Clustering Levels of Evaluation and Management Services: Avoid the Compliance Trap

Clustering levels of Evaluation and Management Services is not a new concept but is something that continues to be a hot topic of conversation spanning everyone from The CMS to the OIG and everyone in between. In 2000, the Office of Inspector General released its Guidance for Individual and Small Group Physician Practices and identified this new risk. Since then, carriers have maintained a maniacal focus on identifying these outliers and recouping monies providers were not entitled to. Along the way, many providers found themselves in more trouble than they bargained for as to their surprise they were slapped with a charge of fraud. You may be asking yourself at this point why it would be considered fraud... Well, hold that thought for just a bit and I will explain.

Over the years, the OIG has provided many prior statements of compliance but the Physician Guidance provides a very specific list of risk areas that the compliance program should address. With that said, it is also critical to not only create a compliance program that addresses these issues but also addresses corrective action and other steps that will be taken should issues be identified during an audit.

The aspects of the compliance program that need to be addressed include:

Clustering levels of service falls into some broader categories, which is where practices find themselves scrambling to get out of the boiling pot of water they landed in.

Those broader categories are listed below:

Clustering is defined as "the practice of coding/charging one or two middle levels of service codes exclusively, under the philosophy that some will be higher, some lower, and the charges will average out over an extended period (in reality, this overcharges some patients while undercharging others)."
Clustering is the result of complex and oftentimes unclear documentation guidelines established by The CMS. We currently have the option of documenting based on 1995 or 1997 guidelines. The E&M Guidelines require detailed amounts of documentation on each patient's history, physical exams, and medical decision-making to support five different levels of physician service. The CMS admits that it is not unusual for physicians to code between one to two levels apart from their peers for identical services because of varying interpretations for what the guidelines require and their style of documentation of the history, physical examination, and medical decision-making.

It cannot be ignored that one of the biggest reasons behind Clustering is the physician's fear of the OIG and other governmental agency crackdown. This leads most physicians to try and find some sense of comfort in their code selection and oftentimes it leads to them developing a pattern that falls outside of the norms and causes potential liability.

I have lots of clients who believe that it all averages out in the end but unfortunately that could not be further from the truth. The thought process is "I do some level II services and I do some level IV and V services so if I just bill everyone down the middle then I am safe!!!" The problem is that all of those level II services you billed as level III are actually overcoded and will result in a refund having to be made in the event of an audit. Unfortunately, on the other side of the coin, all of those level IV and V services are not going to be reprocessed and paid at a higher level.  Then you run into the other side of the thought process which is "I am just going to code everything a level II and avoid the radar." Again, that is a misnomer because carriers use bell curves to track coding patterns and to identify outliers or aberrancies and there are penalties for undercoding.

The OIG has made it known that they intend to target these physicians who routinely and consistently Cluster their levels of service.  Earlier I mentioned the fraud and abuse aspect surrounding Clustering. The Social Security Act prohibits the "practice of presenting or causing to be presented a claim for an item or service that is based on a code that such person knows or should know will result in a greater payment to the claimant than the code such person knows or should know is applicable to the item or service actually provided." Granted, the statute only covers claims in which the provider received greater payment.

For years I have been recommending that physicians use a baseline, or "snapshot," to gain an understanding of their coding and to enable themselves to gauge over a period of time its progress in reducing or eliminating potential areas of risk. When the patterns are identified, it then becomes the responsibility of the practice to develop corrective action to prevent the problems from occurring again and to work with their legal counsel on options available to them for self-disclosure or making voluntary refunds.

I want to quickly address the difference between Fraud and Erroneous claims as there have always been a lot of questions regarding this issue. The easiest way to differentiate between these is that Fraud is based on an intentional misrepresentation of the facts. Basically, you are trying to gain the system. There is no doubt the government has been a bit aggressive with their enforcement efforts over the years targeting innocent well-intentioned providers. This has led to the OIG putting a keen emphasis on the legal differences between innocent "erroneous" claims on the one hand and "fraudulent" (intentionally or recklessly false) claims on the other. The OIG has come to recognize the applicable enforcement cover only offenses that are committed with actual knowledge of the falsity of the claim, reckless disregard, or deliberate ignorance of the falsity of the claim, which is what physicians are prosecuted for. It is important to understand that the statutes do not cover mistakes, errors, and misunderstanding of the rules/guidelines or even acts of negligence. Where Clustering is so widespread, physicians may come to the conclusion that Clustering is an honest misinterpretation of the rules or a simple act of negligence.

To ensure compliance and minimize risk, physicians should first be educated on E&M services and to the practice of Clustering and then ensure all employees, contractors, and agents understand the risks associated with this practice of coding and what their obligations are with regard to understanding compliance obligations and the applicable legal and ethical requirements surrounding documentation guidelines.

In summary, physicians and their staff must receive education and training about documentation of E&M services and the practice of Clustering to avoid costly mistakes.

Sean M. Weiss, CCP-P, ACS-EM, CPC, CPC-C, is Vice President and Chief Compliance Officer of DecisionHealth/Professional Services, a full-scale medical consultancy and regulatory research firm based in Gaithersburg, Maryland. Sean focuses on provider representation in audit appeals at the Administrative Law Judge and Medicare Appeal Counsel Review levels as well as representation at commercial carrier appeal hearings. Sean is a nationally recognized consultant and lecturer with more than 18 years in the industry. and click on the consulting tab.