Medicare
Using Education and Claims Scrutiny to Minimize Physician Billing Errors Gao ID: GAO-02-778T May 28, 2002In its audit for year 2001, the Department of Health and Human Services' Office of Inspector General found that $12.1 billion was improperly paid to Medicare providers. GAO's February report (GAO-02-249) showed that physicians often do not receive complete, accurate, clear, or timely guidance on Medicare billing and payment policies. At the carriers studied, GAO found significant shortcomings in printed material, web sites, and telephone help lines used to provide information and respond to physicians' questions. GAO concluded the Centers for Medicare and Medicaid Services (CMS) needed to initiate a more centralized and coordinated approach and provide technical assistance to carriers to improve provider communications. In fiscal year 2001, CMS revised its policy on conducting medical reviews. The policy directs carriers to differentiate among levels of billing problems and tailor corrective actions accordingly. As a result of this and other medical review modifications, the highest overpayment amounts assessed a physician practice by a carrier dropped substantially.
GAO-02-778T, Medicare: Using Education and Claims Scrutiny to Minimize Physician Billing Errors
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United States General Accounting Office:
GAO:
Testimony:
Before the Committee on Finance, U.S. Senate:
For Release on Delivery:
Expected at 10:00 a.m.
In Bozeman, Montana:
Tuesday, May 28, 2002:
Medicare:
Using Education and Claims Scrutiny to Minimize Physician Billing
Errors:
Statement of Leslie G. Aronovitz:
Director, Health Care”Program Administration and Integrity Issues:
GAO-02-778T:
Mr. Chairman and Members of the Committee:
I am pleased to be here today to discuss the challenges physicians and
the Medicare program face in ensuring that claims for physician
services are billed and paid appropriately. The General Accounting
Office, an agency within the legislative branch that monitors the
effectiveness and efficiency of federal programs for the Congress, has
conducted oversight of the Medicare program for many years. With
annual fee-for-service payments now totaling about $192 billion, the
Centers for Medicare and Medicaid Services (CMS), the agency
responsible for administering Medicare, has an important
responsibility to safeguard payments for health services delivered to
elderly and disabled individuals by hundreds of thousands of
providers. In its most recent audit, covering fiscal year 2001, the
Department of Health and Human Services' (IIHS) Office of Inspector
General found that $12.1 billion, or about 6.3 percent of fee-for-
service payments, was improperly paid to Medicare providers.[Footnote
1]
However, physicians and other providers have raised concerns that
Medicare's efforts to provide information on billing rules fall far
short of the need for clear explanations of the program's increasingly
complex coverage policies and billing requirements. Physicians have
also raised questions about whether the program's enforcement of
payment rules has imposed too great an administrative burden on those
billing Medicare. In light of these issues, legislation before this
committee seeks to address some of these concerns while maintaining
effective payment safeguards.
We have recently completed two studies that examine aspects of the
interactions between physicians and carriers”the contractors
responsible for processing physicians' Medicare claims.[Footnote 2]
The first study, issued in February 2002, reviewed the information
that carriers provide physicians about billing rules. The study we are
releasing today addresses how carriers conduct medical reviews of
claims to ensure compliance with those rules. Medical reviews involve
a detailed examination of a sample of claims by clinically trained
staff and require that physicians submit medical records to
substantiate their claims. My remarks today will focus on (1)
carriers' provision of information to physicians regarding Medicare's
billing requirements and program changes, (2) carriers' scrutiny of
physicians' claims selected for medical review because they are more
likely to have billing errors, and (3) implications of Medicare's
recent changes to claims review policies for physicians. (The details
of how we conducted our studies are included in the two reports.)
In summary, our February report showed that physicians often do not
receive complete, accurate, clear, or timely guidance on Medicare
billing and payment policies. At the carriers we studied, we found
significant shortcomings in printed material, Web sites, and telephone
help-lines that carriers used to provide information and respond to
physicians' questions. We concluded that CMS needed to initiate a more
centralized and coordinated approach, and provide technical assistance
to carriers, to substantially improve Medicare carriers' provider
communications.
