Health Care: Consultants' Billing Advice May Lead to Improperly  
Paid Insurance Claims (27-JUN-01, GAO-01-818).			 
								 
This report investigates health care consultants who conduct	 
seminars or workshops that offer advice to health care providers 
on ways to enhance revenue and avoid audits or investigations. In
this report, GAO (1) attends seminars or workshops that these	 
consultants offer and (2) determines whether the consultants are 
providing advice that could result in improper or excessive	 
claims to Medicare, Medicaid, other federally funded health	 
plans, and private health insurance carriers. GAO found that	 
certain advice was inconsistent with guidance provided by the	 
Department of Health and Human Services' Office of Inspector	 
General (OIG). Such advice could result in violations of both	 
civil and criminal statutes.					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-01-818 					        
    ACCNO:   A01219						        
  TITLE:     Health Care: Consultants' Billing Advice May Lead to     
             Improperly Paid Insurance Claims                                 
     DATE:   06/27/2001 
  SUBJECT:   Consultants					 
	     Health care services				 
	     Health insurance					 
	     Insurance claims					 
	     Fraud						 
	     Program abuses					 
	     Billing procedures 				 
	     Medicaid Program					 
	     Medicare Program					 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Testimony.                                               **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************
GAO-01-818
     
The Honorable Charles E. Grassley, Ranking Minority Member, Committee on
Finance, U. S. Senate

United States General Accounting Office

GAO

June 2001 HEALTH CARE Consultants? Billing Advice May Lead to Improperly
Paid Insurance Claims

GAO- 01- 818

Page 1 GAO- 01- 818 Health Care Consultants' Advice to Providers

June 27, 2001 The Honorable Charles E. Grassley Ranking Minority Member
Committee on Finance United States Senate

Dear Senator Grassley: This report responds to your request that we
investigate health care consultants who conduct seminars or workshops that
offer advice to health care providers on ways to enhance revenue and avoid
audits or investigations. Specifically, you asked that we (1) attend
seminars or workshops that these consultants offer and (2) determine whether
the consultants are providing advice that could result in improper or
excessive claims to Medicare, Medicaid, other federally funded health plans,
and private health insurance carriers.

To assist us in identifying consultants who provide advice on billing
practices and compliance programs, and to analyze the information provided
by these consultants, we contracted with a licensed physician. This
physician and a criminal investigator, who posed as a member of the
physician?s staff, attended two workshops and one seminar. The focus of our
work was seminars and workshops that advertised how to enhance revenue and
avoid audit, rather than on those that provide advice on coding for
reimbursement. We raise issues in this report about advice given at two
workshops-? How to Run a More Profitable Practice,? which was sponsored by
the Medical Society of the District of Columbia and

?Creating a 7- Step Compliance Plan Audit/ Audit- Proof Your Practice,?
which qualified for continuing education credits by the American Association
of Medical Assistants. The same consulting company presented both workshops.
1 We raise no issues regarding the advice provided at the seminar we
attended, which was sponsored by the American Academy of Physician
Assistants. We conducted our investigation from July 2000 to June 2001 in
accordance with investigative

1 This company advertises that (1) it has designed, developed, and presented
hundreds of workshops on behalf of many medical societies and hospitals and
(2) its workshops have been attended by over 50, 000 physicians and 100,000
office managers and medical assistants.

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 01- 818 Health Care Consultants' Advice to Providers

standards established by the President?s Council on Integrity and
Efficiency.

In summary, the two workshops about which we raise issues in this report
offered in- depth discussions of regulations that pertain to billing for
evaluation and management health care services 2 and compliance with health
care laws and regulations. During the course of discussions at those
workshops, certain advice was provided that is inconsistent with guidance
provided by the Department of Health and Human Services? Office of Inspector
General (OIG). Such advice could result in violations of both civil and
criminal statutes. Specifically, certain consultants advocated not reporting
or refunding overpayments received from insurance carriers after they were
discovered. The consultants also encouraged the performance of tests and
procedures that are not medically necessary to generate documentation in
support of bills for evaluation and management services at a higher level of
complexity than actually confronted during patients? office visits.
Furthermore, one consultant suggested that providers discourage patients
with low- paying insurance plans, such as Medicaid, from using their
services by limiting services provided to them and scheduling appointments
for such patients at inconvenient times of the day.

