WASHINGTON -- At a time when Medicare and private health insurers are struggling to control medical bills, many doctors and hospitals are increasing their income by improperly manipulating the numerical codes used to describe their services on insurance claims and billing forms, federal investigators say.
Federal auditors say the techniques are often illegal and clearly violate the intent of federal rules concerning payment for doctors' services under Medicare.
The government has collected millions of dollars in civil penalties and restitution from doctors and hospitals over such billing, including a $1.5 million recovery announced yesterday in Pennsylvania.
The government and private insurers say doctors' creative billing techniques add at least several billion dollars a year to the nation's health-care costs.
Alarmed at what they say is a growing pattern of abuse, federal officials and private insurers have stepped up enforcement efforts, using computers to audit claims in an effort to crack down on doctors and hospitals submitting fraudulent and inflated bills.
Officials say questionable bills most commonly have been submitted by surgeons and other specialists who perform diagnostic and other procedures. The specialists, who tend to be the most highly paid members of the medical profession, face cuts in payments for their services under a new Medicare fee schedule that will take effect next month.
With the help of a small army of consultants, doctors and their billing clerks have become adept at selecting codes that increase reimbursement. In one of the more common abuses, clearly forbidden by federal rules, a doctor bills separately for two or more services that are performed on the same patient at the same time and that are supposed to be reported as a single comprehensive procedure.
For example, instead of a single fee for a total hysterectomy, the doctor might bill separately for four or five procedures. And auditors have found that some doctors charge twice for one of those procedures, removing the Fallopian tubes and ovaries -- once on the left side and once on the right side.
Fragmentation of a bill in this manner is clearly forbidden and can add $1,000 or $2,000 to the cost of a $3,300 hysterectomy, doctors and insurers say.
Hospitals, struggling to squeeze money out of insured patients to help finance care for the uninsured, also have begun to bill separately for many services once regarded as a single package, especially in the emergency room. The government has accused many hospitals of filing inaccurate claims for laboratory tests and X-rays.
To challenge such practices, auditors must penetrate the arcane world of medical coding and billing and must have deep expertise in medical procedures and terminology. Experts on reimbursement say most abusive practices go undetected because it is often difficult to spot them amid the torrent of medical paperwork.
Insurance companies have always worried about the manipulation of billing codes, but the government has only recently begun to combat the problem, amid fresh evidence that doctors and hospitals are increasingly using such techniques improperly to offset cuts in reimbursement under Medicare, Medicaid and private health plans.
A recent federal investigation in Pennsylvania found improper "unbundling" of medical procedures and similar problems in bills submitted by 20 percent of the 8,000 doctors who filed Medicare claims for surgery.
Based on that study, Richard P. Kusserow, inspector general at the Department of Health and Human Services, concluded that "a relatively high percentage of physicians" were improperly manipulating procedure codes for personal profit. He and his staff are investigating similar practices in 14 other states, including California, Florida, Illinois, Michigan, New York and Ohio.
Thomas R. Owens, president of GMIS, a company in Malvern, Pa., that audits claims for private insurers and helped conduct the Pennsylvania Medicare study for the federal government, said illegitimate practices such as fragmentation of bills were adding $5 billion to $6 billion a year to the nation's health-care bill, which came to $666 billion in 1990.
Dr. James S. Todd, executive vice president of the American Medical Association, agreed that billing manipulation was a growing problem but said he did not know how much was illegal.
"The manipulation of procedure codes is purely and simply a method to get adequate reimbursement for what physicians do," he said, adding that it is a law of economics that when reimbursement goes down, such manipulation will increase.
For every service, from an office visit to a heart transplant, there is a standard five-digit code, set by the AMA or the federal government. The codes listed on an insurance claim affect the amount of money that doctors get from Medicare, Medicaid, Blue Cross and Blue Shield and commercial health insurers.
Though the Medicare law does not prescribe a specific method of coding, federal investigators and government lawyers say doctors who bill separately for services provided as a package violate the law because they knew or should have known that violates Medicare rules.
Under federal law, anyone who submits a false claim under Medicare or Medicaid is subject to a civil penalty of $10,000, plus three times the amount of any damages sustained. The maximum criminal penalty is five years in prison and a fine of $250,000.