E&M Codes (Part I): The Demise of Value

Robert P. Nirschl, MD
Article Type: 
Feature Article
May/June 2000
Volume Number: 
Issue Number: 


The revolution in health care financing and its impact on health care services itself has approached a watershed moment. American society has reached a critical position because of a momentous shift in financial control from the user of the medical service (e.g., the patient) to a third party payer (e.g., management company or government) who is the purchaser but not the user of the medial services in question.

This shift in the financing paradigm extends far beyond the espoused goal of societal cost control to the very core and tradition of medical practice as articulated by Hippocrates to physicians, approximately 360 B.C. The essence of the Oath of Hippocrates is doing what is in the best interest of the individual patient. The current sacrifice of this time-honored concept to the altar of societal collectivism has adopted many forms from private sector managed care rationing to regulatory government intervention including mandated documentation criteria for physician supplied medical services. One of the most onerous of the ever-expanding regulatory governmental actions is the establishment of evaluation and management documentation for physician office services. The current format of the documentation model is designed to neatly fit into a computer coding system and is named with the acronym E&M codes. The stated purpose of these regulations as articulated by government is to control fraud and abuse. It is clear however that the collectivist goal of societal cost control is the real agenda. It should be noted that delivery of medical services is individual not collectivist, therefore constant irreconcilable conflict is the inevitable result.(1)

The E&M codes assume greater oppressive persona with the confluence of a segment of the 1996 Kassebaum-Kennedy Bill which criminalizes any miscoding of medical services.(2) Control of the criminalization process resides with the Health Care Financing Administration (HCFA) section of Medicare. HCFA in fact has been granted the power of police, judge and jury with an Inspector General who functions in a manner similar to that of the Internal Revenue Service (e.g., the accused is guilty until proven innocent).

Any objective review exposes these recent regulatory steps as both an ideological and punitive assault on both physicians and the delivery of medical services, and has had a chilling and negative effect on the physician community. It is highly likely that the evolving demise in the quality and access of medical services for the Medicare population as currently observed by the medical community will accelerate as the full burden of the E&M codes become manifest. As quality and access diminish, it is axiomatic that long term costs both in patient medical outcomes and financial burden will increase.

Key Issues

Understanding what physicians do and how they are paid is critical to any analysis. The specific issue of this policy analysis is coding evaluation and management (E&M codes) physician services. It appears that HCFA and the government in general have decided that physicians are both overpaid for their services and have been committing unprecedented fraud and abuse. This in spite of a recent report by the Inspector General (IG) of HCFA that most physician errors in billing are primarily staff errors rather than fraud.(3) It should be noted, dependent upon circumstances, that current physician Medicare fees are now approaching, have reached, or are below the level where the costs of delivering quality medical service exceed the payments received. This situation when observed from the perspective of the practicing physician is now resulting in altered medical service in both quality and access. Elderly and infirm Medicare patients who often require increased physician time and resources magnify this unfortunate trend.

Other concerns of the medical community also run deep. This is particularly true of recent government approaches to criminalize the delivery of medical services by imposing oppressive financial and criminal sanctions on physicians accused of fraud whether wrongly or rightly. These sanctions, contained in the Kassebaum-Kennedy 1996 legislative language include fines of up to 3 times the amount presumed to be falsely claimed, $10,000 fine for every adjudged improper activity, exclusion from the Medicare program, and in some instances prison time.(2) Although HCFA dismisses physician concerns as overreaction, the threats are real and have culminated in the production of a 12-page physician education pamphlet by the American Medical Association (AMA) on September 25, 1997 entitled "Federal Fraud Enforcement --- Physician Compliance."(4) Instructions to field agents on how to investigate physicians in a Justice Department manual are even more onerous.

In response to the criminalization issue, an entire industry has developed concerning billing codes. National organizations such as Conomikes Associates Inc. have developed billing strategies including the special report, "A Blueprint for Documenting Your E&M Services."(5) Indeed the AMA itself has formed a collaborative alliance with HCFA to develop other educational manuals such as Documentation Guidelines for Evaluation and Management Services.(6) This collaboration has in fact created an uproar of AMA grassroots constituent physician members both for the concept of JAMA collaboration as well as the product itself (e.g., the E&M documentation guidelines).(6),7

Background History

A 1998 editorial by Allan Briett, M.D. focuses nicely on the background history of the E&M code debacle.(8) In fact a relatively simple and satisfactory Medicare billing system was in place up to 1991. The included levels of evaluation and management medical service required only 4 pages in the 1991 AMA edition of Current Procedural Terminology code book (CPT 1991).(9) Conscientious physicians had no difficulty with the system and there is no difficulty in tracking normal billing practices by computer profiles controlled by HCFA. Indeed current computer systems make the tracking of outlier billing practices even easier to detect.

