Department of Health and Human Services

OFFICE OF 

INSPECTOR GENERAL 

C M :

ONSULTATIONS IN  EDICARE
C R
ODING AND  EIMBURSEMENT 

Daniel R. Levinson

Inspector General 

March 2006

OEI-09-02-00030
 Office of Inspector General 

http://oig.hhs.gov 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, 
as amended, is to protect the integrity of the Department of Health and Human Services 
(HHS) programs, as well as the health and welfare of beneficiaries served by those 
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the Department, Congress, and the public with timely, useful, and reliable information on 
significant issues.  Specifically, these evaluations focus on preventing fraud, waste, or 
abuse and promoting economy, efficiency, and effectiveness in departmental programs.  
To promote impact, the reports also present practical recommendations for improving 
program operations. 
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community, and issues fraud alerts and other industry guidance.  E X E C U T I V E   S U M M A R Y
  E X E C U T I V E   S U M M A R Y  

OBJECTIVE 
To determine if services billed to Medicare as consultations were coded 
correctly and documented adequately. 
BACKGROUND 
Medicare allowed $3.3 billion for consultations in 2001.  The Current 
Procedural Terminology (CPT) defines a consultation as  . . . a type of 
service provided by a physician whose opinion or advice regarding 
evaluation and/or management of a specific problem is requested by 
another physician or other appropriate source. A consultation differs 
from similar evaluation and management services in that a consultation 
involves a specific request for help with a particular diagnosis or course 
of treatment on a limited basis, while an office or inpatient visit lacks 
such a request and can involve ongoing care of a patient. 
The CPT defines four types of consultation:  (1) office or other 
outpatient, (2) initial inpatient, (3) follow-up inpatient, and  
(4) confirmatory (also called a second opinion).  Within each type, three 
or five levels of complexity exist, with a distinct billing code for each 
level.  The level depends on three key components:  (1) the extent of the 
patient history taken, (2) the thoroughness of the physical examination, 
and (3) the complexity of the consultants medical decisionmaking. 
Pursuant to 42 CFR  411.351 and section 15506 of the Medicare 
Carriers Manual, Medicare allows reimbursement for consultations if  
(1) a physician requests the consultation, (2) the request and need for 
the consultation are documented in the patients medical record, and  
(3) the consultant furnishes a written report to the referring physician. 
Other provisions of Federal law require that physicians document all 
Medicare services and bill them with the correct code. 
We selected a simple random sample of 400 consultations allowed by 
Medicare with dates of service in calendar year 2001.  For each 
consultation, we identified the patient, consultant, and referring 
physician listed on the claim, as well as the provider of any concurrent 
Part A services.  From each of these sources, we requested photocopies 
of the portion of the patients medical record that pertained to the 
sampled consultation.  We contracted with certified professional coders 
who have extensive experience reviewing Medicare claims to determine 
OEI-09-02-00030  CONSULTATIONS IN MEDICARE:  CODING AND REIMBURSEMENT  i  EE XX EE CC UU TT II VV EE    SS UU MM MM AA RR YY
if each service was billed with the correct code and documented 
adequately. 
Because we only reviewed consultation services provided in 2001, our 
sample results cannot be extrapolated to other periods. Accordingly, we 
make no inferences to consultation error rates in subsequent years. As 
noted previously, Medicare reimbursement for consultations increased 
from $3.3 billion in 2001 to $4.1 billion in 2004. To our knowledge, the 
Centers for Medicare & Medicaid Services (CMS) has made no national 
policy changes that would affect the incidence of consultation payment 
errors since 2001, suggesting that at least some of the payment 
vulnerabilities that we identified still exist. 
FINDING 
Medicare allowed approximately $1.1 billion more in 2001 than it 
should have for services that were billed as consultations. 
Approximately 75 percent of services billed as consultations and allowed 
by Medicare in 2001 did not meet all applicable program requirements, 
resulting in $1.1 billion in improper payments. Services billed as 
consultations often did not meet Medicares definition of a consultation 
(19 percent$191 million), were billed as the wrong type or level of 
consultation (47 percent$613 million), or were not substantiated by 
documentation (9 percent$260 million). Consultations billed at the 
highest billing level (the most complex services, which generate the 
highest reimbursements under the physician fee schedule) and 
follow-up inpatient consultations were particularly problematic; 
approximately 95 percent of each were miscoded. 
RECOMMENDATION 
Our review showed that services billed to Medicare as consultations 
often were not actually consultations, were coded as the incorrect type 
or level of consultation, or were not substantiated by documentation. 
Although CMS clarified the difference between office visits and 
consultations in an October 2003 update to section 15506 of the 
Medicare Carriers Manual, the distinctions among the types and levels 
of consultations were not addressed. Therefore, we recommend that, 
through its Medicare carriers, CMS educate physicians and other 
health care practitioners about the criteria and proper billing for all 
types and levels of consultations with emphasis on the highest 
billing levels and follow-up inpatient consultations. 
OEI-09-02-00030  CONSULTATIONS IN MEDICARE:  CODING AND REIMBURSEMENT  ii  EE XX EE CC UU TT II VV EE    SS UU MM MM AA RR YY
In addition, we have forwarded information on the miscoded and 
undocumented services identified in our sample to CMS for appropriate 
action. 
AGENCY COMMENTS 
In its comments to our draft report, CMS noted that the CPT codes for 
follow-up inpatient consultations and confirmatory consultations were 
deleted effective January 1, 2006. CMS has revised its policy manuals 
to reflect these changes. The agency agreed with our recommendation 
to educate providers about consultations and plans to publish on its 
Web site a Special Edition article highlighting these changes and 
providing new coding instructions for consultation services. 
OFFICE OF INSPECTOR GENERAL RESPONSE 
We are pleased that CMS has agreed to implement our recommendation 
and look forward to seeing the Special Edition article when it is 
published. Also, the elimination of the codes for follow-up inpatient 
consultations and confirmatory consultations should improve providers 
understanding of the proper billing for consultations and reduce the 
error rate associated with these services. 
OEI-09-02-00030  CONSULTATIONS IN MEDICARE:  CODING AND REIMBURSEMENT  iii    T A B L E   O F   C O N T E N T S  

