Medical coding and billing: The inside story of how the sausage is made

Medical coding and billing seems impenetrable — those strings of numbers on  a bill that purport to show what was done, and what was spent.

Sometimes it looks as if chimpanzees are typing in random strings of numbers. The bills and explanations arrive months if not years after the event. The numbers are unfamiliar. Memories fog, and calls to hospitals, doctors and insurers  to find an explanation are a maze of voicemail prompts, long hold times and little satisfaction.

We also hear frequently from people who get bills that include procedures or items that were not done in their case — including one specific case of a woman who had a colonoscopy during which she insisted there was no anesthesiologist present, but she got billed for it anyway.

The bills are always confusing, and the opacity of the system only lends to the general feeling that bills cannot be understood by normal human beings.

But is it really impenetrable? I asked a couple of experts to tell me how it works. One  works with a big electronic medical records company’s products as a consultant for hospitals.

Another is a doctor who is the chair of the coding and compliance committee in a large  multi-specialty group. She completed the American Academy of Professional Coders documentation auditing course. Her role is to audit documentation of fellow physicians.

For a glance at what the bills actually look like, here’s our “how to read an explanation of benefits” post.

Warning: There’s a lot of detail here, and so it’s long-ish, but I hope it’s useful. This is a side of the industry that we don’t often see. For some more detail about what the codes actually are, see this post.

‘Making sure we’re getting paid’

The doctor explained.

“One big component of our work is making sure we are being paid. We audit our providers and communicate with insurance. So I had to get some training. I am a physician, and I work over 10 coders.

“How it works:  The physician cannot bill — it’s too complicated. So we hire billers to go through our records and decide which codes to apply.”

Her specialty is fairly straightforward, she said, but “there’s no way surgeons can bill for themselves — it’s too complex.”

People with questions about bills should know, she added that “there’s no one person who knows what’s right — there are differences of opinion” in what was done and how it should be coded.

Most bills are incorrect

“The truth is that most of the submitted bills are incorrect,” she added. “We created a whole system between patient and doctor that is not related to health.”

“Sometimes it doesn’t mean the bills are higher. In my experience, they are underbilling, because providers don’t want to have denials.”

“It’s crazy — there’s no education for us to learn how to bill. And it’s too complex — more complex than treatment. If you have a patient who has a problem, you know what to do. But when it comes to documentation and billing, it’s not patient-friendly and it’s not provider-friendly.”

The rules change frequently, she added: The Centers for Medicare and Medicaid Services changes billing and coding rules, and each commercial insurer has different and ever-changing rules for billing and coding.

She said she has attended some AAPC conventions, and was startled to learn that the coders lack a lot of medical knowledge. So their training includes some work in that field, in understanding a diagnosis, for example.

“In our group, the providers are choosing codes sometimes, but we have coders trying to make sure we choose the right codes.

A relative is an eye surgeon, she said, and he has two coders. “He documents, and they review and submit the codes. He pays two salaries to do this. Can you imagine? You need two people to assign the numbers.”

Protecting against an audit

The issue, of course, is the money. “My group is big, and we cannot risk any issue. Let’s say we are being audited — If we make one error in the chart, or if they find the same mistake in 10 charts, they will pull the money.”

I’ve heard about this before — a doctor friend said he was audited by a big insurance company that said it found a recurring error in his billing. They came to him and said they had proved faulty billing via such a small sample, and wanted to recoup $150,000, projected over the last year or two. He felt the charge was spurious, so he went to hire a lawyer to challenge the company. The lawyer told him it would cost at least $150,000 to bring the case, with no assurance that he’d win. So he went ahead and paid, feeling he had no choice.

Here’s a little more about an insurance audit of a podiatrist, and another audit of a family practice doc. Here’s a law firm talking about this kind of audit.

Insurers audit not infrequently, she said, and Medicare does it too. “We were audited two years ago. One way we prevent errors is that we have this compliance committee. It’s a preventive measure. These audits are almost impossible to fight. Doing the spot checks and documenting everything right is our work.”

When an audit happens, she said, it’s impossible to communicate, especially with Medicare. She has also heard from training and webinars on coding and compliance what the review looks like.

‘Maximizing the charge codes’

My acquaintance who works as a tech consultant for hospitals explained how it works from his perspective.

“We rely on the physician to use the right diagnosis and procedure code. But now with innovation and automation, clinical coders try to maximize the charge codes to see what can be milked out of the insurance company.

“We have people who sift through clinical documentation, look for certain words. Say the record said ‘you poked his nose,’ then we will be adding all these charge codes on the claim and send them through. Their job is to maximize revenue, based on substantiated documentation from the doctor — or whether it is common practice.

