Medical Billing Errors are Alarmingly Common—and Patients Are Paying the Price

May 15, 2019
Payors, patients, and providers can work together to improve healthcare by supporting new technologies that improve medical bill accuracy

It’s a common scenario: a person needs an emergency medical procedure, resulting in a brief hospital stay. Months later, the patient receives an itemized bill that lists the fees for a dizzying array of treatments, medications, saline drips, and other line items, some of which are not covered by the patient’s insurance policy. Most people simply pay the amount due, no questions asked.

Insurance companies may scrutinize bills more closely, but they often don’t discover administrative errors or inconsistencies. Many, therefore, end up overpaying. The truth is that medical bills are often riddled with inaccuracies, many of which go unnoticed until after a provider has been reimbursed—if the mistakes are detected at all.

Whether they are the result of human error or intentional abuse of the system, erroneous medical bills increase costs and siphon money away from insurance companies and employers. Ultimately, the increased costs result in higher premiums for all of us. To help address skyrocketing healthcare costs, it’s critical for payers to establish a mechanism for examining—forensically and at scale—each and every medical bill, before payments are made to providers.

The Root of the Problem

Some studies estimate that four out of five bills contain at least minor errors, which can result in inflated medical charges. For example, an administrator might enter an incorrect diagnostic code indicating that a patient had an X-ray done on both legs, when, in reality, only one leg was imaged. Or because of a typo, a single saline drip registers as many more. Other common mistakes include entering incomplete or incorrect information for a patient or provider or accidentally billing for the same service more than once (known as duplicate billing). Information from the doctor’s notes may also get lost or misinterpreted by a billing department.

A small but significant portion of inflated medical bills are the result of fraud. Some providers have been accused of “upcoding,” or intentionally using incorrect billing codes that will generate increased payment for their services.

One example of upcoding is illustrated by the “facility fees” many emergency departments charge on top of medication and service expenses. The fees are coded on a scale of 1 to 5 to reflect the complexity of care delivered to the patient—4 or 5 representing critical, lifesaving procedures. But an investigation by Vox and the Health Care Cost Institute revealed that ER facility fees rose 89 percent between 2009 and 2015, largely due to minor treatments such as antibiotics and basic wound care being coded as high-complexity visits.

Patients Often Pay For These Mistakes

Oftentimes, a patient will see an in-network provider to get tests or treatment and assume those services are covered by insurance. If the health plan decides that certain medical services are not covered and, therefore, not reimbursable by the plan, the patient may receive a bill for all or part of the service that the insurance company says was not covered. This is one form of balance billing, a practice that is illegal in some cases, depending on the patient’s insurance plan and state insurance laws. Nonetheless, some patients still wind up paying the balance.

From both a health and financial standpoint, patients are most vulnerable during medical emergencies. Kaiser Health News reviewed 350 complaints from patients in 32 states and found that many patients were blindsided by hefty medical bills from out-of-network ambulance companies. In these cases, patients were often stuck paying hundreds, even thousands of dollars out of pocket with little to no recourse, even though they had no way of choosing which ambulance company to hire.

Another unfortunate trend known as “surprise” billing (a type of balance billing) occurs when patients go to an in-network hospital or healthcare facility and are unknowingly treated by an out-of-network clinician. Let’s say a patient needs an emergency appendectomy. The surgeon might be in-network, but the doctor who administers the anesthesia or the pathologist who later confirms the appendicitis are not in-network, resulting in thousands of dollars of unexpected medical bills. This can have a dramatic financial impact on patients -- many of whom do not realize they can contest the bills.

Consumer Protection is Critical

Coding errors can artificially inflate bills per visit or service, which can devastate consumers financially if procedures are not covered by their insurance plans. These common and costly mistakes highlight the need for insurance companies to adopt technologies that can improve accuracy and processes to ensure that all bills undergo expert scrutiny before providers are paid.

Providers can reduce errors by implementing software to automate their billing processes. This can substantially improve accuracy and cut down on the time and administrative costs associated with processing everything manually. Many providers are also opting to abandon paper billing and go electronic, linking their billing systems with electronic health records to reduce errors that occur when administrators misread handwritten notes.

There are also steps patients can take to avoid overpaying. For more complex cases like hospital stays and treatments, patients should ask for itemized versions of bills. They can then look up codes online using the Centers for Medicaid and Medicare Services website. As of January 1, 2019, CMS requires every hospital to publish online a list of basic procedures and care they provide and their costs, which offers a helpful reference.

Erroneous and inaccurate medical bills end up costing everyone—even providers, because mistakes often lead to claim denials that delay payment and affect cash flow. Insurance companies may pay the majority of the extra costs, but individual patients are often more directly affected by overcharges for premiums and medical care. Payors, patients, and providers can work together to improve healthcare by supporting new technologies that improve accuracy and by scrutinizing each medical bill for costly errors before it is too late to correct them.

Doug Klinger is the CEO of Zelis Healthcare

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