Electronic billing has been promoted as a big cost savings for healthcare. But is it? The Center for Public Integrity has challenged the conventional wisdom, and the rest of us would do well to pay attention.

For 20 months, CPI combed Medicare records and talked to providers, billing consultants, and others to document one big reason for the growth in Medicare spending over the last decade: Doctors and hospitals are sometimes “upcoding,” or charging Medicare for higher levels of services when they didn’t provide it, while hospital emergency departments too are grabbing billions in extra fees for their services.

A couple of startling findings:

• “More than 7,500 physicians billed the two top-paying codes for three out of four office visits in 2008, a sharp rise from the numbers of doctors who did so at the start of the decade.”
• “Use of the top two most expensive codes for emergency room care nationwide nearly doubled from 25 percent to 45 percent of all claims during the time period examined. In many cases these claims were not for treating patients with life-threatening injuries. Often they (patients) were treated for seemingly minor injuries and complaints.”

Two weeks ago CPI published its work in a nine-part online report (including two follow-ups) called “Cracking the Code,” plus a shorter version in The Washington Post. The prodigious effort deserves a CJR Laurel, and raises serious questions about the ease at which some doctors and hospitals engage in unsavory, possibly fraudulent practices; about the government’s ability or interest in policing them; and about the use of new technology—electronic medical records—that supporters of health reform have hailed as a way for the health system to save money—not spend more.

The CPI investigation and a subsequent report by The New York Times concluded that these electronic health records may in fact make it easier to over bill for care that is given, with the click of a mouse, or to duplicate patient records, suggesting services were repeated when they were not, in order to jack up reimbursements.

Medicare fraud on the part of providers is hardly new in the program’s 47-year history. But the CPI team, which included Joe Eaton, David Donald, and Fred Schulte, a long-time investigative reporter who’s no stranger to Medicare shenanigans. For me the major take-away is this question: Is America really serious about controlling healthcare costs, or will healthcare providers continue to charge what they can get away with—a business strategy that helps make American healthcare the most costly in the world.

Reading the CPI series, you wonder. In the first story, Schulte writes that the Center’s examination of billing errors and abuse:

has outlined their scope in an unprecedented manner, uncovering a range of costly medical coding mistakes and abuses that have plagued the government-paid health care plan for years and are worsening amid lax federal oversight.

And the Center reports that the government does not seem terribly interested in keeping tabs on the taxpayer’s purse, signaling that it is OK to inflate charges. They cite:

• The government’s long delay in designing coding guidelines that would replace the vague and subjective ones used now

• Prosecutions that are typically settled with deals to keep doctors out of jail. The doctors then also then get easy federal approvals to continue treating patients

“The whole system is set up to suck more money out of the taxpayer,” Schulte told me. No wonder one healthcare consultant, Barbara Vandegrift, from Quorum Health Resources, admitted to reporters: “There is such financial pressure to upcode. It’s ‘wait until we get caught and we’ll fight it at that point.’”

In response to the CPI investigation and the Times story, Attorney General Eric Holder and Health and Human Services Secretary Kathleen Sebelius sent a letter to five major hospital trade groups, warning about fraudulent use of electronic medical records to inflate Medicare bills. The move strikes me as slap-on-the-wrist response to a significant and costly problem, and it certainly bears follow-up from the media.

When confronted with CPI’ s findings, doctors and hospitals predictably pushed back, arguing that patients are older and sicker than they have been in the past. But when CPI checked out that claim, reporters found it wasn’t really true. Some providers also claimed they had been underpaid for their services in the past, and electronic medical records would help them get what is due to them.

Schulte told me that he had witnessed sales pitches in which hospitals were told by sellers that the computerized-record “machines would pay for themselves, because they could bill more aggressively. Before, they were leaving money on the table,” Schulte said in our interview. “The machines are allowing them to code higher.”

Given the billions the government has invested in promoting them as the route to cheaper and better care, abuse of electronic medical records is troubling. The health reform law contained provisions designed to speed along and encourage adoption of such records.

One CPI piece introduced us to Dr. Robert Kolodner, who headed the government’s drive for the new technology in 2007. He acknowledged to CPI that billing abuse took a back seat to efforts aimed at encouraging use of the technology. He said officials were certain that the savings achieved by computerizing medicine would be so great that billing abuse, “while needing to be monitored, was not something that should be put as the primary issue at that time.” When the Obama team arrived in late 2008, it was sympathetic to the pleadings of the technology companies, which would benefit handsomely from the technology.

The press effectively bought in to the conventional wisdom about the technology—promoting the virtues of electronic medical records whenever an advocate for them had something quotable to say. There has been scarcely a nod to the downsides of electronic medical records in the press, until the CPI expose and the Times report.

The two efforts present a good case that it’s time for a closer look at whether the promised cost savings can really be achieved in a healthcare system that’s weighted so heavily in favor of providers.

Correction: The reporting team on the Center for Public Integrity series on Upcoding included David Donald, not Donald David, as we initially reported. CJR regrets the error.

Related stories:

Excluded Voices: An interview with Jonathan Oberlander

Yes, Virginia, There Really Are Cost Controls: What miracle will bring down the price of medical care?


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Trudy Lieberman is a fellow at the Center for Advancing Health and a longtime contributing editor to the Columbia Journalism Review. She is the lead writer for The Second Opinion, CJR’s healthcare desk, which is part of our United States Project on the coverage of politics and policy. Follow her on Twitter @Trudy_Lieberman.