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Shades of Gray in Evaluation and Management Services

Joette Derricks, CPC, CHC, FACMPE, CSS
Vice President of Regulatory Affairs & Research, MiraMed Global Services, Jackson, MI

According to the Office of Inspector General (OIG) Evaluation and Management services (E/M) are 50 percent more likely to be paid for in error than any other Part B services. The OIG findings are based on a detailed report on improper payments made in 2010 for E/M services. The report titled Improper Payments for Evaluation and Management Services Cost Medicare Billions in 2010 reveals improper payments of $6.7 billion and an error rate of 42 percent for E/M claims incorrectly-coded or lacking documentation to support the service.

E/M services are performed by physicians and nonphysician practitioners to assess and manage patients' health. Medicare paid a total of $32.3 billion for these services in 2010, accounting for almost 30 percent of Medicare Part B payments that year. The OIG conducted a medical record review of a random sample of Part B claims for E/M services from 2010 and found 42 percent of the claims were incorrectly coded, meaning they billed at levels either higher or lower than warranted. Additionally, 19 percent of the claims lacked documentation. Furthermore, the OIG found claims from high-coding physicians—those who consistently billed higher level codes, which yield higher payment amounts—were more likely to be incorrectly coded or lack documentation, compared with claims from other physicians. In addition, the annual OIG Work Plan has, for the past several years, included an action item regarding the inappropriate payments for E/M services.

The OIG has recommended the Centers for Medicare and Medicaid Services (CMS) educate physicians on coding and documentation requirements for E/M services. The OIG also recommended continuing to encourage contractors to review E/M services claims from high-coding physicians and following up on claims for E/M services that were paid for inappropriately.

CMS agreed with the first recommendation. However, the agency didn't agree with the OIG's second recommendation, stating it has already directed a medical review contractor to review claims billed by high-coding physicians and the first phase of these reviews led to a negative return on investment, according to the report. Based on additional reviews, CMS plans to consider the effectiveness of reviewing claims from high-coding physicians compared with other efforts, such as comparative billing reports.

CMS partially agreed with the OIG's third recommendation. "CMS will analyze each overpayment to determine which claims exceed its recovery threshold and can be collected consistent with its policies and procedures," the report states. "For the overpayments identified in this report that will not be collected, CMS could send an educational notice to physicians that billed for these claims."

The E/M codes were released in 1992 and the current CMS/American Medical Association (AMA) 1995 and 1997 documentation guidelines soon followed to provide assistance to providers on how to document E/M services. So why is it so tough for physicians and other health care providers to pass auditors scrutiny? The short answer is despite the guidelines, there are no clear regulations or uniform rules when it comes to E/M services. The E/M codes are plagued by fifty shades of different interpretations. Every Medicare Administrator Contractors (MAC) and most other third-party payers’ websites contain guidelines that are imposed on top of the 1995 or 1997 guidelines, along with so many over interpreted and misinterpreted by hundreds of lawyers, consultants, coders and others. Not to mention urban coding myths which are widely distributed and continually rehashed on the internet.

Medical Decision Making Gray Areas

Let’s take a look at the 50 different shades of coding based on the E/M guidelines starting with the medical decision making (MDM) component. Many coders and reviewers believe that the MDM component is the most critical key component and outweighs the history and exam documentation. However, both the 1995 and the 1997 guidelines do not require that the MDM be one of the two components that must be met or exceeded when the E/M level only requires two of the three key components. Perhaps some are confusing MDM with medical necessity which is a requirement for payment by CMS and all third-party payers.

Per CMS, Medical necessity of a service is the over-arching criterion for payment in addition to the individual requirements of a CPT code. It would not be medically necessary or appropriate to bill a higher level of evaluation and management service when a lower level of service is warranted. The volume of documentation should not be the primary influence upon which a specific level of service is billed. Documentation should support the level of service reported. [Internet Only Manual (IOM) 100-04, Claims Processing Manual, Chapter 12, Section 30.6.1]

However, some payers such as Empire Blue Shield and Blue Cross do require that the MDM be met when the E/M service is based on only two of the three key components.