Medicare and Medicaid have consistently been targets for fraudulent conduct
because of their size and complexity. Private health care insurance carriers
are also vulnerable to fraud due to the immense volume of claims they
receive and process. Those who commit fraud against public health insurers
are also likely to engage in similar conduct against private insurers. The
Coalition Against Insurance Fraud estimates that in 1997 fraud in the health
care industry totaled about $54 billion nationwide, 3 with $20 billion
attributable to private insurers and $34 billion to Medicare and Medicaid.

2 Evaluation and management health care services encompass the basic
services provided by physicians in diagnosing and treating patients. 3 The
Coalition used private insurance information provided by the Health
Insurance Association of America and public insurance information supplied
by the Health Care Financing Administration. The most current year for which
statistics were available is 1997. Results in Brief

Background

Page 3 GAO- 01- 818 Health Care Consultants' Advice to Providers

In addition to losses due to fraud, the Department of Health and Human
Services? OIG has reported that billing errors, or mistakes, made by health
care providers were significant contributors to improperly paid health care
insurance claims. The OIG defined billing errors as (1) providing
insufficient or no documentation, (2) reporting incorrect codes for medical
services and procedures performed, and (3) billing for services that are not
medically necessary or that are not covered. For fiscal year 2000, the OIG
reported that an estimated $11.9 billion in improper payments were made for
Medicare claims. 4

In a March 1997 letter to health care providers, the Department of Health
and Human Services? IG suggested that providers work cooperatively with the
OIG to show that compliance can become a part of the provider culture. The
letter emphasized that such cooperation would ensure the success of
initiatives to identify and penalize dishonest providers. One cooperative
effort between the IG and health care groups resulted in the publication of
model compliance programs for health care providers.

The OIG encourages providers to adopt compliance principles in their
practice and has published specific guidance for individual and small group
physician practices 5 as well as other types of providers to help them
design voluntary compliance programs. A voluntary compliance program can
help providers recognize when their practice has submitted erroneous claims
and ensure that the claims they submit are true and accurate. In addition,
the OIG has incorporated its voluntary self- disclosure protocol 6 into the
compliance program, under which sanctions may be mitigated if provider-
detected violations are reported voluntarily.

Evaluation and management services refer to work that does not involve a
medical procedure- the thinking part of medicine. The key elements involved
in evaluation and management services are (1) obtaining the patient?s
medical history, (2) performing a physical examination, and (3) making
medical decisions. Medical decisions include determining which

4 Department of Health and Human Services? OIG report, Improper Fiscal Year
2000 Medicare Fee- for- Service Payments, A- 17- 00- 02000, (Feb. 5, 2001).
5 65 F. Reg. 59434 (Oct. 5, 2000). 6 63F. Reg. 42410 (Aug. 7, 1998). OIG
Guidance

Evaluation and Management Services

Page 4 GAO- 01- 818 Health Care Consultants' Advice to Providers

diagnostic tests are needed, interpreting the results of the diagnostic
tests, making the diagnosis, and choosing a course of treatment after
discussing the risks and benefits of various treatment options with the
patient. These decisions might involve work of low, medium, or high
complexity.

Each of the key elements of evaluation and management services contains
components that indicate the amount of work done. For example, a
comprehensive medical history would involve (1) determining a patient?s
chief complaint, (2) tracing the complete history of the patient?s present
illness, (3) questioning other observable characteristics of the patient?s
present condition and overall state of health (review of systems), (4)
obtaining a complete medical history for the patient, (5) developing
complete information on the patient?s social history, and (6) recording a
complete family history. A more focused medical history would involve
obtaining only specific information relating directly to the patient?s
symptoms at the time of the visit.

Providers and their staffs use identifying codes defined in an American
Medical Association publication, titled Current Procedural Terminology
(CPT), to bill for outpatient evaluation and management services performed
during office visits. The CPT is a list of descriptive terms and identifying
codes for reporting all standard medical services and procedures performed
by physicians. Updated annually, it is the most widely accepted nomenclature
for reporting physician procedures and services under both government and
private health insurance programs. The CPT codes reported to insurers are
used in claims processing, and they form the basis for compensating
providers commensurate with the level of work involved in treating a
patient. Accordingly, the higher codes, which correspond to higher payments,
are used when a patient?s problems are numerous or complex or pose greater
risk to the patient, or when there are more diagnostic decisions to be made
or more treatment options to be evaluated.

