The scope of the inaccurate billing issue is well documented,” said Dendy, who established the medical billing auditing firm in 1995 and also serves as senior healthcare consultant for M&A Equity Advisors, a Miami-based mergers and acquisitions firm. “Whatever the causes for inappropriate and inaccurate hospital billing, the problem is universal and large in scale.”
Medical Bill Auditing Firms Gaining National Recognition
Much debate swirls around medical-billing errors, with industry experts estimating that 30 to 95 percent of medical bills contain mistakes, many in favor of hospitals.
Last spring, CNN’s report on inappropriate charges by hospitals—a single toothbrush billed at $1,000; a single Tylenol caplet billed for $140—coincided with Hospital Corporation of America (HCA) paying out a record $1.75 billion dividend to their investors for 2009 results.
Last fall, New York Times’ Jane Brody weighed in: “Errors are commonplace in hospital bills. A doctor may request a procedure or medication that is subsequently canceled or that the patient refuses, but it still goes on the bill. An entry error may result in a misplaced decimal point or an extra zero or two in the number of treatments, multiplying the cost 10 or 100 times.”
Brody was quick to point out various reasons for overcharges: “Reimbursement rates are negotiated with insurers, and some are considerably less than what a patient without insurance would be charged. And hospitals rely on insured patients to make up for those who fail to pay their bills—and for the rates paid by Medicaid, which may be considerably lower than actual hospital costs.”
“Egregious charges like those described in the CNN report are much less of an anomaly than most payers think,” said Mike Dendy, CEO of Advanced Medical Pricing Solutions (AMPS), a privately held company based in Atlanta, Ga., that identifies and resolves systemic errors in medical billing.
In a 2010 study in the Journal of the American Medical Informatics Association,
Ben-Tzion Karsh, an engineering professor at the University of Wisconsin, said billing goofs—from simple clerical mistakes to charging for anticipated care that was never received—account for “thousands of errors in an hour.”
“More and more hospitals are now in the business of debt collection, and that distracts from careful billing,” said Alwyn Cassil of the Center for Studying Health System Change, a nonprofit organization that focuses on medical care.
Joe Fifer, vice president of hospital finance for Spectrum Health, an operator of hospitals in Michigan, isn’t convinced that evidence supports such a high percentage of medical billing errors. Fifer implemented a program that requires patients to receive free consultations before surgery to cover the anticipated cost of care. “It’s not unlike getting your car repaired,” he explained. “You have to get an estimate upfront.” Unfortunately, pilot programs like the one Fifer implemented are not very commonplace.
For the medical community, several factors have contributed to the uptick in the need for medical-billing auditing services. These service providers got busier after the Centers for Medicare & Medicaid Services (CMS) released a report in mid-2008, announcing that the recovery audit contractors (RACs) pilot program was successfully identifying improper payments and would expand nationwide within two years.
In 2009, economic-stimulus legislation included $19 billion in spending to jumpstart the widespread use of electronic health records—a major source of billing errors, pointed out Ross Koppel, a sociology professor at University of Pennsylvania’s Center for Clinical Epidemiology and Biostatistics who has studied electronic records extensively. By 2014, approximately four of five hospitals will use electronic records, compared to one in five now, estimates the U.S. Department of Health and Human Services.
“The scope of the inaccurate billing issue is well documented,” said Dendy, who established the medical billing auditing firm in 1995 and also serves as senior healthcare consultant for M&A Equity Advisors, a Miami-based mergers and acquisitions firm. “Whatever the causes for inappropriate and inaccurate hospital billing, the problem is universal and large in scale.”
For example, nearly all ERISA plan documents require the payer not to pay more than reasonable and customary charges, yet there’s no comprehensive documentation for reasonable and customary facility charges.
To overcome that challenge, AMPS developed a proprietary hospital pricing transparency and analysis model (TAM) that evaluates claims by comparing its clients’ hospital billings against reasonable and customary fees for like services from similar facilities.
“Our billing review methodology is comprised of two components,” explained Dendy. “First, an analysis of the legitimacy of services provided that’s done exclusively by medical doctors. Second, a financial analysis managed through the TAM protocol.”
AMPS generates the database for the TAM system through both public and private sources including Medicare claims data, hospital cost reports, and other files obtained from CMS.
“Our goal is fair and just reimbursement for all parties and TAM provides a tool to achieve those results,” he explained.
AMPS’ audits have resulted in an average cost savings on adjusted hospital claims of 16.75 percent—over and above PPO discounts. With an average claim size reviewed of $65,500, the average reduction is $11,707 per claim. Roughly 96 percent of the improper payments totaling $992.7 million were overpayments collected from providers, while the remaining 4 percent—$37.8 million—were underpayments repaid to providers.
“AMPS’ software recasts hospital invoices into a format to make recognition of billing errors and overcharges much more transparent,” said Dendy. It “not only pinpoints billing anomalies, but also provides for referenced options as to how to adjust the billing in a way that’s fair and just to both the provider and payer alike.”
Consumers have been taking note, too, about medical billing errors. Earlier this year, Wall Street Journal published a report on consumer debt, focusing on medical billing errors that impact the credit worthiness of 14 million Americans, according to a recent study by the Commonwealth Fund, a Washington-based nonprofit specializing in healthcare research. The Federal Reserve also reported that medical bills account for more than half of all debts in collection, not taking errors into account. To help patients decipher medical codes and non-itemized charges, medical advocates have helped uncover errors for consumers, usually for a hefty fee.
“As all Americans seek to contain healthcare expenditures going forward, paying only what is legitimately due becomes ever more critical,” said Dendy. “This includes the government with Medicare, corporations that financially support their employees’ healthcare programs, and consumers. Paying inaccurate healthcare bills is not acceptable.”
Advanced Medical Pricing Solutions, AMPS, Lynne Jeter, medical billing auditing, Mike Dendy
