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How a Medical Billing Error Could Impact You

May 23, 2014
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By Sharon Hollander 

Learn more about Sharon on NerdWallet’s Ask an Advisor

Allow me to share a story gleaned from reviewing case studies and sharing personal anecdotes for my book, “Medical Billing Horror Stories”—a story that shows the terrible effect a medical billing error can have on you and your finances. Don’t let this happen to you.

Although physician reimbursement is based solely on the Common Procedure Terminology and assigned a billing code, without the appropriate diagnosis that corresponds to the medical necessity of the service or procedure rendered, the claim will be denied. One of the most common billing errors is that claims lack the specificity to justify the procedure billed, leading to claim denials and a lack of payment for the providers.

For example, Medicare will not pay for certain diagnostic tests unless the diagnosis codes falls within their criteria and policies of coverage determination. Some of the determination is based on a national level or on a local coverage area. Medicare websites will provide a list for all CPT procedures (excluding E&M codes) and the “acceptable” diagnosis that can be billed in order to be paid.

The names here have been changed, but the story is real:

One morning Dr. Winters received a phone call from one of his patients, Mr. Jones.

“Dr. Winters, I am really upset.”

“And why is that, Mr. Jones?”

“I recently got hired by a new company, and they are requesting a pre-employment physical.”

The doctor said to his longtime patient: “I have seen you recently and you were in good health, has anything changed?”

“Well, here is the thing, Doc, I am feeling fine, actually better than ever.”

‘OK, so what’s the problem?”

“They denied my employment, and told me to contact my doctor.”

“That’s unusual. Did they tell you why?”

“No, just that I better call you as soon as possible.”

“OK. Why don’t you schedule an appointment with my office, and we can run some tests to see what, if anything, is going on.”

“OK, thank you doctor.”

The patient had a battery of tests and a complete physical; everything was normal. Dr. Winters released Mr. Jones and told him that if he develops any kind of symptoms to contact him. As one might expect, months went by and Dr. Winters forgot about Mr. Jones and the mystery of why he was denied employment.

About three months later, Dr. Winters received a note from Medicare requesting around 20 of his charts for a post-payment review. He was upset—a doctor hears “audit” and feels the same as you would if the IRS came knocking. His staff pulled the patient files and Dr. Winters reviewed his well-documented clinical notes in the medical records.

The first file documented a patient’s congestive heart failure and stated that the patient was anxious about whether to undergo bypass surgery. The next file noted a patient’s rotator cuff injury and how he was worried about his ability to play pro baseball if he had his surgery. The third documented a patient who had experienced symptoms of a heart attack, but it was diagnosed as anxiety.

After careful review, Dr. Winters copied the records and sent them to Medicare. Another three months passed and he received another notice from Medicare to refund them $2,000, based on their audit findings.

Dr. Winters was angry. Medicare’s request happened to come on the day before he was to leave on a vacation, so he hastily cut the check and sent the funds. Most physicians may have left it at that, but Dr. Winters resolved to get to the bottom of this.

He had his staff called Medicare, but they were unable to determine the cause of the problem. Finally, after his frustration escalated, he resolved to solve the case himself. After two hours and countless phone transfers, he finally spoke to a live representative at Medicare, who told him that in each of the 20 cases, he had billed for leprosy.

“Leprosy!” he yelled at the Medicare representative. “There is no leprosy outbreak in Canoga Park.”

The representative replied, “I am looking at the copies of the records on my computer screen and the claims were all billed with a leprosy diagnosis.”

“Well, obviously this is just a simple billing error,” Dr. Winters proclaimed.

After hanging up the phone and talking to his biller, Dr. Winters determined that his biller had transposed a digit on the ICD-9 code and instead of using the code 300.0, she had submitted the bills to Medicare with the code 030.0, the code for leprosy.

Dr. Winters’ office contacted Mr. Jones and his other patients, and told them to notify their commercial insurance companies of the office’s mistake. Mr. Jones did seek new employment—however, his insurance company still shows a history of leprosy in the patient’s database of coverage. When he changes insurance companies, the mistake rears its ugly head again.

The moral of the story: It is the physician who is responsible to make sure his staff submits accurate bills, especially when submitting claims on his/her behalf. Because Medicare flagged Dr. Winters, he had to submit medical records every quarter to justify his level of billing and diagnostic accuracy. Over the course of the next few years he was audited by Medicare three times.

These types of errors occur more often than doctors or hospitals would like to admit. It has been widely reported that 85% of all medical bills contain errors.  Don’t be a victim. If you experience any insurance issues or are denied employment, get to the bottom of the issue. Review your explanations of benefits carefully, and if you have difficulty doing so, or are stuck getting nowhere, reach out to a patient advocate to assist you.