The reasons and impetus for a more complex system is multi-factorial but seems to reside primarily with the government (especially the U.S. Congress with mandate to HCFA) and a non-surgeon segment of the physician community (e.g., family practice, internal medicine, and pediatric physicians). The goals of Congress appear to be increased cost control and the concerns of the self-appointed, non-surgeon physician groups appeared to be dissatisfaction with a perceived inequitable reimbursement system.(10) The eventual new HCFA payment system was modeled on a program entitled Resource-Based Relative Value Scale (RBRVS) developed at the Harvard School of Public Health.11,12 The net effect of these Harvard research studies categorized both office-based E&M and surgical physicians' services within the medical specialties on a common scale.(13)

The final link in the process was the response by HCFA to a mandate by a congressional commission (Physician Payment Review Commission) that new physician billing codes should be understood clearly and assigned unambiguously by providers and payers.(14)

In 1992, HCFA introduced the new confusing and complicated guidelines taking 44 pages in the 1992 CPT code book.(15) Surprisingly these complex guidelines were developed in collaboration with the AMA. This expanding relationship between the AMA leadership, HCFA, and AMA-CPT editorial panel has subsequently resulted in increasing concern of grassroots AMA members and specialty groups.(7,16,17)

The May 1997 version of the Documentation Guidelines for Evaluation and Management Service is even more complex expanding to 54 pages including varying types of patient history, clinical exam, family history, decision complexity, numerous body areas and organ systems, physical exam types, diagnostic tests and explanations there of, and management options.(6) In spite of resounding rejection of the E&M coding approach by the overwhelming majority of physicians,(17) the AMA leadership and HCFA appear determined to press on.(18,19) Indeed in September 1998, the AMA Board asked the AMA-CPT editorial panel to resume consultations with HCFA.(20)

The Medical Record --- Distortion of it's Purpose 

In 1917, Henry Plummer M.D., the famed internal medicine pioneer at the Mayo Clinic, developed the modern day medical records system adopted by many medical institutions worldwide and still in place at the Mayo Clinic. The purpose of the medical record as perceived by Dr. Plummer and subsequent physicians is to enhance the quality and volume of patient care. Pertinent diagnostic facts and treatment approaches were recorded as reminders to the treating physician and any subsequent treating physicians. The record was inviolate and available only to treating physicians and the patient when deemed appropriate. With devolution over time, the medical record has been transformed from focus on the best interest and medical care of the patient to something very different.

The medical liability era initially changed certain aspects of the record to a medical legal document and as well altered the privacy of the record. The precedent of "if information is not recorded, it wasn't done" was also established. Thus, a quantitative dimension was added on or about 1955. These unfortunate precedents were further expanded approximately 1960 with the statistically significant expansion of third party financial control by insurance companies providing so-called health insurance products (a common misnomer as most health benefits programs are not true insurance products). Further expansion of third party control was initiated by government with the introduction of the Medicare/Medicaid programs of 1965 utilizing tax dollars for the purchase of medical services.

The era of quantification of the medical record has now advanced via CPT and E&M coding to the point were the primary purpose is as much or more a billing and medical legal document rather than a medical care record. In the process, patient privacy has totally eroded with the medical record, for all practical purposes, becoming a public document. In this regard I have personally treated patients who were unfairly denied health benefits coverage because of what was contained in the record (e.g., full access was available to the denying insurance company). This valid patient concern was a priority issue in the lawsuit of United Seniors Association v. Shalala (HHS) and HCFA concerning the right of independent contracting for medical services already covered by Medicare (e.g., the patient for privacy reasons wishes to pay outside the Medicare billing system).(21)

What Physicians Do

The delivery of medical services is qualitative rather than quantitative. Citing the game of dominoes in metaphorical terms, physician services align the dominoes in meaningful patterns rather than random quantitative accumulation. The successful physician-patient interface requires a meaningful intellectual process with data selection and focus directed to problematic areas. Irrelevant data is discarded in this intellectual process. Treatment protocols are then formulated on the basis of diagnostic conclusions with specific relevance to the presenting problems and are highly dependent upon the depth of medical information and experience of the involved physician.

Critical components of this process include not only defining the normal versus the anatomic and physiologic abnormal, but also in assessing patient emotional quotients as well as associated available social and financial patient support. Anything which distracts from these physician functions compromises value, is cost ineffective, and therefore derogatory to the best interests of the patient.


