Paccar Hall, Room 292

SPEAKER: Paul Pavlou
AFFILIATION:  Temple University
AREA:  Information Systems

TITLE: 
Do Electronic Medical Record Systems Inflate Medicare Reimbursements

ABSTRACT:
Electronic Medical Record (EMR) systems allow physicians to automate the process of entering data in patient records compared to paper-based records. However, this automation can be used by hospitals to inflate their reimbursement requests from Medicare by overstating the true complexity of patients’ diagnoses (termed “upcoding”). The EMR module that was alleged to facilitate upcoding is the Computerized Physician Order Entry (CPOE) system, which populates patient charts with default templates and allows physicians to copy and paste data from other patients’ records. To combat upcoding, the Centers for Medicare and Medicaid Services (CMS) implemented the Recovery Audit Program that was gradually implemented across different states in the US between 2004-2010 and nationwide starting from 2010. In this study, we examine if the adoption of CPOE systems by hospitals lead to an increase in the reported patient complexity that hospitals report to Medicare, and if this IT audit program attenuated this practice. We find that, on average, the adoption of CPOE systems increases patient complexity reported by hospitals significantly, particularly for-profit hospitals, estimated at a $380M of inflated Medicare reimbursements per year prior until the complete roll out of the IT audit program. Interestingly, after the full nationwide implementation of the Recovery Audit Program in 2010, the average hospital with CPOE systems saw a decrease in their reported patient complexity. Notably, the auditors who developed the capability to identify the use of default templates and cloned records were most effective in combating upcoding. The findings indicate that the very same IT system that can enable upcoding was also used by IT auditors to combat the upcoding practice. Contributions to healthcare theory, practice, and public policy to mitigate inflated Medicare reimbursements from taxpayers’ dollars after the adoption of EMR/CPOE systems are discussed, along with implications for the IS literature on how IT audit can prevent the misuse of information systems.