EXECUTIVE SUMMARY ........................................  i

INTRODUCTION ................................................ 1 

FINDING ......................................................... 8 

Overpayments of $1.1 billion .................................. 8 

RECOMMENDATION ........................................... 11 

  Agency Comments .......................................... 11 

Office of Inspector General Response ......................... 11 

APPENDIXES .................................................. 12 

A: Coding Levels for Consultations........................... 12 

B: Confidence Intervals for Ratios and Percentages ............ 14 

C:  Inappropriately Allowed Amounts From Service Universe ... 16 

D: Agency Comments ....................................... 17 

ACKNOWLEDGMENTS ......................................... 21 
   I N T R O D U C T I O N  

OBJECTIVE 
To determine if services billed to Medicare as consultations were coded 
correctly and documented adequately. 
BACKGROUND 
What Are Consultations? 
The Current Procedural Terminology (CPT) defines a consultation as a 
 . . . type of service provided by a physician whose opinion or advice 
regarding evaluation and/or management of a specific problem is 
requested by another physician or other appropriate source. 
Appropriate sources include physicians, other health care practitioners, 
andin the case of a confirmatory consultationthe patient.1 A 
consultation differs from similar evaluation and management services 
in that it involves a specific request for help with a particular diagnosis 
or course of treatment on a limited basis, while an office or inpatient 
visit lacks such a request and can involve ongoing care of a patient. 
The CPT, which the Centers for Medicare & Medicaid Services (CMS) 
uses as the basis for reimbursing physician services, defines four types 
of consultation according to the place of service and the source of the 
request: 
1.  A	 n office or other outpatient consultation is a consultation 
provided in the consultants office or other ambulatory facility 
such as the patients residence, a hospital observation unit, or an 
emergency department.  As set forth in the 2001 Physician Fee 
Schedule, an office or other outpatient consultation has the 
highest Medicare reimbursement rate of all consultation types. 
2.  A	 n initial inpatient consultation is provided in an inpatient 
hospital, a skilled nursing facility, or a partial hospital setting.  
This type of consultation should be billed only once by a 
particular consultant per inpatient admission. This type of 
consultation has the second-highest level of Medicare 
reimbursement. 
1 Hereinafter, we will use the term referring physician as a generic term to designate the 
source of the consultation, regardless of that individuals credentials.  We will use the 
term consultant to mean the provider of the consultation. 
OEI-09-02-00030  CONSULTATIONS IN MEDICARE:  CODING AND REIMBURSEMENT  1  I N T R O D U C T I O N  
3.  	A confirmatory consultationalso called a second opinionmay 
be initiated by the patient or third-party insurance payers who 
require another opinion before approving a medical treatment or 
surgical procedure. This service can be provided in either an 
office or inpatient setting.  A confirmatory consultation ranks 
third among the consultation types in terms of Medicare 
reimbursement rates. 
4.  A	  follow-up inpatient consultation is a service provided to 
complete an initial inpatient consultation or a new consultation 
provided by a consultant who has already performed an initial 
inpatient consultation for the patient during a single admission. 
A follow-up consultation can include monitoring progress, 
recommending treatment modifications, or advising on a new 
plan of care in response to changes in the patients status.  A 
follow-up inpatient consultation has the lowest Medicare 
reimbursement rate of all consultation types. 
The CPT further divides each type of consultation into levels based on 
the intensity and complexity of three key components.  These three key 
components are patient history, physical examination, and medical 
decisionmaking.  Higher-level codes describe more complex 
consultations and are reimbursed accordingly.  Follow-up inpatient 
consultations are divided among three levels, while the three other 
types each have five levels.  See Appendix A for a detailed explanation 
of consultation levels. 
Medicare Coverage of and Reimbursement for Consultations 
In 1983, CMS adopted CPT as part of the Healthcare Common 
Procedure Coding System (HCPCS) and mandated that providers use 
HCPCS to report consultations and other services to Medicare. Section 
1848(c)(5) of the Social Security Act (the Act) required the Secretary of 
the Department of Health and Human Services to develop a uniform 
procedure coding system for all physician services, and specifically 
called for an appropriate coding structure for . . . consultations. 
Section 1848(a)(1) of the Act established the physician fee schedule as 
the basis for Medicare reimbursement for all physician services, 