The delivery of medical services is being seriously and derogatorily affected by government regulatory action. The further shifting of the responsibility for cost control by the implementation of a cumbersome and criminalized E&M coding system will not reduce costs, or improve the quality of or access to medical services in an already flawed Medicare model. It is highly likely that such action will have the reverse consequences of increased costs, decreased medical value, and decreased access to medical services.

In Part II of this article, we will show that the current Medicare model is seriously flawed and requires serious reform. In the interim it is best to return to pre-1992 qualitative system of coding for physician services. It is appropriate for Congress and HCFA to seek approaches to control fraud and abuse that does not devalue the quality of medical services or limit legitimate access to such services. It is recommended that these efforts be done in consultation with practicing physicians of all medical and surgical specialties rather than isolated reliance solely on government selected organizations purported to represent such physicians.


1. Nirschl R. The Rise and Fall of HMOs. Medical Sentinel 1997;2(4):137.
2. Kassebaum-Kennedy Bill. Health Insurance Portability and Accountability Act. Signed into US Law on August 21, 1996. Public Law 104.91 - Special reference p. 2014.
3. IG audit found errors not fraud in Medicare claims. American Academy of Orthopedic Surgeons Bulletin, p. 13, June 1998, Rosemont, IL., pp. 1-12.
4. Federal Fraud Enforcement --- Physician Compliance. Office of General Counsel, Health Law Division, Chicago, IL. AMA, Sept 25, 1997.
5. A blueprint for documenting your E&M services. Special report Conomikes Medicare Hotline Los Angeles Calif. Vol. 4 (11) p. 1-13, October 1995. Conomikes Associates, 6033 W. Century Blvd., Los Angeles, CA 90045.
6. Documentation guidelines for evaluation and management services. AMA and HCFA Educational Manual, pp. 1-54, May 1994.
7. Indefinite delay in E&M. At AMA fly-in, HCFA pledges cooperation, improvement on Medicare guidelines. AMNews 1998;41(18):1.
8. Brett AS. New guidelines for coding physicians' services - a step background. N Engl J Med 1998;339(23):1705-1708.
9. CPT 1991. Physicians Current Procedural Terminology, pp. 12-16 (Evaluation and Management Services), Chicago, IL. AMA 1990 Current Procedural Terminology, AMA, 3rd Edition.
10. Lesy JM, Borowitz M, McNeill S, London WJ, Savord G. Understanding the Medicare for schedule and its impact on physicians under the final rule. Med Care 1992;30:Suppl N580-N594.
11. Hsiao WC, Brown P, Dunn D, Decker ER. Resource-based relative values: an overview. JAMA 1988;260:2347-53.
12. Braun P, Hsiao WC, Becker ER, DeNicola M. Evaluation and management services in the resource-based relative value scale. JAMA 1988;260:2409-2417.
13. Braun P, Yntema DB, Dunn D. Cross-specialty linkage of resource-based relative value scales: linking specialties by services and procedures of equal work. JAMA 1998;260:2390-2396.
14. Physician Payment Review Commission. Annual report to Congress. Available from Medical Payment Advisory Commission, 1730 K St., N.W., Suite 800, Washington, DC 20006.
15. CPT 1992. Physicians Current Procedural Terminology. Special Supplement Evaluation and Management services excerpted from 4th Edition CPT 1992, pp. 1-54, Chicago, IL., AMA, December 1991.
16. Orthopedic surgeons voice anger over HCFA's rules for fraud and abuse. Medical Economics, Orthopedic Surgery Edition, pp. 24-25, May 1998.
17. House (AMA) rejects checklist approach for E&M guidelines. AMNews 1998;41(24):1.
18. House (AMA) Cements E&M Opposition. Outrage summarizes how physician delegates to AMA feel about evaluational management coding guidelines. AMNews 1998;41(48):1.
19. HCFA begins slow move to E&M revisions. AMNews 1998;41(38):3.
20. AMA tiptoes across the high wire on E&M guidelines. AMNews 1998;42(43):1.
21. United Seniors Association Inc., appellants v. Donna Shalala, Secretary of HHS, appellee, No. 985142 in United States Court of Appeals for the District of Columbia Circuit, Oct. 23, 1998, Washington, DC.

Dr. Nirschl is an orthopedic surgeon in Arlington, Virginia and a member of the Editorial Board of the Medical Sentinel. His e-mail is: nirschl@erols.com.

Originally published in the Medical Sentinel 2000;5(3):102-103, 110. Copyright ©2000 Association of American Physicians and Surgeons.

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