those overpayments.

This report from the OIG is the first in a series of evaluations of E/M services. As mentioned, the OIG did not determine whether physicians who billed higher level E/M codes in 2010 billed inappropriately. Subsequent evaluations will determine the appropriateness of Medicare payments for E/M services and the extent of documentation vulnerabilities in E/M services.

Reed Tinsley, CPA is a Houston-based CPA, Certified Valuation Analyst, and Certified Healthcare Business Consultant. He works closely with physicians, medical groups, and other healthcare entities with managed care contracting issues, operational and financial management, strategic planning, and growth strategies. His entire practice is concentrated in the health care industry. Please visit

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