In a letter to five major hospital associations on September 24, 2012, HHS Secretary Kathleen Sebelius and Attorney General Eric H. Holder, Jr., made sweeping generalizations about the improper utilization of electronic health record (EHR) technology to “game the system” to increase reimbursement. In a letter to the associations, Sebelius and Holder tout the benefits of EHR in coordinating care, improving quality, reducing paperwork, and eliminating duplicative tests, but warn that the technology also might facilitate fraud and abuse. Specifically, the letter cites “troubling indications” that some providers are using electronic health care technology to obtain payments to which they are not entitled, by such as by “cloning” medical records to inflate payments or “upcoding” the intensity of care or patient severity. The letter suggests hospitals may be using EHR to cut and paste together different medical records for a single patient, risking both medical errors and overpayments. The letter asserts that “[f]alse documentation of care is not just bad patient care; it’s illegal.” Sebelius and Holder express their “resolve to ensure payment accuracy and to prevent and prosecute health care fraud.” To that end, the Administration is stepping up data mining and audits, including more extensive medical reviews to ensure that providers are coding evaluation and management services accurately. In addition to enforcement actions (including payment suspension where fraud is suspected), CMS will consider payment reductions as warranted reductions “to address inappropriate increases in coding intensity.” The letter, which followed a report in the New York Times regarding alleged hospital upcoding of evaluation and management codes, was sent to the American Hospital Association, Federation of American Hospitals, Association of Academic Health Centers, Association of American Medical Colleges, and National Association of Public Hospitals and Health Systems, is posted here.

In a rapid response, the American Hospital Association suggested that CMS shares the blame for a lack of clarity on hospital evaluation and management coding, noting “We have made numerous requests to the Centers for Medicare and Medicaid Services to develop national guidelines for the reporting of hospital emergency department and clinic visits. This is a request the AHA has made to CMS 11 times (starting in 2001) since the outpatient prospective payment system was first implemented.” AHA also rejected the need for more audits, saying, “What’s needed is clearer guidance from CMS, not duplicative audits that divert much-needed resources from patient care.” The letter is posted at The Association of Academic Health Centers, in a separate letter, also commented on the lack of coding guidance.

The Sebelius-Holder letter is emblematic of the rapidly-deteriorating relationship between providers and the federal government, as reimbursement and policy disputes are too often viewed through the lens of fraud. This relationship is likely to be further strained as Congress and the Administration negotiate alternatives to sequestration that could result in steeper Medicare and Medicaid reimbursement cuts.