In the report we are releasing today, we examined the operations of
three carriers that serve six states and process claims for about one-
quarter of Medicare participating physicians. The vast majority of
physician practices”at least 90 percent in fiscal year 2001”had no
claims selected for medical review by their carrier. For the
relatively few practices with any claims reviewed, the carriers
typically requested patients' medical records for no more than two
claims during the year. In an independent assessment we sponsored,
carriers were found to be highly accurate in their decisions to deny,
reduce, or pay claims in full. The overall level of accuracy was
consistent across the three carriers at about 96 percent. However,
improvements could be made in selecting claims for review that are
more likely to be inappropriate, thereby making better use of program
resources and reducing documentation requests to providers who have
not made billing errors.
In fiscal year 2001, CMS revised its policy on conducting medical
reviews under an initiative called Progressive Corrective Action (PCA).
[Footnote 3] The policy directs carriers to differentiate among
levels of billing problems and tailor corrective actions accordingly.
It also instructs carriers to focus educational outreach on physicians
who have experienced billing problems. Under PCA, carriers are to
limit extrapolation”a process by which overpayment amounts are
projected from a sample of claims reviewed”to those cases that involve
major billing problems. In fiscal year 2001, the three carriers in our
study virtually eliminated the use of extrapolation. As a result of
this and other medical review modifications, the highest overpayment
amounts assessed a physician practice by a carrier dropped
substantially. The carriers in our study increased feedback to
individual physicians concerning the results of medical reviews and
how to bill appropriately in specific situations.
Background:
Within HHS, CMS provides operational direction and policy guidance for
the nationwide administration of the Medicare program. It contracts
with carriers-23 in fiscal year 2002”to process and pay part B claims
from Medicare physicians and certain other providers.[Footnote 4] To
help providers bill properly, carriers are required to issue bulletins
periodically that publicize new national and local Medicare coverage
rules, inform providers of billing changes, and address frequently
asked questions. In addition, they must use Web sites and maintain
toll-free lines to disseminate new information and respond to
physician inquiries.
Carriers are also responsible for ensuring that claims are paid
properly. Few claims receive more than a computerized review designed
to detect missing information, services that do not correspond to a
beneficiary's diagnosis, or other obvious errors. However, in some
cases, carriers review claims manually to determine, for example,
whether the services physicians bill for are covered by Medicare, are
reasonable and necessary, and have been billed with the proper codes.
In the most thorough type of claims review, called medical review,
clinically trained personnel determine a claim's conformance with
payment rules by examining medical records submitted by the physician.
Medical reviews can occur before a claim has undergone final
processing (prepayment) or after the claim has been paid (postpayment).
Substantial Improvement Needed in Carriers' Routine Communications:
In our February report, we noted that carrier communications with
physicians regarding Medicare rules and program changes are often
incomplete, confusing, untimely, or even incorrect. We found that
Medicare bulletins were often unclear and difficult to use. The
bulletins from 10 carriers we reviewed were typically over 50 pages in
length, contained long articles written in dense language, and were
printed in small type. Many of the bulletins were also poorly
organized, making it difficult for a physician to identify relevant or
new information. For example, several bulletins lacked tables of
contents and the information provided was not delineated by specialty
or by states where it applied. Moreover, information concerning
program changes was not always communicated in a timely fashion, so
that physicians sometimes had little or no advance notice prior to a
program change taking effect.
Carriers' other principal means of communicating information with
physicians”Web sites and information call centers”also proved to be
problematic. Our review of 10 Web sites found that only 2 complied
with CMS content requirements and most did not contain features that
would allow physicians to readily obtain the information they need.
Sites often lacked logical organization, search functions, and timely
information. To assess the accuracy of call-center-provided
information, we placed approximately 60 calls to three carriers'
provider inquiry lines. The customer service representatives rarely
provided appropriate answers to our questions. The three test
questions, selected from the "frequently asked questions" on various
carriers' sites, concerned the appropriate way to bill Medicare under
different circumstances. The results, which were verified by CMS,
showed that only 15 percent of the answers were complete and accurate.
CMS has few standards to guide carriers' communications with
physicians. While the standards require that carriers issue bulletins
at least quarterly, they require little in terms of content or
readability. This is also the case for Web sites, as CMS has done
little, through standards, to promote clarity or timeliness of the
information presented. Similarly, with regard to call centers, the
agency has not established a clear performance requirement for
accurate and complete telephone responses.
