Avoid Billing's Legal Landmines

Worrying about whether your coding and billing practices are within the law can keep you awake at night. We offer some guidelines to help you stay on track.

Imagine this: A two-physician practice is breaking up, and the doctors are going their separate ways. They call their billing company to announce the split. The billing company representative says, "Oh, OK - hey, by the way, it looks like your practice has been doing some upcoding and you have been overpaid by $250,000 over the last year. What do you want to do about that?"

Shocked, the physicians look for their billing company contract. Surely they would have some recourse against the firm. After all, didn't the company say it had certified coders scanning bills for coding errors? Shouldn't someone have caught this long ago? But the physicians can't find the contract.

Why? Because they never signed one; their years-old agreement with their billing company, they recall, had been verbal. They don't know what to do with payments that may have been drawn in error from Medicare and are sitting in their account like contraband.

According to Andrew McDonald, head of the physicians practice group at the health care accounting firm Horne LLP in Nashville, Tenn., this frightening scenario is the sort of legal landmine physicians can step on at any time. And they do. The story of the two doctors is not fictional, but exactly what happened to two physicians McDonald knows who are still scrambling to figure out what to do.

How can you avoid such a saga? Your practice's mantra, says McDonald, should be, "Awareness and hyper-vigilance over all things billing and coding."

"A practice has to know coding backwards and forward," he says. "That's the beginning and end of it. There's no getting around that."

Large practices often have a large billing and coding team. Unfortunately, that's not the case at many smaller practices. According to Lori Baker, also of Horne LLP, many practices - especially the small ones - just rely on their accountants, assuming they are equipped with coding know-how. Other practices simply have their office manager - or any random staff member - handle their billing and coding. Baker says that scenario may constitute a ticking time bomb. "In small physicians' offices they have what they are calling coders, but a lot of times these small groups can't afford to pay anyone with real knowledge, so what they have is often just a data-entry clerk," she says.


Fortunately, there are many solutions. One way to go is hiring someone with a background in coding to work on your team - someone who knows exactly what to look out for and can talk to doctors to straighten out errors as they occur. Baker advises that practices make absolutely sure their coding person attends regular continuing education seminars, given that Medicare rules are so muddy and change almost constantly.

"The rules are so vague, it's hard for physicians to grasp what they can and can't do," says Baker. "That's why they have to have contact with someone who can interpret these rules for them and keep them abreast of all the changes."

Even when a practice has a quality coder in-house, McDonald and Baker still recommend that physicians bring in an auditor once a year to take an objective look at how services are being coded. Think of it as an added bit of insurance, says Baker.

As many companies are willing to take over billing for physicians' practices, another option is outsourcing. Lisa York, director of services at the accounts receivable management firm PrimeARM of Carrollton, Ga., says outsourcing can be a very economical way to go. She says that if a practice takes in $350,000 in one year, they will pay about $17,000 of that to its billing company (6 percent to 8 percent of collections is typical). "You definitely can't hire a qualified person to work in-house for that," she says.

But McDonald cautions practices to make sure any firm they hire to do their coding has certified coders on staff. And be absolutely sure you don't move forward in your relationship with such a company without a contract - lest you end up in the position of the practice with an extra quarter million sitting around due to coding errors.

Although the government is looking into such cases of upcoding as it scrutinizes Medicare bills, undercoding can get you in trouble too. That's because billing for less than you are owed for a service is also considered a "false claim" and thus is illegal.

And yet it's rampant. Why?

"It's a fear mechanism," says Brian White, managing partner of the practice management consulting company Competitive Solutions, LLC, in Nashville, Tenn. "Doctors feel like if they don't ask for as much, they won't be flagged by Medicare as a billing problem. It's very hard to get them to code for what they see."