including consultations, beginning in January 1992.  In implementing 
the physician fee schedule, CMS provided new, nationally uniform 
interpretations of consultation codes. 
Pursuant to 42 CFR  411.351 and section 15506 of the Medicare 
Carriers Manual (the Manual), Medicare allows reimbursement for 
OEI-09-02-00030  CONSULTATIONS IN MEDICARE:  CODING AND REIMBURSEMENT  2  I N T R O D U C T I O N  
consultations if the following conditions are satisfied (not applicable to 
confirmatory consultations): 
o 	 The referring physician requests the consultants opinion or 
advice regarding evaluation and/or management of a specific 
medical problem. 
o 	 The written or verbal request and need for the consultation are 
documented in the patients medical record. 
o 	 After the consultation is provided, the consultant prepares a 
written report of his or her findings, which is provided to the 
referring physician. 
In a September 2001 update of the Manual, CMS clarified that 
physician assistants, nurse practitioners, and certified nurse-midwives 
can request and perform consultations if the services are within their 
scope of practice, as defined by State law. 
In addition to these requirements, section 1833(e) of the Act states that 
Medicare will not pay for services, including consultations, unless 
documentation or other information is furnished to support the claim. 
Federal regulations at 42 CFR  424.5(a)(6) require physicians to 
furnish sufficient documentation (upon request) to Medicare to 
determine whether payment is due and, if so, the amount to be paid. 
In 2001, Medicare allowed approximately $3.3 billion for consultations 
out of a total of $23 billion for evaluation and management services.2 
By 2004, that figure had grown to $4.1 billion.  In 2001, approximately 
45 percent of the allowed claims were for office or other outpatient 
consultations, and 44 percent were for initial inpatient consultations.  
The remaining 11 percent were primarily for follow-up inpatient 
consultations, with a small number of second opinions. 
METHODOLOGY 
Overview 
Certified professional coders reviewed the medical records and 
supporting documentation for a sample of 400 services billed as 
consultations and performed in 2001. 
2 Medicare normally pays 80 percent of allowed charges, and the beneficiary or his or her 
supplemental insurance pays the remaining 20 percent as coinsurance. 
OEI-09-02-00030  CONSULTATIONS IN MEDICARE:  CODING AND REIMBURSEMENT  3  I N T R O D U C T I O N  
Sample Selection 
We defined our population as all services allowed with a consultation 
code (CPT codes 99241 through 99275) appearing in Medicares 
National Claims History with service dates in 2001. From this 
population, we selected a simple random sample of 400 services to be 
reviewed for documentation and billing accuracy.  Because we selected 
our sample in March 2002, and Medicare may reimburse claims up to   
12 months after the date of service, our population actually contained 
only 16,470,281 servicesabout two-thirds of the total 25,557,836 
consultations allowed with service dates falling in 2001. 
After completing the medical review, we compared our population with 
the set of consultations that were provided in 2001, but did not appear 
in the National Claims History at the time we selected our sample (and 
hence were not part of our population).  As a result of this comparison, 
we found that CPT code 99255Initial inpatient consultation, level 
fivewas underrepresented in our population.  We discussed this issue 
with CMS, but were not able to determine why this code differed from 
the others. Because nearly all level five codes were upcoded (see 
Findings), this inconsistency most likely caused us to underestimate the 
dollars allowed by Medicare for miscoded consultations. 
Sources of Medical Records 
For each service, we identified the patient, the consultant who 
submitted the claim, the referring physician listed on the claim (if 
any), and the provider of any concurrent Part A services.  We 
identified the consultant and referring physicians from the unique 
physician identification number matches.  If the claims did not 
include the unique physician identification numbers, we contacted the 
appropriate Medicare carrier to identify the provider.  From each 
physician and hospital, we requested photocopies of the portion of 
each patients medical record pertaining to the sampled consultation. 
Pursuant to Medicare coverage guidelines, documentation for a 
consultation should contain at least three parts:  (1) a request for the 
consultation from the referring physician, (2) the need for the 
consultation, and (3) a copy of the written opinion sent by the consultant 
to the referring physician.3  For office or other outpatient consultations, 
the same documentation should be in the medical records for both the 
3 Centers for Medicare & Medicaid Services, Medicare Part B Physicians & Other 
Non-Physician Practitioner ManualMedical Care Section, p. 11. 
OEI-09-02-00030  CONSULTATIONS IN MEDICARE:  CODING AND REIMBURSEMENT  4  I N T R O D U C T I O N  
