Practice Management Improvement Strategies

Practice Management Improvement Strategies

October 08, 2019
5 min read

Coding errors can cost you money and potentially a sale

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Karen Zupko

by Karen Zupko

As more orthopedic practices are approached for potential acquisition, our firm is engaged by buyers and sellers to evaluate the accuracy of coding and documentation, and the efficiency of the revenue cycle.

What we’re seeing in many practices is that coding and billing has gone unsupervised and unmonitored for some time. Coding staff are hired without proper skills, and training and development of these employees is minimal. This results in costly mistakes. Mistakes that can come back to haunt you if you are approached by a potential acquisition or merger partner.

If your group is contemplating a transaction either with a private equity buyer or a health system, it is important to proactively resolve any potential compliance issues. “A physician group's historical coding practices matter,” according to Colin McDermott, CFA, CPA/ABV, managing director with VMG Health.

If you don't have and follow a compliance plan, if you fail to identify and address coding issues or if you employ an under-skilled, under-trained coding team, a potential buyer will not look favorably on these facts. The auditors that buyers bring with them are paid to be tough. They’ll spot the issues likely to impact the transaction.

Here are five of these that our auditing team regularly uncovers:

1. Overuse of one evaluation and management code

We find many incidences of surgeons who repeatedly use the same level of evaluation and management (E/M) service. It doesn't matter if it’s a high- or low-level service. From a payor's perspective, it’s an indication that something might be amiss. If physicians truly consider individual patient condition and circumstance, it's expected that a wider variety of service levels would be used and billed.

“If E/M coding practices lead to higher revenue, but it turns out that these practices are inappropriate, the buyer will look at the practice through the lens of accurate, coding practices in the future, and re-assess the transaction accordingly,” McDermott said.

That could mean less money or more risk for you and your partners.

To understand whether your E/M pattern distribution falls outside the “norms” that could indicate incorrect or non-compliant coding behavior, review your E/M coding patterns for each provider at least annually, and against the patterns of state and national data. The KZA E/M Profile Analyzer is a spreadsheet tool that makes this fast and easy. If there is a pattern of using only 99202 for new patients and only 99214 for returning patients, it means some visit notes should be selected and reviewed.


Being an outlier isn’t necessarily wrong, and some specialists and subspecialties have patterns that may fall outside the norm. However, significant variances arouse the auditor's curiosity, prompting them to take a closer look. Especially when only one or two codes are used.

2. Incorrect billing by non-physician providers

In one practice we reviewed, the solo physician saw patients in the main office and the two physician assistants (PAs) saw patients in outlying offices. However, all non-physician provider (NPP) work was billed under the physician’s name — for 2 years. This is a big and expensive “whoops!”

As a reminder, Medicare’s incident-to rules require a physician be in the office when the NPP is seeing and billing patients “incident-to.” Otherwise, the care is billed under the NPP’s name. McDermott acknowledges buyers are concerned with incorrect incident-to billing.

In another practice, the nurse practitioners (NPs) believed that because they spent more time with patients, they could routinely bill a level 4 visit. However, one look at the documentation was enough to see that the minor clinical issues they had treated (as indicated by the diagnosis codes chosen) did not require 40 minutes of “counseling.”

These are just two examples of errors we've uncovered for NPP billing. In one practice, 3 years of mistakes, such as these, totaled hundreds of thousands of dollars in refunds to Medicare and other payers.

The bottom line: Stop assuming your NPP billing is being done correctly. If you have PAs or NPs in your practice, engage an independent entity to review the policies, procedures and codes being used in the billing and reporting process for these providers.

3. Hidden take backs

Savvy buyers don’t want to assume a liability as their “gift” with purchase. As part of due diligence, their steely eyed auditors will review a practice’s documentation, supervision and coding processes. What they are looking for are patterns of incorrect coding that could result in an audit, a payer take back or a self-disclosure event, pre-sale. If the deal moves ahead, the purchase price may be adjusted to account for the changed financials.

McDermott advises practices to conduct pre-transaction assessments. Review your coding, documentation and billing processes now and make changes for accuracy and compliance.

“If physicians are proactive by identifying and resolving coding issues now, it will be a much cleaner process to sell the business down the road. If the seller has been proactive and is doing things correctly, there won't be an unexpected price renegotiation with a buyer.”


Don’t forget that audits and take backs can go back several years. CMS, for example, will look back 6 years for incorrect reimbursements. To be compliant you must refund overpayments promptly — whether these are from payers or patients.

4. Unsigned notes

If the buyer’s auditor uncovers unsigned notes, that’s a big problem. We have found provider notes in multiple practices that were never signed. It’s typically a harbinger of other likely non-compliance issues and a signal for an auditor to dig deeper. Anything that raises the eyebrows of a potential buyer does not bode well for the practice.

5. Improper use of modifiers

In about 50% of our audits, modifiers are being used incorrectly. Here are a few examples:

Modifier 25 - Significant, separately identifiable E/M service by the same physician on the same day of the procedure or other service. Routinely billing an E/M code with a 25 modifier for established patients receiving periodic injections for the same diagnosis and anatomic site is wrong. Our reviews have uncovered a high volume of these.

Modifier 59 - Distinct, procedural service. We find frequent incidences of appending modifier 59 when it is not appropriate, due to an NCCI edit or guideline. Overapplying modifier 59 attracts payer attention, and that can lead to an audit.

Overapplied use of modifiers is similar to E/M utilization skewing to higher level codes when in fact those higher levels aren’t accurate. It’s a risk to future earnings. “Remember that buyers are concerned about the sustainability of earnings,” McDermott said. So, if a coding audit turns up an overuse of modifiers that historically resulted in revenue that will disappear when the misuse is discontinued, there could be a restatement of the group’s historical financial performance which may impact transaction proceeds.”

Finally, too many practices have not invested in ongoing training or have hired coders and billers without testing their knowledge. Last week, we interviewed two potential coding staff for a client. As part of our process, each was asked to complete a skills assessment. Both candidates scored a measly 65% — yet both work currently work for orthopedic groups. Both “didn’t know what they didn’t know.”

Would you hire a partner who scored 65% on a clinical skills assessment? Didn’t think so. Don’t hire these people to handle coding and billing either.

If your practice engages a billing service, take a hard and honest look at the coding competence of the vendor's staff. Insist on annual skills assessments to ensure they know what they are doing and are compliant. Errors made by the billing service put your practice, as well as a potential acquisition deal, at significant risk.

As John F. Kennedy said, “The time to repair the roof is before it starts raining.” Same goes for billing and coding. Conduct internal audits, recruit and train the right staff, and ask an independent third party for an outside opinion every now and again.


For more information:

Colin McDermott, CFA, CPA/ABV, can be reached at 2515 McKinney Ave., Suite 1500, Dallas, TX 75201; email:

Karen Zupko is president of KarenZupko & Associates Inc. (KZA), which has been advising and educating physicians about the business of medicine for more than 30 years.


Disclosure: Zupko reports that her firm develops and delivers the annual coding and reimbursement workshops for the American Academy of Orthopaedic Surgeons, and that the E/M Profile Analyzer is a product developed and sold by KZA.