Payments for Evaluation and Management Services: Where OIG Sees Smoke, Physicians Come Under Fire

On May 28, 2014, the Office of Inspector General (OIG) published its findings from a study aimed at determining the error rate in physician coding for Evaluation and Management (E/M) services. The study focused on E/M services billed in 2010, noting that these services accounted for nearly 30% of Medicare Part B payments that year. As indicated by its title, Improper Payments for Evaluation and Management Services Cost Medicare Billions in 2010[i], the report suggests a high incidence of miscoding and insufficient documentation in E/M services claims, resulting in overpayments by Medicare. Physicians and physician organizations should be prepared for continued auditing activity and higher scrutiny of E/M services claims, as the OIG urges that the Centers for Medicare and Medicaid Services (CMS) “must use all of the tools at its disposal to more effectively identify and eliminate improper payments associated with E/M services.”[ii]

Study Objective, Methods, and Findings

The OIG’s study was designed to investigate the degree of coding accuracy and documentation sufficiency for E/M services claims paid by Medicare in 2010. The total projected overpayment for E/M services claims based on data from the study is $6.7 billion and represents 21% of Medicare payments for E/M services billed in 2010. The sample was limited to claims for E/M services with complexity levels three to five and physicians with 100 or more E/M services claims in 2010. The sample was then divided into two groups of claims according to physician coding practices: “high-coding physicians”[iii] and “other physicians”[iv]. The report indicates that 55% of E/M services claims reviewed were incorrectly coded or were not supported by sufficient documentation. Other key findings reported include:

  • 42% of claims were identified as incorrectly coded, of which 26% were billed at a higher level than appropriate (upcoded), 15% at a lower level than justified (downcoded), and 2% suffered other coding errors (e.g., unbundling).
  • 19% of claims were identified as insufficiently documented, with 7% considered undocumented.
  • Among high-coding physicians, 56% of claims were incorrectly coded, upcoding represented 99% of the coding errors, and documentation was insufficient for 26% of claims.
  • Among other physicians, 42% of claims were incorrectly coded, upcoding and downcoding representing 64% and 36% of the errors, respectively, and 12% of claims were insufficiently documented.
  • There was no statistically significant difference in incidence of coding errors or insufficient documentation for services documented in electronic medical records versus paper medical records.[v]

Study Limitations and Generalizability of Results

Significant limitations of the OIG study include its sample size and how the OIG defined non-respondents. Out of 369,629,103 claims submitted, the OIG selected a random sample of only 673 claims. Several key assumptions likely skewed the findings to show greater overpayments. For example, while the inappropriate payment amount for other error categories was calculated as the difference between what Medicare actually paid and what it should have paid, the entire payment for 39 claims for which the OIG did not receive records—six percent of the total sample size—was considered an overpayment. This further skewed the OIG’s calculated response rate, which is used to project error rates and overpayment to the claims population and stratified groups.

Potential Impact on Physicians

As a result of this study, the OIG urges that the perceived significant error rate associated with E/M services claims “must be addressed to properly safeguard Medicare.”[vi] This extrapolation of data from a potentially non-representative sample could leave even prudent physicians vulnerable to an audit. Physicians who routinely see the sickest patients, and thus bill the highest E/M codes, may be particularly susceptible to routine, ongoing audits and increased scrutiny of E/M services claims. Despite citing a negative return on investment in a prior test phase, CMS states that it will reassess the effectiveness of directing medical review contractors to conduct targeted reviews of E/M services claims submitted by “high coding physicians.” This report is also likely to motivate private insurance providers to scrutinize E/M services claims more closely and may lead to delayed payments or claim denials as a result of increased records requests.

Taking a Proactive Approach

Physicians should continue to take a proactive approach to ensuring the soundness of their coding practices and documentation. Collaboration with electronic medical record (EMR) service providers to develop prompts consistent with components of E/M services codes may be an effective way to improve symmetry between documentation and coding. The OIG study is a good reminder that if it is not documented, it did not happen. Finally, legal counsel can assist physicians in the event of an audit and is most effective when sought upon initial contact by a medical review agency.

If you require assistance with an audit or have any questions related to E/M services claims, please contact Peter Mellette (, Harrison Gibbs (, or Nathan Mortier

( or call Mellette PC at (757) 259-9200

Mellette PC acknowledges with appreciation the assistance of Cait Riccobono ’16, University of Richmond Law School, in the preparation of this advisory.

[i] The complete report is available for download at


[iii] Defined as physicians with an average level in the top 1% of their primary specialty and who billed at the two highest levels at least 95% of the time.

[iv] Defined as those who did not meet criteria for classification as “high coding physicians.”

[v] At the 95% confidence level.

[vi] OIG, supra note 2.

This Client Advisory is for general educational purposes only. It is not intended to provide legal advice specific to any situation you may have. Individuals desiring legal advice should consult legal counsel for up to date and fact specific advice.
Categories: Client Advisory