CMS is planning several steps to improve and monitor carrier
communications with physicians. These include developing training for
customer service representatives and maintaining a CMS Web site that
contains, among other things, reference materials on billing changes.
In our February report, we recommended that CMS adopt a standardized
approach to information dissemination that includes the publication of
one national bulletin for physicians (supplemented with information
from local carriers), performance standards for carriers' call
centers, and requirements for carriers' Web sites to link to CMS's
national information sources.
Medical Reviews Affect Few Physicians and Result in Accurate Payment
Decisions:
In addition to poor communication from the carriers, physicians have
expressed concern about whether carriers apply excessive scrutiny to
claims billed appropriately. In our study released today, we focused
on the medical review of claims submitted by physicians to three
carriers: National Heritage Insurance Company (NHIC) in California,
Wisconsin Physicians Service Insurance Corporation (WPS), and
HealthNow NY.[Footnote 5] Data from these carriers show that more than
90 percent of the physician practices”including individual physicians,
groups, and clinics”did not have any of their claims selected for
medical review in fiscal year 2001. Table 1 shows that about 10
percent of the practices that filed claims with WPS had a prepayment
medical review, while this proportion was even lower at HealthNow NY
and NHIC California. In addition, only about one-tenth of 1 percent of
the practices for any of the carriers had claims selected for
postpayment medical review.
Table 1: Physician Practices Whose Claims Received Medical Review,
Fiscal Year 2001:
Medical review: Prepayment;
NHIC California[A], Number: 5,590;
NHIC California[A], Percent of total[C]: 7.4%;
WPS[B], Number: 13,732;
WPS[B], Percent of total[C]: 10.1%;
HealthNow NY, Number: 1,270;
HealthNow NY, Percent of total[C]: 4.3%.
Medical review: Postpayment;
NHIC California[A], Number: 113;
NHIC California[A], Percent of total[C]: 0.1%;
WPS[B], Number: 80;
WPS[B], Percent of total[C]: 01.%;
HealthNow NY, Number: 33;
HealthNow NY, Percent of total[C]: 01.%.
Note: Physician practices were identified by the Medicare Provider
Identification Number (PIN).
[A] The number of practices shown include data from northern
California for November 2000 to September 2001 and from southern
California for December 2000 to September 2001.
[B] WPS prepayment data include reviews in Illinois, Michigan, and
Minnesota only; data were not available for Wisconsin. Postpayment
data include Illinois, Michigan, Minnesota, and Wisconsin.
[C] Because a list of active PINs was not available from NHIC
California, we estimated the total number of solo and group practices
in California based on data from the most recent American Medical
Association census of group medical practices, adjusted for increases
in the total number of nonfederal medical doctors as of December 31,
2000, and the number of osteopaths in the state.
[D] Percentages are based on lists of active PINs obtained from the
carrier.
Source: GAO analysis of carrier data, and physician practice data from
the American Medical Association and American Osteopathic Association.
[End of table]
Further, for most of the physician practices that had any claims
subject to medical review in fiscal year 2001, the carriers examined
relatively few claims. For example, at each carrier, over 80 percent
of the practices whose claims received a prepayment review had 10 or
fewer claims examined and about half had only 1 or 2 claims reviewed.
The typical number of claims per practice that received a postpayment
review was 30 to 50.
For those claims that carriers selected for medical review, we found
that carriers' decisions were highly accurate regarding whether to
pay, deny, or reduce payment. To assess the appropriateness of
clinical judgments made by carriers' medical review staff, we
sponsored an independent review”by a firm that monitors claims payment
error rates for the Medicare program”of the three carriers' payment
decisions. This review included samples of physician claims from each
carrier that were selected randomly from all claims undergoing either
prepayment or postpayment medical review in March 2001. The
independent reviews validated the carriers' decisions for almost all
claims. As shown in table 2, the carriers and reviewers agreed that
the original decisions were correct in 280 of 293 cases examined, or
about 96 percent of the time. Carrier decisions tended to be least
accurate when they partially reduced payment amounts. In 5 of 59
claims where carriers denied payment in part, our reviewers
determined that the claim should have been denied in full, reduced by
a smaller amount, or paid in full.
