Nothing strikes fear in the heart of a hospital compliance officer like receiving a medical record request from the Office of Inspector General (OIG). Now, with the OIG’s recent report on its review of Medicare billing by a Midwestern academic medical center, the prospect of such a review is even more terrifying.
Based on an extrapolation of its findings from a review of 228 claims, the OIG concluded the University of Cincinnati Medical Center (UCMC) owes $9.8 million for overpayments received in 2010 and 2011.
For reasons not explained in the report, the OIG chose to review “Top Ten” claims submitted by UCMC in 2010 and 2011. Through computer matching, data mining, and data analysis techniques, the OIG has identified the following ten types of hospital inpatient and outpatient claims that pose a high risk for noncompliance with Medicare billing requirements:
1. Inpatient short stays
2. Inpatient claims paid in excess of charges
3. Inpatient claims billed with high-severity-level DRG codes
4. Inpatient and outpatient manufacturer credits for replaced medical devices
5. Inpatient transfers
6. Inpatient psychiatric facility (IPF) emergency department adjustments
7. Inpatient claims for blood clotting factor drugs
8. Outpatient claims with payments exceeding $25,000
9. Outpatient claims billed with evaluation and management (E&M) services
10. Outpatient claims billed for Doxorubicin Hydrochloride
According to the report, Medicare paid UCMC $256 million for 16,674 inpatient and 98,043 outpatient claims during this two-year period. The OIG’s audit covered $22.8 million in Medicare payments for 2,742 “Top Ten” claims submitted by UCMC in 2010 and 2011.
Of the total number of “Top Ten” claims, the OIG selected for review a stratified random sample of 228 claims (169 inpatient and 59 outpatient) with payments totaling $3.3 million. The OIG auditors found billing errors on 127 of the 228 claims and calculated the net overpayment as $603,267. Nearly all of the overpayment was attributable to inpatient billing errors; only one-half of 1% related to outpatient billing errors.
With respect to inpatient billing, the vast majority of the overpayment – nearly $400,000 – related to short stays that should have been billed as outpatient rather than inpatient services. The OIG noted that UCMC “may be able to bill Medicare Part B for all services (except for services that specifically require an outpatient status) that would have been reasonable and necessary had the beneficiary been treated as a hospital outpatient rather than admitted as an inpatient.” The OIG, however, did not reduce the total overpayment, noting it would not have enough information to do so unless and until such Part B services are billed by the hospital and adjudicated by the Medicare administrative contractor.
Two other “Top Ten” errors had significant price tags: claims paid in excess of charges ($153,000) and claims billed with high-severity-level DRGs ($130,000). Other identified errors included manufacturer credits for replaced medical devices, transfers, and psychiatric facility emergency department adjustments.
Without an explanation of how it made the calculation, the OIG extrapolated that UCMC received net overpayments totaling at least $9,818,296 for 2010 and 2011. This represents nearly half of the total amount UCMC received in payment for “Top Ten” claims during the same period.
The OIG expects UCMC to repay this nearly $10 million to the Medicare program. Presumably, the total overpayment will be reduced somewhat once UCMC bills and receives payment for Part B services as explained above, but the amount remains staggering.
According to the OIG, “[t]hese errors occurred primarily because [UCMC] did not have adequate controls to prevent the incorrect billing of Medicare claims within the selected risk areas that contained errors.” For the short stays, the OIG identified three specific weaknesses in UCMC’s internal controls: (1) lack of documentation to support the physicians’ clinical decisions to admit patients; (2) physicians’ non-receptiveness to the involvement of case managers; and (3) interpretation of third-party vendor services.
With respect to improper billing for high-severity-level DRG codes, the hospital acknowledged some of these errors were the result of mistakes made by hospital staff. Although mistakes were made on a small number of claims, the alleged lack of adequate oversight had a significant financial impact given extrapolation of the error rate over a larger number of high-dollar claims.
For UCMC, the OIG’s “Top Ten” list billing errors stands to cost the organization nearly $10 million, an amount hospital officials claim will have a “devastating effect” on its operations. In light of the OIG’s extrapolation of audit results, the importance of proper documentation, coding, and billing procedures cannot be overstated.
PYA can assist your organization in evaluating and enhancing internal controls and processes around each of the OIG’s “Top Ten” billing errors. Our professionals can assist in resolving internally identified overpayments and provide support in anticipation of and during government audits and investigations. For more information, please contact Nancy McConnell or Denise Hall at PYA, (800) 270-9629.