Coding study shows wide variance, undercoding

More than a year after implementation of the Medicare outpatient prospective payment system (OPPS), there are "unexpected variances" in the assignment of evaluation and management (E&M) codes on claims from EDs, suggesting many are undercoded or overcoded and may risk compliance charges.

E&M codes reflect the extent of clinical staff involvement with a patient and define payments ranging from $63 to $408 for the medical component of a hospital-based outpatient visit. Undercoding can result in lower levels of reimbursement, but overcoding can be a compliance problem requiring immediate intervention and correction.

Overcoding can result in substantial monetary penalties, sometimes three times the value of the disputed charge, according to the Department of Health and Human Services. Substantial overcoding also can lead to compliance charges that could bring more penalties, civil charges, and expulsion from the Medicare system.

A recent study by American Hospital Directory in Louisville, KY, used hospital OPPS claims to define normal Medicare payment levels and distributions of patients among various levels of E&M codes for calendar year 2002.

Data for some hospitals indicate that there may be systematic undercoding or overcoding of ED encounters, says Paul Shoemaker, president of American Hospital Directory. The company provides the operating details of virtually every hospital in the United States as a free on-line service, plus other services for a fee.

The E&M study shows, for example, that there were eight hospitals with more than 90% of their patients classified to APC 610, the lowest E&M level.

While there could be operational reasons for such a low intensity, Shoemaker says, a hospital falling outside normal ranges should make certain that valid reasons exist. If patients routinely are being classified to the lowest APC regardless of actual circumstances, a hospital would be underreimbursed.

Conversely, there were 19 hospitals with fewer than 2% of their patients classified to APC 610. Shoemaker says it is difficult to define a normal percentage for that APC because of variations in patient populations and levels of care, but anything on the extremes should be questioned.

"Again, it is important to understand the reasons," he says. "If patients are being erroneously classified to a higher range, there could be a compliance problem related to overreimbursement."

Shoemaker says the findings of this study should be useful in helping a hospital to determine whether its E&M coding is within expected ranges.

A free copy of the complete study can be retrieved from the American Hospital Directory web site at


For more on ED coding, contact:

  • Paul Shoemaker, President, American Hospital Directory, 4350 Brownsboro Road, Suite 110, Louisville, KY 40207. E-mail: Phone: (800) 894-8418.