Consultation services under government scrutiny

Practitioners can expect increased attention to consultation billing as the CMS looks for ways to trim the Medicare budget.

Issue: May 1, 2006

ByBenjamin T. Peltier, JD

Ninety-five percent of all complex patient consultations paid by Medicare in 2001 were incorrectly coded. That is one of the findings of a recent report from the Office of the Inspector General of the Department of Health & Human Services. The OIG report is likely to lead to increased government scrutiny of providers who use consultation billing codes. At least one Medicare contractor has already started contacting providers to improve compliance with consultation coding requirements.

The report – “Consultations in Medicare: Coding and Reimbursement,” published in March – also found 75% of all physician consultations paid by Medicare did not meet the agency’s criteria for payment. According to the OIG, Medicare paid $1.1 billion in improper payments in 2001 for improperly coded consultation services.

Types of errors

Benjamin T. Peltier

Nearly half of the improper payments resulted from errors by physicians in classifying the type and level of consultation. In 2001, Medicare paid for four types of consultations: outpatient, initial inpatient, follow-up inpatient and second opinions. For each of the four types of consultations, reimbursement varied based on the complexity of the medical decision-making and the thoroughness of the exam. As a result, providers had to choose from more than a dozen reimbursement levels when billing for consultations. The OIG report showed this complexity led to many errors. Medicare recently eliminated the CPT codes for follow-up inpatient and second opinions so that all consultations are now either inpatient or outpatient.

Most of the remaining errors found by OIG were insufficient documentation or services that failed to meet the definition of consultation.

Contractors educating providers

Alan E. Reider, JD [photo]
Alan E. Reider

Allison Weber-Shuren, JD [photo]
Allison Weber-Shuren

Medicare providers also have received notices from Centers for Medicare & Medicaid Services contractors recommending steps to reduce incorrect coding of consultations. One such letter was the result of a TrailBlazer Health Enterprises review of an individual provider’s billing practices. The TrailBlazer notice told the provider it was singled out because the physician practice “billed E/M services … in a different pattern from your peers.”

The notice required the provider to complete an online training program providing “useful information regarding appropriate billing and documentation of consultation services.” The notice also included detailed appendices outlining when Medicare payment is appropriate for consultations and common consultation errors.

Steps to prevent errors

The report and contractor letters are evidence the government is placing increased scrutiny on services billed as consultations. According to the OIG report, Medicare reimbursement for consultations increased from $3.3 billion in 2001 to $4.1 billion in 2004. As consultation services increase, the potential amount of overpayment will continue to rise. The high reported error rate, the large increase in consultation-related payments and the continued financial pressure on CMS will assuredly lead Medicare to take a closer look at services billed as consultations. It is also likely the OIG will address the topic in its next annual Work Plan.

Because of the increased scrutiny, providers should be careful to follow the CMS guidelines on billing for consultations. Watch for the following general points when considering billing as a consultation.

Was the patient referred by another physician?
Is the referring provider still involved in the care of the patient, and did you send a written report back to the referring provider?
Does the documentation clearly demonstrate the reason for the referral?

If the answer to any of these questions is “no,” CMS may disallow payment for the consultation.

In order to avoid having a claim rejected based on documentation requirements, physicians should ensure that they document fully the reason for the referral and the full extent of the examination. For all consultations, the consulting physician must properly document the three CPT components – history, exam and medical decision-making. According to CMS guidance, the extent of a consultation visit must be more comprehensive than for a new-patient office visit.

Additional guidance is available from your contractor or directly from CMS.

For more information:

Benjamin T. Peltier, JD, can be reached at Arent Fox PLLC, 1050 Connecticut Ave. NW, Washington, DC 20036; 202-715-8473; e-mail: peltier.benjamin@arentfox.com.

Alan E. Reider, JD, and Allison Weber Shuren, JD, can be reached at Arent Fox PLLC, 1050 Connecticut Ave. NW, Washington, DC 20036; 202-857-6462; fax: 202-857-6395; e-mail: reider.alan@arentfox.com.