Five E/M payment integrity trends to watch
Jonathan Edwards and Richard Wheeler, M.D.
Evaluation and management (E/M) services are the backbone of the U.S. healthcare system. E/M codes are used for evaluating and managing patients’ health related care in multiple settings including the Emergency Department, hospital inpatient setting, office setting, home services, and telehealth.
E/M services account for up to 30% of professional services billed and 49% of medical spend, depending on the line of business. E/M cost and utilization has grown faster than other healthcare services following the COVID-19 pandemic, driven in part by higher levels of acuity and greater accessibility via telehealth.
E/M claims represent a significant payment integrity challenge for payers due to the volume of services and criteria used to determine complexity of certain visits. In this first installment of the Cotiviti Payment Policy Insights series, we highlight five important trends around E/M and discuss the implications for payers and payment integrity programs. These insights are based on the analysis of a portion of Cotiviti’s Payment Policy Management client base representing more than 100 million covered lives, and are performed by experts in claim coding, medical and payment policy and analytics.
E/M spend and utilization are on the rise
E/M spend has accelerated following the COVID-19 pandemic, growing from 39% of professional spend in 2018 to 42% in 2023 (Figure 1). This growth in spending reflects an 8% increase in utilization and 29% increase in unit costs. In contrast, unit costs for other services increased only 13%.
Figure 1. E/M spend share of total professional claim type spend.
The increase in spend and utilization may be driven by several factors, including changes to E/M billing guidelines introduced in 2021. These changes were made to rely largely on time allotments to categorize services for care. As such, amounts of time billed are meant to reflect the seriousness of a diagnosis. However, this coding structure also makes it easier to bill higher simply for longer times spent with patients.
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E/M levels of care have increased
There is a noticeable increase in level of care billed across both professional and outpatient E/M claims. E/M codes at levels 4 and 5 are used for visits of 45 and 60 minutes, respectively, with the implication that the time accounts for the seriousness of the diagnosis.
According to Cotiviti data, there was a 5% increase in use of Level 4/5 codes on professional E/M claims from 2018 to 2023, while Level 1–3 claims saw a decrease (Figure 2). Among commercial claims only, the increase in Level 4/5 codes was 7%.
Figure 2. Distribution of Professional E/M Claim Lines by Level of Care.
Across outpatient E/M claims from 2018 to 2023, there was a 10% increase in use of Level 4/5 codes (Figure 3).
Figure 3. E/M Level of Care distribution for outpatient claim type.
Telehealth services also reflect increased acuity across claims, with a 13% increase in use of Level 4/5 E/M codes on telehealth claims from 2020 to 2023 (Figure 4).
Figure 4. Increase in level of care 4/5 share in telehealth E/M claim lines.
There is a possibility that the billed level of care increased over time due to the coding changes in 2021, with providers billing E/M claims at higher levels for longer time spent on each member. With less documentation to provide per patient and an increased reliance on time spent per service, providers may be unintentionally billing higher simply because it is easier to do so.
An increase in higher-acuity visits related to COVID-19 may also be a cause of the rise in spend and utilization, as members continued to seek care for more serious COVID-19 symptoms or even the management of cases related to long COVID-19. For example, research suggests that 5–10% of those affected by COVID19 were likely to develop a case of long COVID-19 over time.
Finally, treatments simply could be reflective of an aging population that is getting treatment for more complex medical issues.
E/M over-coding still remains an issue
The rise in E/M level of care may also reflect an increase in E/M over-coding, a known industry problem and important payment integrity area for health plans. Cotiviti’s E/M over-coding analysis shows that 30% of all E/M procedures are billed at an inappropriately high level, and one in every four providers over-codes E/M services more than 50% of the time.
These errors can be difficult to spot due to the time-related nature of these E/M claims, but an editing program can help. For example, payers deploying Cotiviti’s E/M over-coding payment policy saved an average of >$8M medical spend per year with <5% adjustments.
Whether driven by the uptick in claims, the rise in level of care billing, more payers adopting Cotiviti’s program, or a combination of these factors, Cotiviti has seen a 64% rise in E/M edits per submitted claim line over the last five years (Figure 5).
Figure 5. Increase in over-coding from 2018–2023.
Commercial E/M telehealth shows no slowing since the pandemic
Telehealth has made E/M services more accessible and is now responsible for a sizable portion of E/M claims submitted. Commercial plans are leading the trend with 15% of E/M services delivered via telehealth and sustained utilization following the pandemic (Figure 6).
Most commercial plans have continued to expand telehealth services, and anticipate telehealth visits will continue to rise. In contrast, government plans (Medicare, Medicaid) have experienced a shift away from telehealth E/M (Figure 6), possibly due to Medicare reinstating telehealth rules temporarily suspended during COVID-19.
Figure 6. Telehealth contribution to E/M spends by lines of business.
Payment integrity opportunities on E/M claims have increased
Cotiviti data shows E/M payment integrity issues are on the rise, reflected by an over 50% increase in edits per E/M claim line over six years, compared to a 4% increase for other professional procedures.
As billing errors on E/M procedures increase and regulations make claims less straightforward, plans should focus on optimizing their E/M payment integrity policies. This is challenging because E/M claims are prone to many types of billing errors and are billed by an array of providers. Figure 7 shows Cotiviti’s top five payment policies editing E/M procedures, with most showing an increase in edit rate over six years.
Figure 7. Top policies’ contributions to total E/M edits
and % change in edits per 1000 lines.
The cost and utilization of E/M services, a cornerstone of the healthcare delivery system, has increased notably over the last few years. These trends are driven by a variety of factors including changing billing guidelines, higher patient acuity, health complications from COVID-19, and the rebound of elective procedures post-pandemic. Due to the high volume and complexity of E/M services, it is important for health plans to implement payment integrity policies that minimize inappropriate E/M payments.
Cotiviti has a broad library of payment policies and decades of experience helping health plans improve payment integrity of E/M claims. Cotiviti’s E/M Overcoding Policy is among the top Payment Policy Management policies editing professional E/M claims. The number of clients deploying this policy has doubled over the past six years while the adjustment rate has remained relatively stable at approximately 5%.
If you have questions about these or other trends, please reach out to your Cotiviti Client Engagement representative.
About the authors
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Jonathan Edwards Jon leads a talented team of analytic professionals that deliver actionable insights powering Cotiviti’s most important growth opportunities. With more than 15 years of healthcare analytics and consulting experience, Jon harnesses the power of data to develop leading-class analytic products and services that inform decision-making, accelerate growth, and differentiate Cotiviti’s value proposition. |
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Dr. Richard Wheeler, M.D. Dr. Richard Wheeler has spent decades in the healthcare industry, with more than 15 years as a physician and decades of experience with health industry businesses. He has been with Cotiviti for 13 years. |