referring physician and the consultant.  For initial inpatient and 
follow-up inpatient consultations, documentation of the request, the 
patient history and physical examination, and the written consultation 
should be contained in the same hospital medical record.  For 
confirmatory consultations completed in an office setting, the consultant 
is the only source of the record.  For confirmatory consultations 
completed in an inpatient setting, documentation of the patient history 
and physical examination and the consultants written report should be 
included in the hospital medical record.  Regardless of the setting, 
consultants usually keep a copy of the written opinion in their office 
records. 
Collecting Medical Records 
We mailed an initial written request to all consultants, referring 
physicians, and hospitals appearing in our sample.  A number of these 
initial mailings were returned by the post office as undeliverable.  We 
conducted Internet searches using various search engines for alternate 
addresses for these individuals and facilities.  We continued mailing 
requests to all alternate addresses until we found a valid address or 
exhausted all possibilities.  We sent up to two follow-up requests to each 
physician or hospital that did not respond.  If a hospital did not respond 
to our second follow-up request, we called the facility to request the 
records. 
Even after repeated attempts, we could not contact any of the sources 
associated with three consultations in our sample.  We removed these 
services from all subsequent data analyses.  Of the 397 consultations for 
which we were able to contact at least 1 of the sources, we did not 
receive any records for 2, and counted these as undocumented.  Hence, 
we received a response from at least 1 source of records for 395 of the 
400 services in our sample, for an overall response rate of 99 percent. 
In some cases, we did not receive records from all the sources for a 
consultation. In these cases, the coders still could complete their record 
review because most of the information from the various sources is 
redundant. 
Record Review 
We contracted with certified professional coders who have extensive 
experience reviewing Medicare claims to review the medical records.   
Relying on the coders expertise, we developed a review instrument 
using Medicare and CPT guidelines for evaluation and management 
services.  The coders used this standardized instrument to perform the 
OEI-09-02-00030  CONSULTATIONS IN MEDICARE:  CODING AND REIMBURSEMENT  5  I N T R O D U C T I O N  
reviews. The coders reviewed each record and determined if the service 
performed was coded correctly (meaning it met Medicares definition of 
a consultation and was billed as the type and level of consultation) and 
was documented adequately.  After completing the instruments, the 
coders forwarded them for review to our primary contractor, who then 
returned the instruments to us. 
Cost Projections 
To calculate the allowed amounts cited in the findings, we first 
calculated the ratio of the total overpayments for a given category of 
error (e.g., upcoded consultations) to the total amount allowed for all 
consultations in our sample. We then applied this ratio to the total 
amount allowed for consultations in 2001$3,290,931,599to 
determine the amount allowed in 2001 for each category of improper 
payment.  We used a similar method to estimate the total amount 
allowed in 2001 for undocumented services.  Appendix B shows the 
point estimates and confidence intervals for these ratios, as well as for 
other percentages cited in the report.  Appendix C gives projections of 
improperly allowed dollars based strictly on projections to our service 
universe. 
Because we only reviewed consultation services provided in 2001, our 
sample results cannot be extrapolated to other periods. Accordingly, we 
make no inferences to consultation error rates in subsequent years.  As 
noted previously, Medicare reimbursement for consultations increased 
from $3.3 billion in 2001 to $4.1 billion in 2004.  To our knowledge, CMS 
has made no national policy changes that would affect the incidence of 
consultation payment errors since 2001, suggesting that at least some of 
the payment vulnerabilities that we identified still exist. 
CERT and This Inspection 
In 2003 and 2004, CMS reported payment error rates for consultations 
as part of its Comprehensive Error Rate Testing (CERT) program. 
While its findings were quite similar to the findings in this report, 
which are based on 2001 data, the Office of Inspector General (OIG) and 
CMS reviews should not be directly compared because their goals and 
methodologies are different.  The goal of CERT is to measure the 
performance of CMSs contractors by calculating a paid claims error 
rate.  Our objective, on the other hand, was to determine specifically if 
consultations billed to Medicare were coded correctly and documented 
adequately.  Hence, CERT reports on nearly every type of service 
Medicare allows, but does not offer the same depth of information 