The CPT has two series of evaluation and management codes for outpatient
office visits, one series for new patient visits and another for established
patient visits. Each series of CPT codes has five levels that correspond to
the difficulty and complexity of the work required to address a patient?s
needs. The code selected by the provider to describe the services performed
in turn determines the amount the provider will be paid for the visit. For
example, under the current Medicare fee schedule

Page 5 GAO- 01- 818 Health Care Consultants' Advice to Providers

for the District of Columbia and surrounding suburbs, 7 a provider would be
paid $39.30 for a new patient who is determined to have received services
commensurate with a level 1 visit and $182.52 for a level 5 visit.
Similarly, payments for level 1 and level 5 visits by an established patient
are $22.34 and $128.03, respectively.

The two workshops we attended provided certain advice that is inconsistent
with the OIG guidance and that, if followed, could result in violations of
criminal and civil statutes. Specifically, at one workshop the consultant
suggested that when providers identify an overpayment from an insurance
carrier, they should not report or refund the overpayment. Furthermore,
consultants at both workshops suggested that providers attempt to receive a
higher- than- earned level of compensation by making it appear, through
documentation, that a patient presented more complex problems than he or she
actually did. Additionally, one consultant suggested that providers limit
the services offered to patients with lowpaying insurance plans, such as
Medicaid, and that they discourage such patients from using the provider?s
services by offering appointments to them only in time slots that are
inconvenient to other patients.

One workshop focused on the merits of implementing voluntary compliance
programs. The consultant who presented this particular discussion explained
that a baseline self- audit to determine the level of compliance with
applicable laws, rules, and regulations is a required step in creating a
voluntary compliance program. Focusing on ?how to auditproof your practice?
and avoid sending out ?red flags,? the consultant advised providers not to
report or refund overpayments they identify as a result of the self- audit.
The consultant claimed that reporting or refunding the overpayment would
raise a red flag that could result in an audit or investigation. When asked
the proper course of action to take when an overpayment is identified, the
consultant responded that providers are required to report and refund
overpayments. He said, however, that instead of refunding overpayments,
physician practices generally fix problems in their billing systems that
cause overpayments while ?keeping

7 Medicare has separate fee schedules for various geographic regions
throughout the United States. Some Advice

Provided by Consultants Could Result in Violations of Law

Nondisclosure of Overpayments

Page 6 GAO- 01- 818 Health Care Consultants' Advice to Providers

their mouths shut? and ?getting on with life.? Such conduct, however, could
result in violations of criminal statutes. 8

According to the most recent OIG Medicare audit report, the practice of
billing for services that are not medically necessary or that lack
sufficient diagnostic justification is a serious problem in the health
insurance system. The OIG estimated that during fiscal year 2000, $5.1
billion was billed to insurance plans for unnecessary services.
Intentionally billing for services that are not medically necessary may
result in violations of law. 9

Moreover, based on advice given at workshops that we attended during this
investigation, we are concerned that insurers may be paying for tests and
procedures that are not medically necessary because physicians may be
intentionally using such services to justify billing for evaluation and
management services at higher code levels than actual circumstances warrant.
Specifically, two consultants advised that documentation of evaluation and
management services performed can be used to create, for purposes of an
audit, the appearance that medical issues confronted at the time of a
patient?s office visit were of a higher level of difficulty than they
actually were.

For example, a consultant at one workshop urged practitioners to enhance
revenues by finding creative ways to justify bills for patient evaluation
and management services at high code levels. He advised that one means of
justifying bills at high code levels is to have nonphysician health
professionals perform numerous procedures and tests. To illustrate his
point, the consultant discussed the hypothetical case of a cardiologist who
examines a patient in an emergency room where tests are performed and the
patient is discharged after the cardiologist determines that the patient has
a minor problem or no problem at all. To generate additional revenue, the
consultant suggested that the cardiologist tell the patient to come to

8 See, for example, 18 U. S. C. sect. 641 (intentional conversion of federal
property to personal use), and 42 U. S. C. sect. 1320a- 7b (duty to report
changed circumstances that affect a provider?s entitlement to payment).

