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Eleven years ago, Dr. Kathryn Locatell’s testimony at a U.S. Senate hearing on alleged Medicare billing abuses generated a rush of media coverage, but little lasting reform.

Locatell, a California physician, helped expose medical billing consultants who made a living teaching doctors how to use the billing system to reel in higher fees.

The techniques ranged from billing for medical treatments that weren’t needed to packing a patient’s file with irrelevant details as a means to justify higher, more lucrative, Medicare billing codes.

“The information presented to us at the seminars did not include any method of … ensuring that the services billed for were medically necessary,” Locatell testified at the June 2001 Senate Finance Committee hearing.

Despite much legislative hand-wringing and media attention — CBS Evening News told her story prominently — little changed in the aftermath of the congressional probe.

More than a decade later, federal officials are still struggling to make sure doctors code accurately and charge Medicare only for treatments that are medically necessary, a Center for Public Integrity investigation has found.

The Center’s analysis of Medicare billing records found that more than 7,500 doctors billed the two top paying codes for three out of four office visits, a sharp rise from the start of the decade. Government records also show medical professionals billing billions of dollars in suspect payments in recent years through coding errors.

The Center also examined more than a dozen recent Medicare audits that revealed medical care which auditors said was not necessary, properly documented or correctly coded in a strikingly high percentage of patient files sampled — sometimes half or more. Medicare officials projected overcharges of more than $1.4 billion due to coding errors for office visits during 2010 alone.

Locatell, a geriatric medicine specialist in Sacramento, said doctors today face even more financial pressure to chase dollars than a decade ago.

“It’s so easy to pad your documentation so you can meet the requirements” for higher billing codes, she said in an interview. “Until we get enough movement of people clamoring for something different … it will not change, and vested interests won’t allow it to change.”

Medical groups deny that their members “upcode” patient visits. Most doctors, they say, bill less than they deserve, often because they aren’t exacting in writing down all the work they do, or out of fear of being audited.

But the American Medical Association, which wrote the billing codes and controls their use, also has raised the specter of increased upcoding tied to the explosion in use of electronic health records. In May, the AMA urged tighter government controls to assure that the digital devices don’t prompt upcoding by, among other things, facilitating “documentation of irrelevant services.”


Medicare and other health insurers use the AMA’s fee scales to pay doctors for routine medical services, such as office visits and other care provided in hospitals and nursing homes.

The five-digit scales, called “Evaluation and Management” codes, reflect the complexity of the service and the time it usually takes. Medicare paid out more than $33 billion in 2010 using the codes, which are the bread and butter for many medical practices.

Yet from the early 1990s, when the current system was established, coding has bewildered many doctors. Dr. Stephen Levinson, a coding expert and physician, notes that doctors aren’t taught much in medical school about how to code correctly — even though it’s essential to getting paid. Many doctors would rather focus on treating patients than wading through arcane billing tracts, he said.

“Doctors want to focus on patients. They’re not policy wonks,” noted Michael Miscoe, a Pennsylvania health care lawyer and medical coding specialist.

The need for coding assistance has spawned a multi-billion dollar industry that employs tens of thousands of professional coders. Some work in doctors’ offices and hospitals, while others sift through computerized records at home or at billing companies. An estimated 2,000 companies nationwide handle billing for doctors and hospitals, according to the Healthcare Billing and Management Association

By all accounts, demand is rising. Courses on how to code are a staple of online universities and training programs. The U.S. Department of Labor has forecast medical coding to grow faster than most other occupations and create 37,700 new jobs by 2020.

Two national groups have set curriculum and accreditation standards for coders. The American Association of Professional Coders, founded in 1988, boasts more than 117,000 members. The American Health Information Management Association, which has advocated for accurate medical record keeping since 1928, has 64,000 members. Both groups have written ethics canons to which members must adhere.

Raemarie Jimenez, the director of education for the coders’ association, said doctors aren’t trained in the “business of medicine” and using a professional offers them a “safeguard.”

Yet it’s widely accepted in medicine that coding is more art than science and that two experts often will disagree over which code to assign. And despite years of government campaigns to foster correct coding, errors are common and show signs of worsening with electronic billing systems.

Federal officials concede they have no idea how much tax money is lost through simple coding mistakes and disagreements, and how much occurs from deliberate overcharging. It’s also not clear who is making the mistakes. The Medicare billing records analyzed by the Center for Public Integrity don’t indicate whether high-billing doctors coded their own bills, hired professional coders or billing companies, or took advice from consultants.

The system’s shortcomings were evident after investigators, with Locatell’s help, went undercover in 2001 and sat in on sessions conducted by “revenue maximization” consultants.

At the ensuing hearing, U.S. Sen. Charles Grassley, R-Iowa, lamented that officials had no way to know how many doctors were turning to billing consultants — let alone how many handed out dubious advice.

“There is no mandatory accreditation or certification of health care consultants. Anyone can put out a shingle and call themselves a health care consultant,” Grassley said at the time.

Robert Hast, a GAO investigator involved in the 2001 undercover operation, testified that certain advice dispensed at the seminars was “inconsistent” with federal Medicare law.

One example cited: a patient with a sore throat for whom the doctor collected “extraneous information” that once entered into the medical file was used to justify a higher billing code. Another consultant had advocated diagnostic tests such as heart monitoring tests for all cardiac patients, whether needed or not, according to testimony.

One consultant’s website promised to boost a doctor’s earnings by $10,000 per month, with the consultant pocketing 40 percent of the money, witnesses said. Though federal officials said at the time and still believe that these “percentage billing arrangements” can create an incentive to overcharge, they remain in wide use. But the Healthcare Billing and Management Association contends these deals are “appropriate and reasonable,” according to executive director Brad Lund.

Though most don’t provide precise financial details, a range of billing and coding consultants promise doctors their methods and products will boost revenue. One website, for instance, promises its coding methods will stay on the right side of the law and generate a “10%-15% increase in revenue.”

There’s still little oversight of consultants who offer billing advice, even though their numbers appear to be increasing with a decision by the federal government to spend as much as $30 billion in stimulus funds helping doctors and hospitals purchase electronic health records.

For instance, some online advertisements for electronic records and billing software assure doctors they can profit from higher coding once they get wired up.

Many billing consultants argue that doctors are simply getting their just due after years of understating the work they perform. Still, several said that coding controversies will not go away so long as doctors are paid by the number of services they provide.

Florida consultant Frank Cohen, for instance, believes that little will change unless the government scraps the billing codes and find new methods for paying doctors.

Cohen, who advises physicians on proper coding, said “nebulous” coding guidelines assure “there’s going to be a wide range of errors.”

Health lawyer and coding expert Miscoe agreed. “Fundamentally, we need to change the reimbursement system so doctors can go back to being doctors,” he said. “There’s got to be something wrong when they [doctors] need coding experts to get through a regular day.”

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