The Maze – Part 1:
Medical Coding: Intro & Procedures

Hedge mazeI won–I think.

George was a Vietnam vet, a grunt who served honestly and well. Drank hard and smoked, got hosed with Agent Orange like many, got discharged and went on with life. Settled down, stopped smoking, got married, a solid citizen.

In his early 50’s, he presented with an advanced, aggressive form of bladder cancer, the payback of choices both honorable and foolish. Too advanced for surgery, he underwent chemotherapy and radiation, and initially did well. At his interval cystoscopy–a visual exam of his bladder–I saw some changes that were troubling, suspicious for recurrent cancer. After the exam, we sat and talked–about the findings, the need for further evaluation with CAT scan, which was scheduled, and additional treatment options, including major surgery, should the cancer have recurred. It was a good 30-40 minutes after the exam before he and his wife left. That was last July–nine months ago. I just got notified that I will be paid for his visit.

Now, this is not really about George–it’s about his insurance company, and the Feds, and many other insurance companies just like his. And to explain the issue, and how insane and perverse it is, you will first need to go to school. So take your seats, sharpen your No. 2 pencils, open your spiral notebooks, and listen up: I’m gonna teach you about how George’s medical charges and billings–and yours, and millions like you and him–really work. This course is called Medical Coding and Reimbursement 101. Ready? I knew you were (except for those who thought you were auditing Transgendered and Feminist Perspectives on War, Rape, and Postmodern Literature: next classroom, please). So lock the door — no smoking, you in the back–and let’s get started.

Let’s start simple: for payment purposes, medical services provided by physicians and other health care providers such as nurse practitioners are categorized into two main classes: procedures and E&M services. Procedures are things you do to patients: surgery, x-rays, treatments, therapy, stitch up a cut. E&M services (which stands for Evaluation and Management) are the interactions between the physician and the patient–everything from the quick office visit for a sore throat to managing a cardiac arrest or a ventilator in an ICU.

First, procedures: how do we figure out how much to charge, and what we’ll get paid, to suture your cut finger or take out your spleen? Back in the old days, a doctor simply made up a charge, billed it, and by and large got paid. This arrangement was called the UCR system–for Usual, Customary, and Reasonable–and somewhat surprisingly, it worked pretty well. Most doctors charged relatively small fees for services, handed the patient the bill, the patient paid for the service and submitted the claim themselves to their insurance company. Bookkeeping was simple, no delays in payment (for the doctor, and usually the patient, from their insurance)–and if you were a crook and charged $5000 to take off a wart, your patient knew immediately and you would never see him or her again. If you were poor, had no insurance, or were in financial straights, the doctor charged less or did it for free.

Then along came Medicare and Medicaid, in 1964. Initially it worked the same–bill the patient based on UCR, patient submits claim to Medicare, etc.–but not surprisingly, as more patients could afford care–and someone else was paying–total health care costs began to rise. And some doctors figured out that government doesn’t have very good accountability, and so, if you charged more, you automatically got paid more. The Pavlovian response, as you can imagine, is that fees began to rise as well–and nobody received care for free, or for reduced charges.

In order to get a handle on its rising health care tab, the Feds needed to know what they were paying for. And so, long ago, in a land far, far away–in a magical place called Harvard–a bunch of fellows got together, sat down, and tried to figure out the value of each and every service in health care. They came up with a system called RVUsrelative value units–which assigned a number corresponding to the relative worth of a medical service. So suturing your cut finger might be, say, a 1 (actually, more like a 1.03), while taking out your spleen might be, oh, a 30.27. No dollar values assigned–not yet–just a number. (The number was actually a sum of smaller numbers for procedural work, practice expense, and malpractice costs–and is also adjusted by your geographic location–if you must know).

The Feds and the insurers were ecstatic, as you can imagine, and immediately started using these values to determine what physicians and health care providers were paid. Nice and easy, formulaic: multiply the RVU by a magic number (called a conversion factor) and you get a fee, a dollar value. So if you pick a conversion factor of 20, you get paid about $20 for that cut finger, and about $600 for your ruptured spleen.

Now, as every computer programmer knows, there are things called constants–values which never change–and things called variables, which can. The RVU represents a new, postmodern concept: it is a constant variable–a constant which changes. Every year, the Feds sit down and calculate their budget for health care, and change not only the magic number (the conversion factor), but also the RVU. The RVU is occasionally adjusted to better reflect the work involved in a procedure–but is driven primarily by volume. So if the government determines it is paying too much for cardiac bypass surgery–that the volume is too high–the RVU for heart surgery will be reduced. Guess what? Your heart surgery just got a lot easier to do! The government says so!