Table 2: Accuracy of Carrier Medical Review Decisions on Physician
Claims:
Carrier decision: All decisions on sampled claims[A] (n=293);
Accurate decision rate: 95.6%;
Inaccurate decision rate: Overpayment: 2.7%;
Inaccurate decision rate: Underpayment: 1.7%.
Carrier decision: Deny in full (n=64);
Accurate decision rate: 98.4%;
Inaccurate decision rate: Overpayment: 0.0;
Inaccurate decision rate: Underpayment: 1.6%.
Carrier decision: Deny in part (n=59);
Accurate decision rate: 91.5%;
Inaccurate decision rate: Overpayment: 1.7%;
Inaccurate decision rate: Underpayment: 6.8%.
Carrier decision: Pay in full (n=170);
Accurate decision rate: 95.9%;
Inaccurate decision rate: Overpayment: 4.1%;
Inaccurate decision rate: Underpayment: 0.0%.
[A] Claims randomly selected from all carrier prepayment and
postpayment reviews during March 2001. Although 100 claims were
selected from each of the three carriers, five claims from WPS and two
from HealthNow NY were excluded either because the billing entity did
not meet our definition of physician or because documentation from the
carrier associated with the claim was unavailable or not interpretable.
Source: GAO analysis of independent review results.
[End of table]
To avoid payment errors, carriers should target for medical reviews
those claims most likely to be billed inappropriately. After
identifying and validating a suspected billing problem, they develop
computerized edits”instructions programmed into the claims processing
system that identify a set of claims meeting specified
characteristics.[Footnote 6] Although carriers' reviews produced
highly accurate payment decisions, their selection of potentially
erroneous claims left opportunities for improvement. We examined
fiscal year 2001 data on carrier edits used for medical reviews
conducted before a payment decision is made. Specifically, we looked
at denial rates”the percentage of claims selected for review for
particular reasons that were denied, in full or in part”and the
average value of the amount denied. We found that denial rates for the
edits that accounted for the largest number of claims reviewed by the
carriers varied considerably. CMS does not provide information to
carriers programwide on criteria for selecting claims to review that
have proven to be effective, nor does it encourage carriers to share
information on their most productive criteria. These actions could
lead to more effective claims reviews with potential reduction in
inappropriate Medicare payments, better investment of administrative
resources, and less burden on providers.
Under PCA, Physicians Had Lower Repayment Amounts Assessed and More
Individualized Education:
Carriers in our study conducted postpayment reviews for about 0.1
percent of physician practices. However, individuals involved in such
reviews have raised concerns regarding carrier procedures. We found
that, since implementation of CMS's revised medical review policy”PCA”
in fiscal year 2001, the carriers in our study have adopted a more
strategic approach to medical reviews, particularly postpayment
reviews. As PCA has been applied to these reviews, carrier requests
for documentation from physicians and assessments of amounts to be
returned to the program have declined, while efforts to educate
physicians individually about appropriate billing have increased.
The following components of the PCA initiative are designed to ensure
the effective use of carriers' medical review resources and improve
physicians' ability to achieve compliance with program billing rules:
* Differentiating billing errors by levels of concern. Carriers are
instructed to conduct a "probe" medical review”examining a small
sample of a practice's claims”to determine whether a suspected billing
problem exits. After taking this interim step, carrier staff classify
the billing problems identified in the sample as belonging to one of
three levels of concern: minor, moderate, or major. For example, minor
concerns can include cases where the percentage of dollars billed in
error is small and the billing physician does not have a history of
filing problem claims. In contrast, major concerns can include cases
where the percentage billed in error is high, or moderate if the
physician has not responded to carrier education efforts to correct
previous billing problems.
* Tailoring corrective actions to the seriousness of the billing
errors identified. Across all levels of concern, PCA directs carriers
to contact physicians individually to discuss their particular billing
problems and to recover payments for erroneous claims. For minor
concerns, education may be the principal action the carrier takes. For
moderate concerns, carriers may also medically review a portion of the
physician's claims prior to payment for a set period of time. For
major concerns, carriers may go one step further by reviewing another
larger postpayment claims sample in order to estimate and recover
potential additional overpayments.
