Aug. 25, 2009 at 7:00 AM ET
Scott Fedyshyn and his wife recently brought home a bouncing baby boy -- and an unexpected $600 medical bill. But Fedyshyn, a trained billing consultant, fought back. He demanded itemized bills from his doctor explaining each charge, and why his health insurance wouldn't cover some items.
Soon, he got another statement from the doctor's office – but this one came with a $20 refund check.
Billing errors are common, experts say. Double-billing, typos, upselling, and outright fraud add up to big unexpected medical bills for consumers -- even those who think they are fully covered by insurance. A complex web of bills, forms, and other paperwork mean a lot of Red Tape for health care, and often leads to overpayment by consumers.
Fedyshyn's tale is typical, and simple. A few weeks after the birth of his son, now 10 weeks old, he received the bill.
"It said, 'Amount due: $600.' And there was no real explanation for it," the 29-year-old from Virginia said. "I said I wanted a line-by-line breakdown of what was not covered and why."
When he received the breakdown, the reason for the discrepancy was obvious: an ultrasound image of the baby that insurance refused to pay for. The physician's billing department had coded the procedure as if the Fedyshyn family had requested an extra – and unnecessary -- baby image during their initial visit. But in fact the doctor had ordered it because their child was facing the wrong direction when the first "picture" was taken, and the doctor wanted a second look.
"So it should have been covered," Fedyshyn said. "After going back and forth a bit, it was changed."
These kinds of small errors in billing and coding can lead to big bills for patients, said Candy Butcher, CEO of the Medical Billing Advocates of America. Her firm trains advisors who sell medical billing audit services to consumers. Most work on contingency basis, taking 20 to 40 percent of the refunds they earn for clients.
"Eight out of 10 bills we see have some error," she said.
Harvard Professor Malcolm Sparrow, author of "License to Steal: How Fraud Bleeds America's Health Care System," said many medical bills seem arbitrary.
"Insurance companies and medical provider billings seem to bill on the basis of 'let's just see what we can get away with,' knowing that many consumers are too timid to question them," he said. Recently, when he questioned a bill, he was immediately offered a $200 discount as a "professional courtesy."
"I took it as sure evidence that (the provider) knew the original bill was unjustifiable," he said. "A sign of how aggressive the billings are would be the apparent ease with which they back off and adjust their demands when called to justify them."
All about coding
Errors can occur in many ways. In Fedyshyn's case, the doctor's office had incorrectly described its treatment to the insurance company when it "coded" the procedure. Each separate medical procedure, treatment, or drug given to a patient is recorded by the doctor or hospital in software, boiled down into a short numeric code. When providers miscode, insurance companies often reject the bill, and the patient can end up paying the difference. It can be easier for doctors to send patients a bill than to resubmit insurance claims.
Robert Tennant, senior policy adviser for the Medical Group Management Association – a trade group that represents physicians – said it's hardly fair to lay the blame for overbilling on doctors. The complexity of billing procedures is a breeding ground for mistakes, he said.
"With the thousands of health plans, complications galore, the lack of standardization, it's inevitable that this is going o be the outcome," he said.
Here's one glimpse of the tortured billing process doctors face. After a visit, doctors code a patient's ailment using a standard called ICD-9 (International Classification of Diseases). Currently, doctors must choose from about 17,000 possible codes. There are nearly 10 codes just to signify an ankle sprain, for example. But such coding can still be inexact, and many ailments must be squeezed into one designation or another. It's obvious how errors might occur.
In an effort to improve the precision of the codes, the Department of Health and Human Services (which manages the coding standards with Medicare) has added a host of new designations – there will be 155,000 possible code diagnoses soon. The new system will allow for recording of far more granular details: for example, whether a laceration to the head was caused by an ice hockey stick or a field hockey stick. Doctors must implement the system by 2013. An average small doctor's office will have to pay $84,000 just to upgrade their systems to handle the new coding scheme, Tennant said.
"It's a very complicated process," Tennant said. "And it's going to get even more complex." Blue Cross and Blue Shield, for example, expect coding errors to increase 10 to 25 percent in the first year of the new system.
The penalty to physicians for incorrect coding is severe: Generally, insurance companies will deny all claims with coding mistakes. And that's just one of the roadblocks to payment that can spring up along the way. Others abound. There are, for example, about 1,200 potential claim forms used by health insurance companies. So while doctors must wait until long after they have provided care to receive payment – try that with your auto mechanic – consumers end up utterly confused when they look at their bills, and often don't even know how to begin questioning costs.
"What we're getting at is the question of transparency," he said. "As a patient, you might ask, 'Why can't I just see how much it costs for a medical procedure?' Well, because it's very obscure even for the provider … and the reality is because it's so complicated errors do occur."
RED TAPE WRESTLING: Four steps to fair billing
Fedyshyn, who managed to get a refund from his physicians, knew the right questions to ask because he's a consultant who challenges balance sheets for a living. But many consumers just pay their bills, happy to be healthy and feeling they don't have the expertise to challenge complex hospital stay bills, Butcher said. Many consumers could do just as well as Fedyshyn, however, if they took a few simple steps during and after their medical treatments, she said. Her tips:
Naturally, many consumers are in no position to track all these things during their health care stay. But the original doctor's orders for all procedures should be available to a patient through a request for medical records. Many times, patients should request those records after they receive their initial Explanation of Benefits (EOB) form from their insurance company, which show what costs are covered by insurance and what kind of bill to expect from the doctor or hospital.
Once a discrepancy is suspected or found, Butcher recommends patients go directly to the supervisor of the billing department at a hospital. She suggests patients send a certified letter with evidence of the error, and state clearly a desire that the item be placed "in dispute" and a request for a "30-day hold" on the payment process. That should stall any potential collections activity while the dispute is worked out.
Don't be afraid
Challenging a doctor's bill is easier said than done, however. Many consumers feel reluctant to challenge their physician's authority, particularly if they have an ongoing relationship with him or her. Even Fedyshyn said he'd gulped hard after raising an issue with a different pediatrician over tests that had been ordered which weren't covered by insurance.
But Butcher said that shouldn't be a concern. Virtually all doctors she's worked with have been helpful when errors are brought to their attention.
"Physicians most of the time have no idea what goes on with the billing process. ...This has nothing to do with the care that is provided," she said. "It has to do with people hired to work in the billing department and the coding of items. When we bring things to the attention of physicians, they have been more than willing to adjust it off the bill or give some kind of credit. So people should not be afraid to bring it up to their physician."
Naturally, most consumers don't pay a lot of attention to hospital bills unless their explanation of benefits statement indicates they will face a big out-of-pocket expense. But Butcher said patients should scan their bills carefully even if they are fully covered. It pays to watch out for overpayments by the insurance company, she said. Why?
Consumers can run into annual caps and find themselves forced to pay at the end of the year -- or worse.
"Most policies have a lifetime cap, and if you have a terminal illness, it's very easy to meet that lifetime maximum," she said. "Even though it may not benefit you financially now, you should still look over those bills. If the insurance company pays something they should not have, in the long run, that could hurt you, too."