9 Among the criminal statutes applicable to health care fraud are 18 U. S.
C. sect. 1347 (knowing, willful scheme to defraud federal health care programs),
42 U. S. C. sect. 1320a- 7b (knowingly providing false statements to obtain
federal benefits). The False Claims Act 31 U. S. C. sect.

3729 applies civil penalties plus damages for knowingly presenting to
federal authorities a false claim for payment, and 42 U. S. C. sect. 1320a- 7b
also applies civil penalties to improper claims made on the federal health
programs. Creating Documentation to

Support Higher- ThanWarranted Code Levels

Page 7 GAO- 01- 818 Health Care Consultants' Advice to Providers

his office for a complete work- up, even when the cardiologist knows that
the patient does not have a problem. He advised that the work- up be
performed during two separate office visits and that the cardiologist not be
involved in the first visit. Instead, a nurse is to perform tests, draw
blood, and take a medical history. During the second visit, the cardiologist
is to consult with the patient to discuss the results of the tests and
issues such as life style. The consultant indicated that the cardiologist
could bill for a level 4 visit, indicating that a relatively complex medical
problem was encountered at the time of the visit. The consultant made clear
that the cardiologist did not actually confront a complex problem during the
visit because the cardiologist already knew, based on the emergency room
tests and examination, that the patient did not have such a problem.

Another consultant focused on how to develop the highest code level for
health care services and create documentation to avoid having an insurer
change the code to a lower one. The consultant engaged in ?exercises?

with participants designed to suggest that coding results are ?arbitrary?

determinations. His emphasis was not that the code selection be correct or
even that the services be performed, but rather that it is important to
create a documentary basis for the codes billed in the event of an audit. He
explained that in the event of an audit, the documentation created is the
support for billing for services at higher code levels than warranted.

During the exercises, program participants- all were physicians except for
our criminal investigator- were provided a case study of an encounter with a
generally healthy 14- year- old patient with a sore throat. Participants
were asked to develop the evaluation and management service code for the
visit that diagnosed and treated the patient?s laryngitis. The consultant
suggested billing the visit as a level 4 encounter, supporting the code
selection by documenting every aspect of the medical history and physical
examination, and mechanically counting up the work documented to make the
services performed appear more complicated than they actually were. All of
the participants indicated that they would have coded the visit at a lower
level than that suggested by the consultant, who stated that

?documentation has its rewards.? The consultant explained that in the event
of an audit, the documentation created would be the basis for making it
appear that a bill at a high code level was appropriate. 10

10 The OIG?s most recent audit of Medicare claims at level 4 showed that
over the last 5 years, providers on average incorrectly coded at level 4 in
over 41 percent of the cases the OIG reviewed.

Page 8 GAO- 01- 818 Health Care Consultants' Advice to Providers

One workshop consultant encouraged practices to differentiate between
patients based on the level of benefits paid by their insurance plans. 11 He
identified the Medicaid program in particular as being the lowest and
slowest payer, and urged the audience to stop accepting new Medicaid
patients altogether. The consultant also suggested that the audience members
limit the services they provide to established Medicaid patients and offer
appointments to them only in hard- to- fill time slots.

Workshop participants were advised to offer better- insured patients follow-
up services that are intended to affiliate a patient permanently with the
practice. However, the consultant suggested that physicians may decide not
to offer such services to Medicaid patients. He sent a clear message to his
audience that a patient?s level of care should be commensurate with the
level of insurance benefits available to the patient. This advice raises two
questions: First, are medically necessary services not being made available
to Medicaid patients? Second, are better- paying insurance plans being
billed for services that are not medically necessary but performed for the
purpose of affiliating patients from such plans to a medical practice?

Program participants were further urged to see at least one new patient with
a better- paying insurance plan each day. The consultant pointed out that,
by seeing one new patient per day, a provider can increase revenue by $6,000
per year because the fee for a new patient visit is about $30 more than the
fee for an established patient visit. He said that over time such measures
would result in reducing the percentage of Medicaid patients seen regularly
in the practice and increase the number of established patients with better-
paying insurance.