Although CPT coding guidelines do not specify which two out of the three key components must meet or exceed the stated requirements to qualify for reporting a particular level of E/M for an established patient visit, the Health Plan requires that medical decision making be one of the two key components used to determine the E/M code level selected. The other component can be either patient history or physical examination. http://www.empireblue.com/provider/noapplication/f5/s4/t0/pw_e228712.pdf?refer=ehpprovider

Other gray areas with MDM include how the MAC or commercial payer may evaluate the following (shown in Table 1).

Similar to the MDM component, the examination and history components also have many gray areas based on what MAC or payer claim is being submitted to for reimbursement.

History Component Gray Areas

CMS clarified several years ago that in regards to the use of the status of three chronic conditions in place of the History of Present Illness (HPI), the physician or nonphysician practitioner could use either with both the 1995 or 1997 guidelines. Most other payers have followed suit and likewise allowed the status of three chronic conditions when the 1995 guidelines are being used. Unfortunately there are many other gray areas that still plague the history component. A few key ones to examine with your specific MAC and other payers are (shown in Table 2).

Exam Component Gray Areas

In regards to the examination component of an E/M visit physician, nonphysicians and coders may select either the 1995 or the 1997 guidelines. CMS has said that either may be used depending on which is most advantageous to the provider; yet, some hospital physician enterprises and payers limit it to the 1997 guidelines. In general, the 1995 guidelines are more beneficial to primary care providers whereas the single specialty exam guidelines in the 1997 guideline may be more specialty-system oriented.

Regardless of which set of guidelines, much like the MDM and the history components, the exam component is beset with gray areas. The concept of “double dipping” in the exam area documentation means that an element cannot be counted as a body area and also counted as an organ system. That is, abdomen soft would be credited under the body area of abdomen or the gastrointestinal organ system. Most payers are in agreement with this concept. Where the differences fall is in what body area or organ system specific information may be counted. Further, it can only be counted once. For example, according to Palmetto MAC, documentation of no edema may be counted as two body areas for the lower extremities or it may be counted once under the cardiovascular or musculoskeletal system. It would be incorrect to count it to both the cardiovascular and the musculoskeletal systems.

The most difficult question in the exam area is deciding between an expanded problem focus exam which requires a limited exam of the affected body area or organ system or a detailed exam which requires an extended exam of the affected body area or organ system. Some payers merely count the number of body areas or organ system identified in the documentation. In this case, five to seven body areas or organ systems documented is credit as a detail exam. Other payers require at least two elements documented in the affected body area or organ system and one other system or body area. The strangest method for crediting a detail examination comes from Novitas MAC. It is commonly called the “4 x 4 method” which requires four elements examined in four body areas or four organ systems. However, despite strongly promoting this “tool” Novitas goes on to say that clinical inference overrides the 4 x 4 method. According to Novitas, their reviewers utilize one of the following when making a determination on whether an examination is expanded problem focused or detailed. The method chosen must be the one that is most beneficial to the physician. 

  • 1997 E/M examination guidelines,
  • 1995 E/M examination guidelines utilizing the 4 x 4 method, or
  • 1995 E/M examination guidelines utilizing clinical inference

Providers and coders should verify what system is in place with their Medicare MAC and other major payers to determine the exam level. In addition to the three key components as addressed herein, they also should verify how other information must be documented. For example, when time is the controlling factor of the visit, some payers may require time in and time out, or total time and time spent counseling in minutes, or a statement that more than 50 percent of the visit time was spent in counseling or coordination of care.


The E/M codes were released in 1992 and the first set of guidelines in 1995, yet 20 years later there is still much confusion over how to document the services accurately. Perhaps it is time for the AMA and CMS to step up and clarify the definitions and terms that have resulted in these gray areas.

Joette Derricks, CPC, CHC, FACMPE, CSSGB is a published author and national speaker and serves as Vice President of Regulatory Affairs and Research for MMGS. She has 30+ years of healthcare financial management and business experience. She is a member of MGMA, HCCA, AAPC and other associations and a regular speaker at practice management conferences. Ms. Derricks can be reached at 517-787-6440 or This email address is being protected from spambots. You need JavaScript enabled to view it.

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