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Cheating the system

Do electronic medical records allow hospitals to bill higher for the same services?

The controversial practice of using electronic health record (EHR) systems to “upcode” Medicare claims has attracted the attention of policymakers and triggered targeted audits by the Department of Health and Human Services. “Upcoding” refers to the selection of billing codes that, “reflect more intensive care or a sicker patient population, thus leading to higher reimbursement.” However, a recent study published in Health Affairs found no evidence that upcoding was associated with EHR adoption, refuting claims made in a 2012 New York Times analysis that linked higher Medicare reimbursements with physicians and practices receiving EHR incentive payments.

Source: Sean MacEntee (Flickr/CC)

Source: Sean MacEntee (Flickr/CC)

and use by health care providers. Only physicians and practices that serve Medicare and Medicaid populations—populations that are underserved and/or have more medical needs by nature—are eligible for financial incentives. Incentive payments are critical to the decision to adopt EHRs. However, the much-needed financial assistance has been jeopardized by concerns and anecdotal reports of fraudulent billing activity. While we want to ensure appropriate and efficient usage of public funds, reductions in incentive payments could halt advances and exacerbate disparities in the patient populations served by these providers.

The study authors categorized hospitals as those that adopted ten key functions of an EHR across two time periods (adopters) and those that had not adopted all ten key functions during the study period (non-adopters). The authors compared the hospitals based on their case-mix index, an indicator of patient acuity, and their payment per discharge. Importantly, (and in contrast to the New York Times analysis) the analysis controlled for size, ownership, and health care market.

As the US health care system transitions from fee-for-service, quantity-based payments to value-based payments for health care services, the incentives to upcode are diminishing. For example, health care practices that are members of an Accountable Care Organization (ACO) are rewarded for cutting costs while maintaining quality. In these cases, fraudulent billing would undermine efforts to increase efficiencies and realize cost savings. This study rebuts the contention that illegal billing activities are occurring on a widespread basis associated with EHR adoption and should quell the fears of policymakers, regulators, and critics.

commentary by Megan Douglas, JD


The recent uptick in hospital adoption of electronic health records (EHRs) has been accompanied by growing concerns among some policy makers that hospitals may use these systems to select billing codes that reflect more intensive care or a sicker patient population in order to generate more revenue through higher reimbursements. Such “upcoding” would increase overall health care spending. We used national data to examine whether new adoption of EHRs was associated with increases in coded patient acuity or Medicare payments. We found that hospitals that adopted EHRs increased billing to Medicare, but at a rate comparable to that of matched controls of non-EHR adopters. In our difference-in-differences models, patient acuity and payment per discharge were essentially the same between adopters and non-adopters. We also failed to find a relationship between adoption and either patient acuity or payment within groups of hospitals that may be more likely to use EHRs to increase coding and revenue, such as for-profit hospitals and those in highly competitive markets. Thus, we found no empirical evidence to suggest that hospitals are systematically using EHRs to increase reimbursement. Our findings should reduce concerns that EHR adoption by itself will increase the costs of hospital care. PMID: 25006156 Adler-Milstein, J. & Jha, AK. Health Aff. 2014; 33(7): 1271-7.

Megan Douglas, JD
About Megan Douglas, JD

Megan Douglas is the Associate Director of Health Information Technology Policy in the National Center for Primary Care at Morehouse School of Medicine in Atlanta, GA. She is a licensed attorney and focuses on health policy and its impact on individuals from underserved communities. She was a 2012-13 Health Policy Leadership Fellow under Dr. David Satcher, 16th Surgeon General of the United States. Megan has worked on health policy issues related to neurodevelopmental disabilities, HIV and AIDS discrimination, racial and ethnic health disparities, and individuals identifying as LGBTQ. In her current role, she is looking at the impact of Health Information Technology (HIT) policies on healthcare providers who serve underserved communities and is identifying ways to leverage HIT to improve health outcomes for the underserved. Contact: Website | Facebook | Twitter | Google+ | More Posts