* Educating physicians about appropriate billing practices. Carriers
must inform physicians and their staffs about billing rules to prevent
the recurrence of payment errors. Carriers are instructed to notify
physicians of billing problems through one-on-one contacts using phone
calls, letters, and meetings. Whereas in the past, carriers' medical
review staff simply pointed physicians toward the applicable Medicare
rules, under PCA, carrier staff are directed to assist physicians in
applying these rules to their specific billing situation. As part of
their strategies to increase physician education, the three carriers
in our study reported greater use of phone calls and letters to
provide individual physicians feedback on their billing errors.
Although we cannot identify as yet how PCA affects the rate of
physician billing errors, one effect is measurable. The highest amount
a physician practice in our study was required to repay the Medicare
program decreased substantially. In fiscal year 2000”the year before
PCA implementation”the largest overpayment amounts assessed ranged
from about $95,000 to $372,000 across the three carriers. These
amounts declined in fiscal year 2001, when PCA was implemented, with
overpayment assessments ranging from $6,000 to $79,000. A major factor
contributing to this decline is that, under PCA, the carriers in our
study virtually eliminated their use of extrapolation”a way of
estimating the amount Medicare overpaid a physician by projecting an
error rate found in a sample of the physician's claims. According to
an October 2001 CMS survey, most other carriers similarly limited
their use of extrapolation. Of the 18 carriers that responded to the
CMS survey, only three”serving Ohio, West Virginia, Massachusetts, and
Florida”had more than nine cases involving extrapolation in fiscal
year 2001.
Concluding Observations:
Carriers, CMS, and physicians all have a role in efforts to minimize
erroneous claims. Carriers must do a better job than in the past of
providing physicians with clear and complete information on
appropriate billing practices. In this regard, CMS, through its PCA
initiative, has made billing education a key component of its payment
safeguard activities. Over time, it should become evident whether the
strategic and educational approach under PCA will effectively reduce
Medicare's payment errors. In addition, we have recommended that CMS
assume a direct role in communicating programwide information to all
physicians and other providers rather than relying on the individual
carriers. In previous work, we also recommended that CMS take steps to
ensure that medical review "best practices" of individual carriers are
shared and, when appropriate, implemented by other carriers. In our
view, it is essential CMS take the necessary steps to strike a
reasonable balance between safeguarding a fiscally troubled program
while not placing an inappropriate burden on physicians.
Contact and Acknowledgments:
Mr. Chairman, this concludes my prepared statement. I would be happy
to answer any questions that you or other Committee Members may have.
Contact and Acknowledgments:
For further information regarding this testimony, please contact
Leslie G. Aronovitz at (312) 220-7600. Rosamond Katz, Hannah Fein,
Jenny Grover, Joel Hamilton, and Eric Peterson made contributions to
this statement.
[End of section]
Footnotes:
[1] Department of Health and Human Services/Office of Inspector
General, Improper Fiscal Year 2001 Medicare Fee-For-Service Payments A-
17-00-02000 (Washington, D.C.: Feb. 15, 2002).
[2] In February 2002, we issued Medicare: Communications With
Physicians Can Be Improved, [hyperlink,
http://www.gao.gov/products/GAO-02-249] (Washington, D.C.: Feb. 27,
2002). In conjunction with this hearing, we are releasing our report
Medicare: Recent CMS Reforms Address Carrier Scrutiny of Physicians'
Claims for Payment, [hyperlink,
http://www.gao.gov/products/GAO-02-693] (Washington, D.C.: May 28,
2002).
[3] HHS, Health Care Financing Administration, Medical Review
Progressive Corrective Action, Program Memorandum Transmittal AB-00-72
(Baltimore, MD: Aug. 7, 2000).
[4] Part B covers charges from licensed practitioners, as well as
clinical laboratory and diagnostic services, surgical supplies and
durable medical equipment, and ambulance services. Part A covers
hospital inpatient and certain other services.
[5] NHIC's California component is a large insurer with separate
facilities that serve the northern and southern areas of the state.
WPS, also a large insurer, has separate facilities in four states
(Wisconsin, Illinois, Michigan, and Minnesota). In comparison,
HealthNow NY is a small insurer that serves providers in upstate New
York.
[6] Some edits focus on billing codes for certain clinical procedures;
others focus on the frequency with which services are delivered.
Carriers develop edits based on their analysis of billing data or
other factors that suggest a pattern of erroneous billing, followed up
by medical reviews of small samples of claims selected by the edit to
test the validity of identified problems.
[End of section]
