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E/M: Physician Versus Facility

An article By Jackie Miller, RHIA, CCS-P, CPC, PCS, from the March/April issue of HBMA Billing

A physician practice biller who was concerned about possible inappropriate billing practices at a local hospital contacted a coding consultant. One of the biller's physicians saw a patient in the hospital's outpatient clinic, and the biller was horrified to discover that the hospital had submitted an Evaluation and Management (E/M) code to Medicare for the clinic visit. She explained to the consultant that this was clearly fraudulent billing because only physicians can use E/M codes, and she questioned whether it would be appropriate for her to turn in the hospital to the Office of Inspector General.

Hopefully this anecdote made you chuckle because you already knew that it is appropriate for hospitals to use E/M codes, but you may not be familiar with the unique ways in which E/M codes are used in the hospital setting. In this column, we will take a quick look at how E/M coding for hospitals differs from E/M coding for physicians.

Physician E/M Services

The CPT® Evaluation and Management codes were designed to report physician services. They represent cognitive, non-procedural professional services, including taking a history, performing a physical examination, ordering and evaluating the results of diagnostic tests, and determining a plan of treatment.

Since 1992, E/M codes have been defined in terms of three key components (history, examination, and medical decision- making). In order to report a given level of E/M service, the physician must document key components that meet or exceed those specified in the code's definition (there is an exception for encounters that consist primarily of counseling or coordination of care). Depending on the category of service, the code may require either two or three of the key components. For example, a level 2 new patient office­­/outpatient visit (99202) requires all three of the following: expanded problem focused history, expanded problem focused examination, and straightforward medical decision making.

Hospital E/M Services

Hospitals use CPT and HCPCS level 2 codes to report outpatient services. These codes are the basis for hospital reimbursement under the Medicare Outpatient Prospective Payment System (OPPS). In particular, hospitals use CPT E/M codes to report clinic visits, emergency department visits, and outpatient critical care services. Although most critical care services are provided to inpatients, there are instances when a patient receives critical care on an outpatient basis in the emergency department and is then transferred to another institution without being admitted as an inpatient.

When CMS first began requiring hospitals to report E/M codes in April 2000, the agency was aware that the CPT E/M code definitions are not suited for hospital use. When billing for a clinic visit, for example, the hospital is charging for the use of facility resources, such as the room, supplies, and nursing time. These items do not necessarily correlate with the extent of the physician's work as reflected in the three key components. In the August 23, 2006 Federal Register, CMS acknowledged that the E/M codes "were defined to reflect the activities of physicians and do not describe well the range and mix of services provided by hospitals during visits of clinic and emergency department patients and critical care encounters." Depending upon the circumstances, two clinic visits where the physician documented the same E/M service might reflect very different levels of hospital resources.

Because the three key components are not useful for classifying levels of facility resource use, CMS initially planned to develop a set of criteria that all hospitals could use to determine the level of E/M service for each encounter. However, this proved to be a much more challenging project than the agency anticipated. For example, it is unlikely that hospitals could use a single set of criteria for classifying services as disparate as emergency department visits, oncology clinic visits, and wound care clinic visits.

While CMS was considering how to proceed, hospitals were busy creating their own systems for classifying visit services. Many hospitals used a classification system developed by the American Health Information Management Association (AHIMA) as a starting point, customizing it to fit their own needs. Eventually, in the 2008 OPPS Final Rule, CMS issued some general guidelines for hospital visit classification systems. For example, the hospital's system must "reasonably relate" the intensity of hospital resources to the different levels of E/M services, so that the more hospital resources are used, the higher the E/M level will be.

Here are a few examples of factors that hospitals might consider in determining the level of a visit:

  • Administration of medication
  • Bedside testing, such as dip stick urinalysis
  • Insertion of a nasogastric tube
  • Catheter care
  • Frequent monitoring (e.g., vital signs every 15 minutes)
  • Social service intervention
  • Extended patient education
  • Application of an elastic bandage or sling
  • Supervision of a patient threatening self-harm

Clearly, these factors are very different than those that determine the level of the physician E/M service.

Currently, CMS has suspended work on a national set of facility E/M guidelines. The agency noted in the 2012 OPPS Final Rule that hospitals are billing for a fairly stable distribution of E/M services, so it appears that the hospitals' internal guidelines are not causing any significant skewing of E/M levels.

One other unique aspect of hospital E/M services is worth mentioning. Just like physicians, hospitals must distinguish between new and established patients when billing for clinic visits. However, their definition differs from that of physicians. In the physician realm, a new patient is one who has not received professional face-to-face services from the same physician, or from another physician of the exact same specialty and subspecialty from the same physician practice, within the past three years. For hospital purposes, on the other hand, a new patient is one who has not been registered as an inpatient or outpatient of the hospital within three years prior to the current visit. The rationale is that patients who have been registered within the past three years will have an existing medical record and database.


It is easy to see that, although E/M codes are used by both physicians and hospitals, there are dramatic differences in the way they are assigned. There are many instances when both the hospital and the physician will choose an E/M code for the same encounter – for example, when the patient is seen in an outpatient clinic or emergency room – but frequently the E/M codes will not be the same. The differences in the E/M levels are entirely appropriate and should not come as a surprise to anyone who has a working knowledge of both reimbursement systems.

Related Searches: E/M code, CPT, Evaluation and Management code