So, each year, there is a brand new RVU schedule: tens of thousands of numbers representing the value of each and every medical procedure and service. Fairly straightforward, since you know what you’ll be paid, you say? Not so fast. True, the Federal government uses its own RVU schedule for that year–but not infrequently publishes an amended schedule later in the year. And the insurance carriers–ever the pilot fish scavenging the bloody scraps from the federal feeding frenzy–are not obligated to use the current RVU–in fact, they often don’t. Since their patient mix may well be different than the Federal programs, they crunch the numbers and find out which RVU schedule will get them the most bang for the buck–and use that one. So while Medicare is using the 2006 RVU schedule, Mutual of Podunk is using the 2003 RVU schedule–assuming they’re telling you how their fees are determined–which they often don’t. And did I mention that virtually all fees are fixed by either law (in the case of Federal programs) or by contract, in the case of third party insurers. No more discounts for the poor (they’re actual illegal under Federal programs!), no charging more if you’re the best heart surgeon in the world, etc. etc.

Right, got that.

Still seems somewhat sane, no? Oh, you foolish child–listen up: not even close. It gets better–much, much better.

First, there’s these things called edits. Edits would be better called gotchas, as they function pretty much that way. Let’s say you have two different surgeries, procedure A and procedure B. You perform both procedures at the same time, and try billing them together, on two separate line items. Gotcha! Edits say you can’t do that–and if you do: a) you will not get paid for one of them, and/or b) you are guilty of fraud. You see, B is considered to be included in the payment for A (a component edit), or B is deemed to be mutually exclusive with A. The Feds publish these updated edit lists quarterly, made up of thousands of paired procedure codes–and it’s up to you to be sure you check them before submitting your claim. Otherwise, gotcha! Oh, and did I mention: many insurance companies have what’s called black box edits: they deny payment for procedure B when billed with procedure A–but don’t tell you that up front, and you don’t find out until after your claim is denied. And they won’t disclose these to you–even though you have a contract to provide services to their clients for payment. Nice.

Then there’s these things called globals. When you perform a surgery, you get paid not only for the surgery, but also for the postoperative care, for a predetermined number of days–usually 90 days for major surgery, 10 days for minor procedures like a laceration. Some simple procedures have a zero day global–which means you can charge for subsequent related care–but not for related care on the day of the procedure (“So why 0 days, and not a 1 day global?” “Quiet please, sit down”). Such post-procedure care is said to be bundled–that is, included in the package fee for the procedure or surgery. No matter if the care proves simple or complex, one visit or 90 in the postop period: same reimbursement.

So if you do a fairly simple office procedure, like George’s cystoscopy–which has a 0 day global–you may not bill him separately for the time you spend discussing the results of the test. It’s bundled–whether you pat him on his behind and tell him everything is fine, or whether you spend 45 minutes answering his questions about what you found. But life–and medicine–is not all that simple: what if you do more, such as order additional tests, or initiate treatment, or discuss a different, unrelated problem? You can, technically, bill for these additional services by using something called a modifier–a special code submitted to Medicare or the insurance company with the claim, which says you did things over and above simply telling him the results–and almost always requires more paper documentation to prove it to our ever-trusting friends in government and the insurance business. OK, fairly complicated, but still manageable, sorta… and that’s where George’s situation comes in. His visit covered far more than looking in his bladder and simply telling him the bad news: it involved additional risks (from the ordered diagnostic test and treatments), medical decision making, and raised new problems to be addressed.

So George had a legitimate E&M service in addition to his procedure (the cystoscopy). Pretty straightforward, by the rules, billed with accompanying documentation in detail. One line item for the procedure, the cystoscopy; one line item for the E&M service (the discussion and decisions about additional care), with the appropriate modifier. His insurance company responded–several weeks later–and said “fuggedaboutit,” paid for the cystoscopy only, and denied the E&M visit. Nearly one year later, I received the check for $45 for the visit. And so our sad saga begins.

You’ve all been very patient, and I know your bladders are full from drinking coffee to stay awake, so we’ll take a break, hit the head, and be back in 10 minutes to tackle the real fun: determining E&M service levels.

17 thoughts on “The Maze – Part 1:
Medical Coding: Intro & Procedures

  1. Great summary. It’s absurd how we do (and often don’t) get paid.

    What’s your solution?

  2. Dr J,

    There’ll be a few thoughts on alternatives later. Whether this system ever changes, though, is more political than rational.

  3. I found part 4 and decided to come back and read from the beginning.

    I had no idea that is is what was going on. I just remember something going into effect out here in CA about 20 years ago called “DRG”s (disease related groups) that only paid a certain amount for something no matter what was required.

    I’m heading for Part 2 now….

  4. Good article. No wonder medical billing is such a mess. Not only does the goverment pay the lowest but then they don’t want to pay! The government is making it hard to send claims via paper, they want everyone to go electronic.

  5. the scariest part of all is that having been in the coding and billing industry(on both sides of the coin, hospital, dr and insurance company) all of this makes Perfect sense to me!
    it’s also why i tell people all time, healthcare will never be reformed. no way, no how. if it ever does happen, i’ll have crow for dinner that day, thank you.

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