OEI-09-02-00030  CONSULTATIONS IN MEDICARE:  CODING AND REIMBURSEMENT  6  I N T R O D U C T I O N  
specific to consultations that our narrowly focused inspection provides. 
This inspection was not designed to reproduce or to review the CERT 
findings. 
This inspection was conducted in accordance with the Quality 
Standards for Inspections issued by the Presidents Council on Integrity 
and Efficiency. 
OEI-09-02-00030  CONSULTATIONS IN MEDICARE:  CODING AND REIMBURSEMENT  7    F I N D I N G  
 Medicare allowed approximately $1.1 billion more  Medicare allowed approximately   
than it should have for services that were billed as  26 million services that were billed 
with a consultation code in 2001.  
consultations 
According to our medical review, 
approximately 75 percent of these services did not comply with 
Medicare regulations for reimbursement as a consultation, were billed 
with an incorrect consultation code, or were documented inadequately.  
Table 1 shows the types of services improperly paid as consultations, 
the representation of each type in our sample, and projections to the 
universe of all services allowed with consultation codes in 2001.4 
Table 1: Seventy- Five Percent of Services Billed as Consultations 
Were Improperly Paid 
Sample  Projected 
Type of Improper Payment  Allowed  Services  Allowed Amount 
Services 
Amount  (Proportion)  (Millions) 
Not a Consultation  74  $2,860.85  0.19  $191 
Incorrect Consultation Code  187  $9,186.39  0.47  $613 
Incorrect Type  7  $339.64  0.02  $23 
Incorrect Level  180  $8,846.75  0.45  $591 
- Upcoded  161  $9,625.61  0.41  $643 
- Downcoded  19  ($778.86)  0.05  ($52) 
Undocumented  37  $3,894.36  0.09  $260
Nonresponse  2  $97.06  *  *
Unsubstantiated  35  $3,797.30  0.09  $254 
Total Improperly Paid  298  $15,941.60  0.75  $1,064 
Source:  Office of Inspector General, Analysis of Record Review Results, 2004.  Projected allowed amounts for the 
different types do not equal total due to rounding.  The * indicates that the n for that cell is too small to reliably project. 
Not a consultation.  Approximately 19 percent of services allowed as 
consultations did not meet the definition of a consultation contained in 
42 CFR  411.351.  Had providers billed these services correctly, 
Medicare and its beneficiaries would have saved approximately  
$191 million in 2001. Most of these services were actually lower-paying 
regular office or inpatient visits.  Other examples of errors included 
billing a psychiatric diagnostic interview and a discharge management 
service as initial inpatient consultations. Nurses (who are not eligible 
4 See the Methodology section for a discussion of our sampling frame as it relates to the 
universe of services allowed as consultations in 2001. 
OEI-09-02-00030  CONSULTATIONS IN MEDICARE:  CODING AND REIMBURSEMENT  8  F I N D I N G  
to bill Medicare for consultations) furnished an additional two services 
in our sample. 
Incorrect consultation code:  Incorrect type. Two percent of the services that 
were coded as consultations met the regulatory definition of a 
consultation, but were billed as the wrong type of consultation.  Most of 
these were billed as a type of consultation reimbursed at a higher rate 
than the one actually performed.  Two consultants, however, billed for 
follow-up inpatient consultations instead of the appropriate, higher-
paying initial inpatient consultation codes. Net overpayments for 
consultations billed as the wrong type totaled $23 million. 
Incorrect consultation code:  Incorrect level. Nearly 45 percent of the 
services that were billed as consultations in 2001 were not coded at 
the proper level.  More specifically, 41 percent of all services billed as 
consultations were upcoded (billed at a higher level than the service 
actually performed), and 5 percent were downcoded (billed at a lower 
level).  Overall, Medicare and its beneficiaries paid $643 million too 
much for upcoded consultations but paid $52 million too little for 
downcoded consultations, yielding a net overpayment of $591 million. 
Table 2 shows the distribution of downcoded and upcoded services. 5 
Table 2: Distribution of Levels Downcoded and Upcoded 
Projected 
Percentage of 
Number of  Under- or Over-
Downcoded/  Mean Under- or 
Type of Error  Services in  Allowed 
Upcoded  Over-Payment 
Sample  Amount 
Services 
(Millions) 
Downcoded  19  - ($40.99)  ($52.1)
- By 1 Level  18  95%  ($37.36)  ($45.0)
- By 2 Levels  1  5%  ($106.81)  * 
Upcoded  161  - $59.79  $643
- By 1 Level  92  57%  $39.27  $241
- By 2 Levels  53  33%  $77.95  $276
- By 3 Levels  16  10%  $117.62  $126 
Total Billed at 
180  - $49.15  $591 (net) 
Incorrect Level 
Source:  Office of Inspector General, Analysis of Record Review Results, 2004. 
The * indicates that the n for that cell is too small to reliably project. 
5 Data are reported in the aggregate for all consultation types.  Differences in upcoding 
among the types of consultation exist, but were not statistically significant. 
OEI-09-02-00030  CONSULTATIONS IN MEDICARE:  CODING AND REIMBURSEMENT  9  FF	 II NN DD II NN GG