White says he reassures physician clients that what Medicare fiscal intermediaries and insurance companies look for when they flag physicians for investigation is a bell-shaped curve in their billing patterns. Payers want to ensure that most of what a doctor bills for lands squarely in the middle of the five levels of severity used in billing and coding (1 being the least complicated type of visit, 5 being the most complicated). If, among its peers in the same specialty, one practice codes at a lower level of severity for most visits, that will get noticed. If another practice tends to bill for visits at the higher end of the coding scale in terms of severity and time spent with patients, that will also draw attention.

Richard Cowart, chairman of the health law department at the law firm of Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, in Nashville, Tenn., agrees, adding that upcoders are naturally more likely to bring on payers' wrath. "In a field of poppies, what gets seen are the tall ones," says Cowart. "If you are high volume - or bill for high-severity visits too much of the time - the computer programs the government uses will pick that out. They watch for the tall poppies." These "tall poppy" practices tend to get reviewed more often by Medicare, adds Cowart, and they may even risk being dropped from commercial payers' provider lists.


Sometimes how doctors document a patient visit is the problem. "Doctors have to appreciate that documentation is part of the billing process," says Jennifer Miller, external relations liaison for the Medical Group Management Association (MGMA) in Washington, D.C. She adds that the government has increased the number of claims it brings against practices due to faulty documentation.

A doctor may see a patient who complains primarily of headaches but who also mentions noticing blood in his urine. The physician may order a urine test but fail to document why, only noting the headaches.

The solution? Revisit how you document. Do you wait until the end of the day to make notes on the 30 patients you saw? If so, says White, consider taking a minute to write additional notes in each patient's file just after the visit. Or take a helper into the exam room with you. According to White, some doctors are now training medical assistants to be their scribes during patient visits.

Other doctors are turning to voice-recognition systems that transcribe oral messages. These practitioners keep patient documentation current and detailed by talking into a handheld device after visits and before dashing off to the next patient, says White.


Coding and documentation don't constitute the only legal landmines in billing. There are also deductible collections.

PrimeARM's York says that some practices collect deductibles from Medicare patients when they come in for treatment, unaware that this practice is illegal. Collecting such deductibles is Medicare's job. "[Medicare] views collecting the money as a suspicious practice - even if the doctor's office does it in error," says York. "That's because the practice could just pocket that money. A lot of the beneficiaries are not on top of their game; when they then get billed for that deductible, they just pay it - unaware that they've already paid it. It's a no-no."

Erroneous billing can happen with workers' compensation patients as well. York explains that practices that don't know the rules may wrongly bill such a patient (sometimes repeatedly). These patients are not liable for payment unless there's been a settlement. Typically their employers are responsible for the bills.

Then there are Medicare waivers, designed to protect patients from unauthorized doctor bills. According to York, any time a Medicare recipient gets, say, a B12 shot, she must sign a waiver saying she understands that Medicare won't pay for it; rather, it is the patient's responsibility. Without a waiver in hand, the physician can't bill the patient for that service. The same goes for a lot of preventive measures for Medicare recipients, says York. Bill those patients without waivers and you put your practice at legal risk. "They have to remember [that] there's a legally binding contract with the carrier," says York.

MGMA's Miller also advises practices to learn about and comply with state laws that dictate how quickly a practice must bill a patient. (The flip side of that, Miller adds, are state laws that dictate how long an insurance company can delay paying claims to providers.) Awareness is key to ensuring none of these things happen to you. Address problems the instant they arise, says Cowart. "You don't know about these mistakes until they bite you, and by then it's usually pretty severe," he warns. If you are bitten, consult an attorney right away and address the matter under a privileged format, says Cowart.

While billing discrepancies are serious, White counsels his physician clients against excessive anxiety if they notice honest mistakes in their coding or billing. "'Don't freak out,' I tell them, because there are not a lot of arrests for honest mistakes," says White. "You see it more when doctors are billing for patients who never came to them. Remember - it happens more when there's intent or just rash stupidity."

Suz Redfearn is a freelance writer and editor with more than 10 years of experience writing about business and healthcare issues. She can be reached via editor@physicianspractice.com.

This article originally appeared in the April 2006 issue of Physicians Practice.

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