EHRs: A Catalyst for Billing Fraud?

Electronic health records have the potential to reduce costs by, for example, making sure redundant or inappropriate tests are not ordered. But federal officials are now acknowledging that EHRs can also be used to support fraudulent billing. And their threat of potential prosecutions for such fraud is stirring up controversy.

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The HITECH Act is providing billions of dollars worth of incentives for hospitals and physicians to use EHRs in hopes of squeezing costs out of the healthcare system. But this week, the Department of Health and Human Services and the U.S Justice Department sent a letter to five medical trade associations warning that the government will prosecute healthcare providers who "game" the system by using EHRs to submit fraudulent bills. That includes "upcoding," or exaggerating the kind of care they give patients, as well as "cloning" digital records to submit falsely documented bills for multiple patients.

The letter said there are "troubling indications that some providers are using this technology to game the system, possibly to obtain payments to which they are not entitled."

Provider Reaction

The trade organizations that received the letter are indignant. The American Hospital Association, for example, blasted back a response letter saying "America's hospitals take seriously their obligation to properly bill for the services they provide to Medicare and Medicaid beneficiaries. We agree that the alleged practices described in your letter, such as the so-called 'cloning' of medical records and 'upcoding' of the intensity of care, should not be tolerated."

However, the AHA wrote, "it's critically important to recognize that more accurate documentation and coding does not necessarily equate with fraud."

The AHA argues that Medicare and Medicaid payment rules "are highly complex and the complexity is increasing." And the association points out that it has long called for national guidelines for hospital emergency department and clinic visits billing.

Impact of EHRs

Clearly, EHRs provide great potential cost-savings benefits. For example, EHRs also help prevent physicians from making potentially dangerous and expensive medical mistakes by red-flagging drug allergies and adverse medication interactions. And of course, digitized data can also greatly reduce paper handling and related administrative costs.

But EHRs also create new opportunities for fraud. A recent New York Times story pointed out that an analysis of Medicare billing data found that hospitals received $1 billion more in reimbursement in 2010 than five years earlier, in part as a result of billing codes used in emergency departments - which might also be attributed to more widespread use of EHRs.

A Delicate Balance

Public and private healthcare payers alike need to continue to closely monitor whether EHRs, in fact, are contributing to payment fraud.

But a delicate balance needs to be achieved. HHS is spending billions through the HITECH Act to promote the use of EHRs in hopes of widespread adoption. Harsh, threatening letters to medical trade associations could lead some honest healthcare providers who aren't thrilled about digitized records in the first place to resist adopting the technology for fear of false accusations of billing fraud.

A better approach would be for regulators and associations to work together to develop anti-fraud educational efforts that can not only help identify criminal behavior but also help honest healthcare providers avoid making suspicious-looking billing missteps using EHR data.

Enhanced, more granular ICD-10 billing codes might prove to be another tool in the fraud-fighting effort. The codes provide more detail to payers about the care provided to patients. However, HHS - in response to health industry pushback - recently delayed ICD-10 implementation deadlines by one year, to Oct. 1, 2014.

In the meantime, thousands of healthcare providers will continue to roll out EHR systems and apply for HITECH incentive payments.

To make a dent in payment fraud, government and private insurers must collaborate on fraud detection and prevention efforts. A new anti-fraud coalition launched earlier this year is a good start.