E/M Leveling: Compliance, Correct Coding and Best Practices

Recently, we’ve had a number of conversations with healthcare leaders concerned about their evaluation and management (E/M) coding levels being out of synch with Centers for Medicare and Medicaid Services (CMS) guidelines, and who wanted to review their processes to ensure compliance. Concerns over whether coding departments (if not outsourced) are properly notating the coding level of care provided seems to be a rising concern; for example, are they arriving at levels that are two high (too many 4s and 5s) against the industry’s bell curve? This is just one concern.

Why the concern? Well, according to the HHS Office of the Inspector General (OIG), the program paid $32.3 billion for E/M services in 2010 — 30 percent of Part B payments that year – but by 2012, the OIG reported that from 2001 to 2010 physicians increased their billing of higher level codes for E/M services in all visit types.

E/M code sets were originally designed to classify services provided by physicians in their evaluation of patients and managing their care. All reimbursements are driven by these code structures. E/M codes reflect the complexity of a visit, and despite longevity of CMS guidance, dating back more than two decades, there is still confusion permeating the sector.

Determining correct E/M service codes
Three components determine the correct E/M service code:

  • Extent of patient history. Physicians use their clinical judgment and the nature of the patient’s presenting problem(s) to determine the depth of history needed to complete the service. A patient history can be classified into one of four types, ranging from problem focused to comprehensive.
  • Extent of physical examination. Physicians use their clinical judgment and the presenting medical problem(s) to determine the type of examination needed. There are four types of physical examinations, ranging from problem focused to comprehensive.
  • Complexity of medical decision making. The complexity of medical decision making hinges on the number of possible diagnoses or the number of options that must be considered; the amount and/or complexity of medical records, diagnostic tests, and other information that physicians must obtain, review and analyze; and the risk of significant complications, morbidity and/or mortality.

Upcoding epidemic
Here’s why E/M coding is a rising issue. Recently, the OIG reported that 75 percent of consultations did not meet Medicare coverage requirements — resulting in $1.1 billion in improper payments — as well as that E/M consultations billed at the highest level were miscoded 95 percent of the time.

When applying both the 1995 and 1997 coding guidelines, the OIG found that the “appropriate level for an E/M service using whichever version of the documentation guidelines resulted in the most advantageous code for the physician.” Likewise, during its review, the OIG found that most (79 percent) of miscoded claims were upcoded by one level; 17 percent were upcoded by two levels. A small percentage (0.8 percent) of claims were upcoded by three levels.

“High-coding physicians”
The OIG has coined the term “high-coding physicians” as follows: (1) those whose average code level was in the top 1 percent of their specialty; and (2) from that subset of physicians, those that billed for the two highest level codes for E/M services at least 95 percent of the time.

Fifty-six percent of claims for E/M services billed by high-coding physicians in 2010 were incorrectly coded, leading to Medicare inappropriately paying an average of $15,594 per high-coding physician in 2010. Ninety-nine percent of miscoded claims for E/M services billed for by high-coding physicians in 2010 were upcoded. Additionally, claims from high-coding physicians were more likely to be incorrectly coded or insufficiently documented than claims from other physicians.

Coding for health systems
According to the American College of Emergency Physicians(ACEP), facility coding guidelines are inherently different from professional coding guidelines. Facility coding reflects the volume and intensity of resources utilized by the facility to provide patient care, whereas professional codes are determined based on the complexity and intensity of provider-performed work and include the cognitive effort expended by the provider. There is no definitive correlation between facility and professional coding and, thus, no rational basis for the application of one set of derived codes, either facility or professional, to the determination of the other on a case-by-case basis.

In 2011, CMS said, “A hospital may bill a visit code based on the hospital’s own coding guidelines, which must reasonably relate the intensity of hospital resources to different levels of HCPCS codes. Services furnished must be medically necessary and documented.” However, in 2012, CMS indicated that hospital outpatient therapeutic services and supplies (including visits) must be furnished incident to a physician’s service and under the order of a physician or other qualified practitioner. Services provided by a nurse in response to a standing order do not satisfy this requirement. Since diagnostic services do not need to meet the requirements for incident to services, they may be coded even if the patient were to leave without being seen by the physician.

At this point, there is no national standard for hospital assignment of E/M code levels for outpatient services in clinics and the emergency department (ED). Managing the process can be cumbersome. CMS requires each hospital to establish its own facility billing guidelines. Facility billing guidelines should be designed to reasonably relate the intensity of hospital services to the different levels of effort represented by the codes. Coding guidelines should be based on facility resources, be clear to facilitate accurate payments, only require documentation that is clinically necessary for patient care, and not facilitate upcoding.

Coding with integrity
Because of coding inflations, leadership teams must be proactive in ensuring revenue integrity to protect the financial health of their facilities. Because of our conversations with healthcare leaders, we often cite four key behaviors that drive compliant coding while minimizing denials and ensuring revenue integrity:

  1. Use data to identify problem areas and address them proactively.
  2. Provide targeted education for coders and physicians.
  3. Identify benchmarks and establish Key Performance Indicators (KPIs) for coders.
  4. Improve coding practices to decrease the risk from payer audits.

Through such an approach we are able to provide proper coding; achieve quicker coding turnaround times; improve accounts receivables; and ensure code quality and consistency to minimize denials and audits.

In most cases, the organizations we connect with for a code audit don’t know what they don’t know. Perhaps their data is not aggregated, or they are concerned that all of theirs codes are submitted as 4s and 5s. In other cases, they may not have conducted a third-party audit of their processes and determine that they must do so to remain compliant. Some organizations do not follow ACEP processes, but contrive their own so want to address any compliance concerns.

E/M code level audits ensure compliance no matter the leveling system employed, and can be customized to meet the needs of the organizations, including random sampling, addressing certain concerns and even specific physicians, test types and even areas of the organization. Through an audit, we also can offer education or opportunities for organizational improvement.

If interested in a complimentary coding audit, contact MRA for design, pricing, best practices and questions.

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This program has been approved for continuing education unit(s) (CEUs) for use in fulfilling the continuing education requirements of the American Health Information Management Association (AHIMA). Granting of Approved CEUs from AHIMA does not constitute endorsement of the program content or its program provider.