“We have tools that say ‘the Dermatological Society of America says it is very common that when a doctor is diagnosing X, they also charge or bill for A, B and C.’ If the doctor is diagnosing X and they don’t see A or B or C on the charge ticket, they will add them, and add documentation to substantiate.

“Say the doctor puts in notes, they pick the diagnosis and procedures. Then a different team synthesizes all of that and puts in documentation to maximize revenue.

Recommendations based on machine learning

“Also there is software called Computer Assisted Coding. The computer reads pages and pages, files and files worth of documentation and notes. It picks certain words to make recommendations on what you should bill, based on documentation and machine learning.”

Something like this is used in Computer Aided Diagnosis, he said. In diagnostic imaging or radiology, a doctor’s interpretation may be subjected to a second level of review, the computer-aided diagnosis, sort of a “second opinion,” This CAD is right now a second opinion, but in the future, it might be a first opinion.

With Computer Assisted Coding, he said, “you get all the documentation on a case, and run it through the system. Then they can go into queues where there is missing documentation, or a scanned document can’t be read by optical character recognition, or other queues.” So then either a human being will look at it and say “looks good” or release for claims, or say “this is too much” or “there’s something missing.”

Similar to resume review with key words

It’s quite similar to resume review with key words, he said — resume review software looks for key words to build interest in the candidate to invite for an interview. CAC looks for key words that the system is trained to research because they are linked to high-dollar procedures and diagnosis.

“Let’s say you’re at the doctor for a sore throat. The doctor starts with ‘Jeanne has discoloration of tonsils, fever. Her great-great-grandmother had cancer. If that’s the order: ‘fever, couldn’t sleep, sore throat, swallowing, cancer,’ the system won’t charge for oncology.”

Bundled payments are more opaque, he said. Package pricing, case rate — there are similar terms. In the reimbursement agreement between insurer and hospital, it will say “you’re doing X so we’ll pay Y” — like a capitated rate, in which pre-arranged payments are settled upon between payer and provider on a per-person, per-month basis. So in this case, things we know didn’t happen might be put onto the bill if the software found a certain set of key words. “This sounds like an abscess-draining episode, which usually includes A, B and C, so I’ll bill for that,” he explained.

Records systems, with or without billing

The EMR systems like Epic, Cerner and Allscripts originally were focused on the simple EMR, but they also incorporate billing and can have these functionalities. Not every hospital buys the whole integrated suite, he said.

One hospital, for example, might have an Allscripts EMR for practice management, documentation and scheduling, but its parent company wants all the hospitals to be on one system for physician and hospital billing.

A hospital might have an Epic or Cerner EMR, but they might bill out of Eagle software, made by American Healthware, which was bought by Siemens and then bought by Cerner, which bought all of Siemens’s healthcare information technology a few years ago, he said.

“So it’s not always Epic’s billing or technology. It can be, or it can be bits and pieces. The doc might document on Epic, including allergies, prior conditions, lab results. But that might feed Eagle or some other third-party billing system.

“Smaller practices might hire a coding company and give them access. Those coders will look through the bill and find revenue, and they get a percentage.

A small business: 2 coders do it all

“A friend’s wife has a business. They have two coders. AthenaHealth is the practice management system. She and the two coders go in and look at the claim, and put in extra codes. They’re motivated to get revenue — that’s how they get paid. They handle denials and rejections too. If they get something wrong and the claim is rejected, the bill doesn’t get paid, so they don’t get paid.”

Compare that with the automated or electronic way, where the doc has documentation, it goes to Epic, that generates codes, the claim file gets generated, then it’s released to Cigna. Cigna denies it and sends it back, where it sits in a queue for a human to intervene. That’s money sitting on the table.

“In the prior model, my friend’s coders will be all over it — that’s lost revenue.

Yet another layer

Then, he said, there’s another layer, beyond standard physician medical billing with CAC. There’s a step in between, a product called a pre-bill editor, like Claim Scrubber, made by 3M. This software will scrub the claim and look for maximum revenue. It has a dictionary, and rules like “if this diagnosis code exists, you should always add the following CPT code, because insurers will pay for this all together.”

So an ENT doc might put in three charges for your visit, but he scrubber might find a fourth and either append it r recommend it. The hospital setting up the system might say “make suggestions and we’ll let a human rule on it” or “put in everything you think is right, and we’ll deal with a rejection later.”

When a claim is denied, the insurer will send back a denial code: There’s a missing NPI number, or this was not medically necessary, or you provided documentation but we still think it’s unnecessary.”

So if you can’t understand your bill, these are some of the reasons.

For a glance at what the bills actually look like, here’s our “how to read an explanation of benefits” post.