Deeper Than the Headlines—OIG Continues Their Hospital Compliance Reviews with the University of Michigan

For years, the OIG has been performing Hospital Compliance Reviews that are essentially data-driven billing analyses of inpatient and outpatient reimbursement. They base these reviews on risk areas that they identified during prior reviews at other hospitals.

The most recent review just posted by the OIG on Feb. 6, 2018 was performed on services from the University of Michigan’s Health System (the Hospital). Specifically, the audit covered $28,633,879 in Medicare payments to the Hospital for 2,582 claims that were potentially at risk for billing errors. These claims consisted of inpatient and outpatient claims paid to the Hospital for services provided to Medicare beneficiaries during CYs 2014 and 2015.

The OIG selected a stratified random sample of 181 claims with payments totaling $4,703,043 for review. These 181 claims had dates of service during the audit period and consisted of 139 inpatient and 42 outpatient claims.

For these claims, the OIG concluded that the Hospital complied with Medicare billing requirements for 108 of the 181 inpatient and outpatient claims. However, according to the OIG, the Hospital did not fully comply with Medicare billing requirements for the remaining 73 claims, resulting in overpayments of $1,294,130 for the audit period. Specifically, 65 inpatient claims had billing errors, resulting in overpayments of $1,279,439, and 8 outpatient claims had billing errors, resulting in overpayments totaling $14,691.

The OIG reported these errors occurred primarily because the Hospital did not have adequate controls to prevent incorrect billing of Medicare claims within the selected risk areas that contained errors. Based on their sample results, OIG estimated that the Hospital received net overpayments totaling at least $6,162,201 for the audit period and they recommended the Hospital return the total amount of $6.16 Million.

Let’s look at some of the specific examples identified by the OIG:

• Inpatient Rehabilitation Facility (IRF): For 37 of 45 sampled claims, the Hospital incorrectly billed Medicare Part A for beneficiary stays that did not meet Medicare criteria for the higher inpatient rehabilitation facility level of care (36 claims) and for an incorrect CMG classification (1 claim). The medical record documentation reviewed did not support the intensive rehabilitation therapy services that are uniquely provided in IRFs. The Hospital did not provide a cause for the errors because Hospital officials believe the claims met Medicare requirements.

The OIG did note, however, that thirteen of the thirty-seven claims partially met Medicare coverage requirements for the inpatient rehabilitation facility level of care. The medical reviewers found that these claims met medical necessity requirements but lacked complete preadmission screening documentation. These claims did not meet Medicare documentation requirements but had no monetary effect on their statistical estimation.

• Incorrectly Billed Claims Paid in Excess of Charges Under Medicare’s IPPS: Fiscal intermediaries reimburse hospitals a predetermined amount for inpatient services furnished to program beneficiaries, depending on the illness and its classification under a DRG.

Claims paid in excess of charges may be vulnerable to incorrect billing because of incorrectly coded DRGs, procedures, units, or charges (e.g., $10,000 per day for room and board). In addition, unnecessary outlier payments may also result in claims paid in excess of charges. An outlier is an additional payment that is made for atypical cases that generate extremely high costs compared with most cases in the same DRG.

For 12 of the 41 sampled claims, the Hospital billed Medicare for an incorrect DRG code. The Hospital stated that most of the errors in this risk area occurred because of miscommunication between the person coding the services and the person performing the treatment. According to the OIG, the Hospital’s key internal controls did not prevent these errors.

• Incorrectly Billed High-Severity-Level Diagnosis-Related-Group Codes: For 14 of the 45 sampled claims, the Hospital incorrectly billed Medicare for high-severity-level DRG codes. Hospital officials stated that the Hospital’s internal controls did not fail in preventing three of the questioned claims. However, the internal controls failed for six claims because of miscommunication between the person coding the services and the person performing the treatment.

The Hospital did not provide a cause for five of the errors identified because Hospital officials believe the claims met Medicare requirements.

• Manufacturer Credits for Replaced Medical Devices Were Not Reported: Federal regulations require a reduction in the IPPS payment when an implanted device is replaced if
  1. the device is replaced without cost to the provider or the beneficiary,
  2. the provider receives full credit for the cost of the replaced device, or
  3. the provider receives a partial credit equal to or greater than 50 percent of the device cost.

To bill correctly for a replacement device that was provided with a credit, hospitals must code Medicare claims with a combination of condition code 49 or 50 and the value code “FD.” For two of the eight sampled claims, the Hospital did not submit an adjusted claim for the credit of a replaced device. Hospital officials stated that these errors occurred because hospital employees did not follow established internal controls.

This was also an issue on the outpatient side. CMS requires the provider to report the modifier “FB” and reduced charges on a claim that includes a procedure code for the insertion of a replacement device if the provider incurs no cost or receives full credit for the replaced device. For 2 of the 12 sampled claims, the Hospital did not report medical device credits received. The Hospital stated that these errors occurred because Hospital employees did not follow internal controls.

• Incorrectly Billed Outpatient Services with Modifier -59: The ‘-59’ modifier is used to indicate a distinct procedural service. This may represent a different session or patient encounter, different procedure or surgery, different site, or organ system, separate incision/excision, or separate injury (or area of injury in extensive injuries). For 6 of the 30 sampled claims, the Hospital billed Medicare using incorrect HCPCS codes appended with modifier -59. The amounts the codes represented were already included in the payments for other services billed on the same claim, or the claim did not require modifier -59. The Hospital stated that these errors occurred mainly because of employee inexperience and incorrect application and/or understanding of coding guidelines.

These hospital compliance reviews can provide valuable insight into vulnerable areas in your organizations as well. Even if your organization does not provide the exact same service, apply the concepts and principles demonstrated in the OIG review to perform your own proactive reviews.

As always, if you need extra help keep us in mind. We have expert consultants and improved software solutions to help you proactively audit areas in your organization to reduce risks.