American College of Physicians: Internal Medicine — Doctors for Adults ®


Policy Brief

ACP-ASIM: Medicare needs to change its definition of "improper payments"

From the July 2001 ACP-ASIM Observer, copyright 2001 by the American College of Physicians-American Society of Internal Medicine.

While ACP-ASIM is pleased that improper Medicare payments in 2000 reached their lowest level last level in five years, it urged the HHS to change the way it categorizes and counts improper payments to better reflect physician practices.

A recent report from the HHS Office of Inspector General (OIG) found that "improper" payments fell by half since 1995, when the OIG began tracking payments to physicians and other providers. The College, however, reiterated its longstanding concerns about how the OIG defines improper payments and urged HHS to review the following categories:

  • Coding errors. The College noted that a "sizeable portion" of physician coding errors, which the OIG says have not improved during the last five years, result from physicians' choice of evaluation and management (E/M) intensity levels. The College pointed out that different Medicare carriers vary in how they interpret E/M levels of service. As a result, it said that disagreements about E/M levels of service should be considered differences in judgment, not errors.

  • Unnecessary services. The OIG report noted that medically unnecessary services represented 43% of the total error rate for fiscal year 2000 and attributed 11.8% of those errors to physicians. The College pointed out, however, that the OIG gave only one example of a physician error and asked HHS for more examples to help physicians understand what it considers an unnecessary service.

  • Unsupported services. While the College was pleased that "errors" in the form of unsupported services shrank from $3.2 billion in 1995 to $0.6 billion in 2000, it urged the OIG to stop counting unsupported services as errors. (HHS considers a service unsupported when physicians don't provide adequate documentation or fail to respond to a query from their medical carrier.) In its letter, ACP-ASIM said that a physician's medical record should be considered the "ultimate determinant" when reviewing the necessity of a patient service.

ACP-ASIM also urged the OIG to use a larger sample size when calculating payment error rates and to avoid relying on Medicare carriers to help calculate error rates. The OIG has acknowledged that some of its contractors have manipulated HCFA payment rules to increase their pay and earn new contracts.

The full text of the College's letter is available online at


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