Physicians billed approximately 2 million services at the highest level 
of the correct type of consultation, but coded just 5 percent of these 
correctly. For example: a level five office or other outpatient 
consultation requires a comprehensive history and evaluation and a 
high complexity of medical decisionmaking. Nine physicians billed 
this code instead of the level three office or other outpatient 
consultation that was supported by the medical record, which showed 
that the physician took only a detailed history and evaluation and 
exhibited only a low complexity of medical decisionmaking. Office or 
other outpatient, initial inpatient, and confirmatory consultations 
billed at level five were upcoded by 1.9 levels on average, for a mean 
overpayment of $93.61 per service. 
Undocumented. Reviewers found that 9 percent of consultations were 
not documented in any of the patients medical records, including those 
we received from the consultant, the referring physician, and/or the 
inpatient facility where the patient was staying at the time of the 
service. Based on this finding, we estimate that Medicare may have 
allowed approximately $260 million in 2001 for undocumented services 
billed as consultations. Besides services that were completely 
undocumented, medical records for an additional 4 percent were 
insufficient to determine the correct code to describe the service. 
Approximately 94 percent of services billed as follow-up inpatient 
consultations were coded incorrectly 
Excluding undocumented and inadequately documented services, 
approximately 94 percent of services that were billed as follow-up 
inpatient consultations should have been billed as another service. In 
our sample, we found that: 
o 	 79 percent of these services were actually inpatient visits for daily 
care, not consultations; 
o 	 6 percent were actually initial inpatient or outpatient consultations; 
and 
o 	 9 percent were upcoded. 
As indicated by the Physician Fee Schedule, Medicare reimbursed 
follow-up inpatient consultations at a lower rate than other types of 
consultations or regular inpatient visits in 2001. Therefore, it is 
likely that most of these errors were unintentional. 
OEI-09-02-00030  CONSULTATIONS IN MEDICARE:  CODING AND REIMBURSEMENT  10  EEE XXX EEE CCC UUU TTT III VVV EEE     SSS UUU MMM MMM AAA RRR YYY
  R E C O M M E N D A T I O N  

