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The Dartmouth
February 27, 2024 | Latest Issue
The Dartmouth

Electronic med. billing may inflate payments

Although former President George W. Bush and President Barack Obama have granted tens of billions of dollars in federal subsidies to hospitals that implement electronic medical records to increase hospital efficiency and patient safety, these records may be contributing to increased billings, according to Medicare data analyzed by The New York Times. While the Justice Department and other federal regulatory agencies are investigating instances of potential fraud, analysts at the Dartmouth Atlas of Health Care a research group run through The Dartmouth Institute for Health Policy and Clinical Practice that analyzes variations in health care delivery say that this correlation likely reflects underlying flaws in Medicare's fee-for-service payment system.

Hospitals with electronic medical records charge Medicare for significantly more intensive and costly procedures than their peers, according to The Times. Since 2006, hospitals with electronic records documented a 47-percent increase in claims coded at the highest reimbursement level, while peer hospitals reported a 32-percent increase. In total, hospitals received $1 billion more in Medicare reimbursements in 2010 than they did five years previously.

Although the Dartmouth Atlas has not performed specific investigations into the correlation between increased use of electronic medical records and rising health care costs, Atlas founder and TDI professor John Wennberg said he was not surprised by the results.

In addition to potential for fraud such as up-coding categorizing a patient's ailment as more serious than actually observed and cloning, copying test data from one file into another, electronic records make it easy for doctors and hospitals to make it appear that they are treating sicker patients with more rigorous care than they may actually be delivering, Wennberg said. This practice poses a problem because Medicare reimburses doctors at higher rates for treating more serious ailments.

"Electronic medical records urge doctors to find the most complicated diagnosis and write that down," Wennberg said. "This is not necessarily fraudulent behavior, but it's a behavior that stems across the whole health care sector and drives up costs."

Doctors and hospitals are also encouraged to provide more intensive care, even if this care is not proven to provide better outcomes, Wennberg said. Some doctors estimate that excessive care including more tests, referrals and procedures than necessary makes up 30 percent of all care in the United States, he said.

"If you pay someone more for doing more, they'll probably do more," Wennberg said. "That's the nature of fee-for-service medicine."

Visiting more doctors also creates an observational bias, according to Wennberg. Each doctor makes an additional diagnosis, so that a patient may appear sicker than if he had seen fewer doctors.

Medicare encourages observational bias by mandating that doctors make a diagnosis each time they see a patient.

In theory, electronic records should help doctors catalogue and coordinate care by decreasing the amount of paperwork and clerical errors, according to TDI professor and Atlas co-principal investigator David Goodman. However, these records can also be used as a tool to optimize reimbursements to hospitals.

"Electronic records can play into a game of documentation," Goodman said. "They can make it appear that a hospital is delivering a higher quality of care than it is actually providing," he said.

Some hospitals actually pay third-party companies to run algorithms that analyze their electronic medical records to look for ways to maximize profits, Wennberg said.

Researchers at the Atlas have spent over 20 years analyzing Medicare data to examine variations in medical costs and health care delivery on the national, regional and local levels, Goodman said. They have discovered a number of surprising results, such as little correlation between more costly care and better quality care, especially when treating chronic illnesses.

"Each place has its own particular style of practice that's invisible in most cases to providers and patients," Goodman said. "A doctor ordering more tests seems to be working harder for you, but those tests aren't necessarily valuable."

Recent Atlas research also revealed that the number of doctors and medical resources in an area impacts the amount of care delivered to a population, according to TDI analyst and Atlas researcher Yunjie Song.

"We looked at people moving from low-intensity care settings to high-intensity care settings, specifically Minnesota to Miami," Song said. "It appeared like patients were getting sicker, but they were receiving much more care for similar problems."

These results were explained by a capacity bias, Wennberg said. There is a financial incentive for doctors and hospitals to keep beds filled and imaging machines in use, creating costlier norms for delivering care in some regions of the country versus others.

"The last zinger is that high-capacity care areas like Miami will get substantially more money from Medicare than low-intensity regions," Wennberg said. "Things get worse and worse. They build more hospitals and hire more doctors with that money."

These variations in regional norms for intensity of treatment or types of procedures may also vary from national guidelines for administering care, Song said. The significant differences in health care delivery patterns across the country reflect differing opinions among doctors about what kind of care should be delivered and at what intensity, which may or may not be linked to outcome-proven results.

Although the Atlas acts mostly as a research group, its partnership with TDI has resulted in the use of its research in policy recommendations on regional and national levels, Goodman said. The Atlas recently crafted recommendations about limiting health care resources like imaging machines to prevent overuse, new ideas for payment plans that reward hospitals for choosing less costly procedures and the concept of shared decision-making that incorporates patients.

These recommendations try to alter existing incentives within Medicare to reward doctors and hospitals that efficiently provide high-quality care, according to TDI and economics professor Jonathan Skinner. Accountable care organizations, part of the Affordable Care Act, were formed in part using Atlas data and researchers' ideas about incentivizing efficient care.

"The idea is you don't want to reward doctors for skimping on care, but you want to pay them for doing stuff that's useful," Skinner said. "Doctors aren't necessarily administering bad care, but we're looking for ways to cut down on the costliest care."

Wennberg founded TDI in 1988 and the Atlas in 1996. The Atlas developed as a research group dedicated to studying variations in health care delivery across regions and providers and is currently run through the Center for Health Policy Research, one of TDI's seven research centers.