Hospitals Warned by U.S. on Medicare Electronic Billing

Joshua Roberts/Bloomberg

Ross Fletcher, chief of staff at the Veterans Administration Hospital, demonstrates the facility's electronic medical records system in Washington, D.C.

Hospital bills are being audited as the U.S. tries to identify whether new electronic records were used to “game the system” and overcharge the Medicare health program.

Some hospitals may be “cloning” patient records and “upcoding” their bills -- charging for higher intensity services than are given -- to raise payments from the government, Kathleen Sebelius, secretary of the U.S. Department of Health and Human Services, and Attorney General Eric Holder said in a letter yesterday to five trade associations. Hospitals caught misusing the electronic systems may be prosecuted for fraud or lose Medicare payments, the officials said.

Encouraged by as much as $27 billion in incentives in President Barack Obama’s 2009 economic stimulus law, hospitals and doctors’ offices have been converting paper record-keeping systems to computers, an effort the administration said would reduce medical errors and save money. Instead, hospitals may be using the systems to increase their billings for Medicare, the federal program for the elderly and disabled, the U.S. said.

“There are troubling indications that some providers are using this technology to game the system, possibly to obtain payments to which they are not entitled,” Sebelius and Holder wrote.

The Centers for Medicare and Medicaid Services is conducting audits to identify improper chargers, Sebelius and Holder said. It also will do more extensive medical reviews to make sure hospitals properly bill for care in emergency rooms, the officials said. Emergency rooms were identified as a target for hospital overbilling in reports last week by the Center for Public Integrity and the New York Times.

Changes Urged

The American Hospital Association, the largest of the organizations that received the letter, said in a response to Sebelius and Holder that it has asked the government 11 times since 2001 to write specific guidelines for emergency department billing. Instead, Medicare has told hospitals to use their own internal guidelines to determine the level of care delivered in emergency rooms and outpatient clinics.

“What’s needed is clearer guidance from CMS, not duplicative audits that divert much-needed resources from patient care,” Rich Umbdenstock, the president and chief executive officer of the association, said in a letter to the federal officials.

To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net