Our review showed that services billed to Medicare as consultations 
often were not actually consultations, were coded as the incorrect type 
or level of consultations, or were not substantiated by documentation.  
Although CMS clarified the difference between office visits and 
consultations in October 2003, it did not address the distinctions among 
the types and levels of consultations. 
Therefore, we recommend that, through its Medicare carriers, CMS educate 
physicians and other health care practitioners about the criteria and proper 
billing for all types and levels of consultations with emphasis on the highest 
billing levels and follow-up inpatient consultations.  
In addition, we have forwarded information on the miscoded and 
undocumented services identified in our sample to CMS for appropriate 
action. 
AGENCY COMMENTS 
In its comments to our draft report, CMS noted that the CPT codes for 
follow-up inpatient consultations and confirmatory consultations were 
deleted effective January 1, 2006. CMS has revised its policy manuals 
to reflect these changes.  The agency agreed with our recommendation 
to educate providers about consultations and plans to publish on its 
Web site a Special Edition article highlighting these changes and 
providing new coding instructions for consultation services. The 
complete text of CMSs comments is included starting on page 17. 
OFFICE OF INSPECTOR GENERAL RESPONSE 
We are pleased that CMS has agreed to implement our recommendation 
and look forward to seeing the Special Edition article when it is 
published. Also, the elimination of the codes for follow-up inpatient 
consultations and confirmatory consultations should improve providers 
understanding of the proper billing for consultations and reduce the 
error rate associated with these services. 
OEI-09-02-00030  CONSULTATIONS IN MEDICARE:   CODING AND REIMBURSEMENT  11    A P P E N D I X   ~   A  
Coding Levels for Consultations 
As defined by CPT, evaluation and management codes include seven 
basic elementspatient history, physical examination, medical 
decisionmaking, counseling, coordination of care, the nature of the 
patients presenting problem (or the reason for the visit with the 
physician), and time. 6  The first three components are key to selecting 
the correct level for a consultation.  To properly code the consultation, 
the provider must determine, based on these key components, which 
level of consultation is appropriate.  The three key components are: 
o 	 The extent of the patient historyconsultants use their clinical 
judgment and the nature of the patients presenting problems to 
determine the depth of the history needed to complete the 
consultation and provide an opinion to the referring physician.  A 
patient history can be classified into one of four categories: 
 	 Problem focused (brief history of present illness or problem), 
 	 Expanded problem focused (brief history of present illness 
with problem-pertinent system review), 
 	 Detailed (extended history of present illness with pertinent 
past, family, and social history directly related to the 
presenting problem; includes review of a limited number of 
additional systems), and 
 	 Comprehensive (extended history of present illness with 
review of body systems directly related to the patients 
problems; complete past, family, and social history). 
o 	 The extent of physical examinationbased on clinical judgment 
and the presenting medical problems, the consultant can perform 
four types of examination: 
 	 Problem focused (limited examination of the affected body 
area or organ system), 
 	 Expanded problem focused (limited examination of affected 
area or systems with other symptomatic or related organ 
systems), 
6 American Medical Association, Current Procedural TerminologyCPT 2000, 2002, and 
2003 versions. 
OEI-09-02-00030  CONSULTATIONS IN MEDICARE:  CODING AND REIMBURSEMENT  12  A P P E N D I X ~ A  
 	 Detailed (extended examination of affected body areas and 
other related systems), and 
 	 Comprehensive (a general multisystem examination or a 
complete examination of a single organ system). 
o 	 The complexity of the consultants medical decisionmaking, 
referring to the factors needed to establish a diagnosis and/or 
select a management option: 
 	 Selecting the correct level of decisionmaking is based on the 
number of possible diagnoses or the number of options that 
must be considered; the amount and/or complexity of 
medical records, diagnostic tests, and other information that 
physicians must obtain, review, and analyze; and the risk of 
significant complications, morbidity, and/or mortality. 
 	 Four levels of medical decisionmaking are recognized:  
straightforward, low complexity, moderate complexity, and 
high complexity. 
OEI-09-02-00030  CONSULTATIONS IN MEDICARE:  CODING AND REIMBURSEMENT  13    A P P E N D I X   ~   B  
Confidence Intervals for Ratios and Percentages 
Statistic  N  Point Estimate  95% Confidence Interval 
Ratio of excess allowed amount for services that were 
397  0.33  0.29 to 0.36 
miscoded or undocumented to all allowances 
Percentage of services that were miscoded or 
397  0.75  0.71 to 0.79 
undocumented 
Percentage of services that were not consultations  397  0.19  0.15 to 0.23 
Ratio of excess amount allowed for services that were not 
397  0.06  0.04 to 0.08 
consultations to all allowances 
Percentage of services billed as consultations that were 
397  0.47  0.42 to 0.52 
coded as the incorrect type or level 
Ratio of excess amount allowed for services coded as the 
397  0.19  0.16 to 0.22 
incorrect type or level to all allowances 
Percentage of services billed as the incorrect type  
397  0.02  0.00 to 0.03 
of consultation 
Ratio of excess amount allowed for services billed as the 
397  0.01   0.01 
incorrect type of consultation to all allowances 
Percentage of services billed at the incorrect level  397  0.45  0.40 to 0.50 
Ratio of excess amount allowed for services billed at the 
397  0.18  0.16 to 0.21 
wrong level to all allowances 
Percentage of services that were upcoded  397  0.41  0.36 to 0.45 
Ratio of excess amount allowed for upcoded services to all 
397  0.20  0.18 to 0.23 
allowances 
Percentage of services that were downcoded  397  0.05  0.03 to 0.07 
Ratio of underpayments for downcoded services to all 
397  (0.02)  ( 0.02) to (0.01) 
allowances 
Percentage of services that were undocumented  397  0.09  0.06 to 0.12 
Ratio of the amount allowed for undocumented services  
397  0.08  0.05 to 0.11 
to all allowances 
Percentage of services that were documented   
397  0.04  0.02 to 0.06 
inadequately 
OEI-09-02-00030  CONSULTATIONS IN MEDICARE:  CODING AND REIMBURSEMENT  14  A P P E N D I X ~ B  
Confidence Intervals for Statistics (continued) 
Statistic  N  Point Estimate  95% Confidence Interval 
Percentage of services billed at level five of the  
22  0.95  > 0.87 
correct type that were billed incorrectly 
Mean degree of upcoding where the consultation was   
22  1.91 levels  1.58 to 2.24 levels 
billed at level five of the correct type 
Mean overpayment due to upcoding where the  
22  $92.52  $77.98 to $107.06 
consultation was billed at level five of the correct type 
Ratio of dollars improperly allowed at level five to all 
397  0.07  0.04 to 0.09 
allowances 
Percentage of documented services billed as follow-up 
34  0.94  > 0.86 
consultations that were miscoded 
OEI-09-02-00030  CONSULTATIONS IN MEDICARE:  CODING AND REIMBURSEMENT  15    A P P E N D I X   ~   C  
Inappropriately Allowed Amounts Based Strictly on Our Service Universe 
Statistic  N  Point Estimate  95% Confidence Interval 
Excess amount allowed for services that were miscoded   
397  $656 million  $578 million to $734 million 
or undocumented 
Excess amount allowed for services that were not actually 
397  $118 million  $77 million to $159 million 
consultations 
Excess amount allowed for consultations billed as the 
397  $378 million  $317 million to $439 million 
incorrect type or level 
Excess amount allowed for consultations billed as the 
397  $14 million  < $29 million 
incorrect type of consultation 
Excess amount allowed for consultations billed at the 
397  $364 million  $304 million to $424 million 
wrong level 
Excess amount allowed for upcoded services  397  $396 million  $340 million to $452 million 
Underpayments for downcoded services  397  ($32 million)  ($47 million) to ($17 million) 
Amount allowed for undocumented services  397  $160 million  $105 million to $216 million 
OEI-09-02-00030  CONSULTATIONS IN MEDICARE:  CODING AND REIMBURSEMENT  16    A P P E N D I X   ~   D  