The consultant also recommended that providers limit the number of scheduled
appointment slots available to Medicaid patients on any given day and that
Medicaid patients be offered appointments only in hard- to- fill time slots
rather than in the ?best,? or convenient, time slots. He suggested that
insurance information and new patient status be used to allocate the best
time slots to the best payers. He identified this approach as

?rationing,? which he described as ?not real discrimination,? but

?somewhat discrimination.? 11 The presenter recommended rating the various
insurers based on the amount they allow for services, the percentage of
claims collected, and the timeliness of their claims processing. Limiting
Services to

Medicaid Patients

Page 9 GAO- 01- 818 Health Care Consultants' Advice to Providers

While neither the Social Security Act 12 nor Medicaid regulations require
physicians to accept Medicaid patients, title VI of the Civil Rights Act of
1964 13 prohibits discrimination based upon race, color, or national origin
in programs that receive federal financial assistance. The Department of
Health and Human Services, which administers the Medicare and Medicaid
programs, takes the position that the nondiscrimination requirement of title
VI applies to doctors in private offices who treat and bill for Medicaid
patients. While the conduct promoted by the consultant is not overt
discrimination on the basis of race, color, or national origin, under
certain circumstances, such conduct might disproportionately harm members of
protected groups and raise questions about title VI compliance. Moreover,
even if the conduct promoted is not unlawful, it raises serious concerns
about whether it would result in depriving Medicaid patients of medically
necessary services, and whether better- paying insurance plans are billed
for services that are not medically necessary but performed for the purpose
of affiliating patients to a particular medical practice.

Advice offered to providers at workshops and seminars has the potential for
easing program integrity problems in the Medicare and Medicaid programs by
providing guidance on billing codes for evaluation and management services.
However, if followed, the advice provided at two workshops we attended would
exacerbate integrity problems and result in unlawful conduct. Moreover, the
advice raises concerns that some payments classified by the OIG as
improperly paid health care insurance claims may stem from conscious
decisions to submit inflated claims in an attempt to increase revenue. We
have discussed with the Department of Health and Human Services? OIG the
need to monitor workshops and seminars similar to the ones we attended.

As arranged with your office, unless you announce its contents earlier, we
plan no further distribution of this report until 30 days after the date of
this letter. At that time, we will make copies of the report available to
interested congressional committees and the Secretary of the Department of
Health and Human Services.

This report will also be available at www. gao. gov. If you have any
questions about this investigation, please call me at (202) 512- 7455 or

12 42 U. S. C. sect. 1396, et seq. (1994). 13 42 U. S. C. sect. 2000d. Conclusion

Page 10 GAO- 01- 818 Health Care Consultants' Advice to Providers

Assistant Director William Hamel at (202) 512- 6722. Senior Analyst Shelia
James, Assistant General Counsel Robert Cramer, and Senior Attorney Margaret
Armen made key contributions to this report.

Sincerely yours, Robert H. Hast Managing Director Office of Special
Investigations

(600863)

The first copy of each GAO report is free. Additional copies of reports are
$2 each. A check or money order should be made out to the Superintendent of
Documents. VISA and MasterCard credit cards are also accepted.

Orders for 100 or more copies to be mailed to a single address are
discounted 25 percent.

Orders by mail:

U. S. General Accounting Office P. O. Box 37050 Washington, DC 20013

Orders by visiting:

Room 1100 700 4 th St., NW (corner of 4 th and G Sts. NW) Washington, DC
20013

Orders by phone:

(202) 512- 6000 fax: (202) 512- 6061 TDD (202) 512- 2537

Each day, GAO issues a list of newly available reports and testimony. To
receive facsimile copies of the daily list or any list from the past 30
days, please call (202) 512- 6000 using a touchtone phone. A recorded menu
will provide information on how to obtain these lists.

Orders by Internet

For information on how to access GAO reports on the Internet, send an email
message with ?info? in the body to:

Info@ www. gao. gov or visit GAO?s World Wide Web home page at: http:// www.
gao. gov

Contact one:

 Web site: http:// www. gao. gov/ fraudnet/ fraudnet. htm

 E- mail: fraudnet@ gao. gov

 1- 800- 424- 5454 (automated answering system) Ordering Information

To Report Fraud, Waste, and Abuse in Federal Programs
*** End of document. ***