How The Health Care Billing Coding System Gets Gamed

How Money Gets Wasted and Shuffled in The 3rd Party Payer Model
How Money Gets Wasted and Shuffled in The 3rd Party Payer Model


September of 2014 I replied to a blog post from Sean Parnell’s site called “The Self-Pay” patient.  I recommend folks interested in market accountability for health care follow his posts.

Since I recently am out in solo practice I am getting rapidly re-aquainted with the heinous behaviors by the biggest payer in my practice, namely Medicare.  Last Sunday’s blog illustrated how difficult things have become due to bureaucratic overload.  To see more vivid details regarding the payment process and all the pitfalls/inefficiencies of this “game” read my reply to Mr. Parnell’s blog regarding a 20 thousand dollar bill someone got from an ER visit involving a CT scan on an injured child.


I am practicing medicine now for just over 20 years. Your blog is going to cause me to go into some detail- here goes! This past year I have been watching the random ways in which CMS/Medicare uses the coding system to deny or lump services together thus lowering my office reimbursement.

The corollary as your blog and the WJS article points is out is that providers and especially hospitals look to the coding system to “game” for maximal reimbursement.

It is my conclusion presently that the coding system as developed (in collusion with the AMA, government and all other active participants) is touted as the way to avoid fraud. The irony is that it has become the tool by which fraud is committed. The government commits fraud each minute (claims are submitted continuously) by creating random unforeseen “rules” of not recognizing prior established coding rules (changing the rules on the fly) and thus reducing reimbursement by decree. The government further commits fraud by creating the laws that eliminated a free market for our services. Most people do not understand that Medicare providers (virtually 98% of doctors in this country presently) cannot collect any revenues above the prices fixed/set by decree each year. This price fixing is what is actually harming access so terribly. PPPACA/Obamacare is/will make this worse in spades.

Evidenced by the “coding education industry”, providers, the pharmaceutical industry and as in the cases outlined in the article, hospitals commit fraud by pigeonholing services into a code that provides for maximal payment. The perpetrators feel entitled to this activity because of the “free rider” principle. By placing the service into a code, then asking a large, faceless pool (called Medicare or Health Insurance) to pay for it the myth of “someone else is paying”, the free rider principle thrives. The truth is the risk is all born by the collective (high costs of taxes for health and now mandated health insurance) and the profits go to the various participants in the market. I say to this “no thanks” and your website and terrific book The Self-Pay Patient is saying the same.

To those concerned, it is my experience that your hospital bill is never accurate. Hospitals intentionally place their billing services off site -usually in another totally different geographic area. They only supply numeric codes for their initial bill and most insured people never make the significant effort to find out what the code is describing. If they do often they will have a bone to pick with the submitter. Certainly they will recognize inexplicable fees for the experience they encountered. Granted it is impossible to place a number on a life-saving service but doctors do this routinely and don’t charge inexplicable fees. Quick pointer: if you want to commit fraud, commit confusion. Going further into the model, the various cost centers (take the ER in this case) don’t actually have a collections department or billing department. By removing any incentive to collect or explain their services, the customer is again moved additional steps from the actual service experience, allowing the confusion factor to multiply. Now add the time element to this confusion recipe. You don’t get to see a bill when you leave, rather it shows up in the mail weeks to months after your care. I hope this is starting to place some light on the subject.

In my office it is simple, Medicare patients get charged what Medicare allows, I have no say in the fee. My ability to participate in this market is waning fast due to insufficient revenues for the work demanded. Eventually a bad customer has to be asked to leave; the government is pushing beneficiaries into this category. Demanding balance billing to return will remedy this problem (AMA”s My Medicare policy for instance).

Then I have the rest of the market/patient base. I post my basic services and prices/fees on my website. These are the fees I need to maintain a healthy and viable medical practice. My staff collect at the time of service. This means any billing errors are brought to light at the time of the exchange and corrected. Payment is settled and then my office will submit your claims history to your insurance if you have insurance. I have no time nor interest trying to satisfy the unreasonable administrative burdens and restrictions for the experience of delayed care and payment, fraudulent payment schemes constructed by the various health insurance options.

Going forward we are experiencing the two tiered system. Bureaucracy vs private market. On the private side, I see the possibility of lowering my prices if I can harness technology to allow the removal of redundancy (paperwork for histories, billing, etc), and to enhance services (disease specific education, screening/monitoring options). By offering and providing enhanced services patients will have more efficient, comprehensive care at a lower, more affordable price. In order for that to happen, I need the rules and regulators to get out of the exam room and office. Continuing to go along with the various political and insurance based recommendations will only harm the situation further for the actual patient.

The market participants need to have the opportunity to recognize their needs, wants and budgets and then maximal supply and demand efficiency can be delivered