OEI-09-02-00030  CONSULTATIONS IN MEDICARE:  CODING AND REIMBURSEMENT  17  A P P E N D I X ~ D  

OEI-09-02-00030  CONSULTATIONS IN MEDICARE:  CODING AND REIMBURSEMENT  18  A P P E N D I X ~ D  

OEI-09-02-00030  CONSULTATIONS IN MEDICARE:  CODING AND REIMBURSEMENT  19  A P P E N D I X ~ D  

OEI-09-02-00030  CONSULTATIONS IN MEDICARE:  CODING AND REIMBURSEMENT  20    AA PC PK EN NO DW ILXE  D~ G  AM  E N T S  

This report was prepared under the direction of Paul A. Gottlober, 
Regional Inspector General for Evaluation and Inspections in the San 
Francisco regional office.  Other principal Office of Evaluation and 
Inspections staff who contributed include: 
Deborah Harvey, Project Leader 
Scott Hutchison, Project Leader 
Silvia Chin, Program Analyst 
Cheryl Dotts, Program Assistant 
Robert Gibbons, Program Analyst 
Michael Henry, Program Analyst 
Thomas Purvis, Program Analyst 
Stephanie London, Program Specialist 
Linda Moscoe, Program Analyst 
Bambi Straw, Program Specialist 
Tricia Davis, Director, Medicare and Medicaid Branch 
Barbara Tedesco, Mathematical Statistician 
OEI-09-02-00030  CONSULTATIONS IN MEDICARE:  CODING AND REIMBURSEMENT  21