Inside the Most Audited Hospital Services — And How to Stay Compliant

Government audits of hospital activities are plentiful. Is your hospital ready for such audits? Let’s take a look at some of the issues hospitals face from external government audits. 

Drugs and Biologicals 

Hospitals spend and are reimbursed large amounts for various drugs and biologicals. Some of these substances are supplied to hospitals in vials that are single-dose while others are multi-dose vials.  

A single-dose vial is approved for use on a SINGLE patient for a SINGLE procedure or injection. For safety reasons, any remaining amount of the substance in a single-dose vial should be discarded and not used. Hospitals can bill for that discarded amount in single-dose vials only. To identify the discarded substance on a billing claim, hospitals should use the coding modifier JW. This modifier is required to be reported on a claim to report the amount of drug that is discarded and eligible for payment under the CMS discarded drug policy.  

However, this modifier should only be used for claims that bill single-dose container drugs. The use of JW modifier is not appropriate for drugs that are from multiple-dose containers. Claims billed incorrectly will result in an overpayment.  

Recovery audit contractors (RACs) have approval from CMS to audit for this. The HCPCS codes represented the affected drugs and biologicals are J0702, J9034, J9036, J9056 , J9058, J9059, J9267. 

Panniculectomy 

Another RAC topic approved for auditing hospitals is performing a panniculectomy for cosmetic purposes. A panniculectomy is a surgical procedure that removes excess, overhanging skin and fat from the lower abdomen, often referred to as the "pannus" or "apron." 

Cosmetic panniculectomies will not be deemed medically necessary. In addition, some cases of panniculectomy billed at the same time as an open abdominal surgery, or if it is incidental to another procedure, is not separately coded per specific medical coding guidelines and/or local coverage determinations (LCDs). The CPT^® codes affected by this audit are 15830 and 15847. 

Hospital Services to Hospice Patients 

When a Medicare beneficiary decides to accept hospice care for a terminal illness, they sign an election statement, which indicates their choice to receive hospice care. The election statement also states the beneficiary waives rights to other Medicare payments related to the terminal illness and related conditions. Services and items are included in the hospice benefit to reduce pain and manage symptoms related to the terminal illness, secondary or related conditions. These services may include, but are not limited to, medical equipment, supplies, physical, occupational or speech therapies, and nursing care. Payments for services palliating or managing related conditions are covered under a Medicare Part A per diem to hospice facilities. The per diem rate is based on the level of care provided to the beneficiary. Routine home care, continuous home care, inpatient respite, and general inpatient care, are the four levels of care provided to beneficiaries receiving hospice services. 

Hospital outpatient services unrelated to the hospice enrollee’s terminal illness, secondary, and related conditions may be covered under Medicare Part B of A and are coded using condition code 07, “treatment of non-terminal condition for hospice.” Outpatient services palliating or managing secondary and related conditions for hospice enrollees are not covered under Medicare Part B of A services. 

Consequently, government contracted auditors are performing hospital outpatient medical record reviews of supporting documentation to determine if hospital outpatient services provided to hospice enrollees and billed with condition code 07 palliated or managed the terminal illness and related conditions. 

Inpatient Rehabilitation Facilities (IRFs) 

Inpatient rehabilitation hospitals and rehabilitation units of acute-care hospitals, known as Inpatient Rehabilitation Facilities (IRFs), provide intensive rehabilitation therapy in a resource-intensive, inpatient hospital environment. These services are for patients who require complex nursing support, medical management, and rehabilitation needs. IRFs offer an inpatient stay and an interdisciplinary team approach to the delivery of rehabilitation care. 

The billing requirements are extensive and prior government audits have identified some hospitals that are not meeting the requirements. Many of these requirements can be found in the: 

• Medicare Benefit Policy Manual (MBPM), Publication (Pub.) 100-02 Chapter (Ch) 1, §110 Inpatient Rehabilitation Facility (IRF) Services 

• Medicare Claims Processing Manual (MCPM), Pub. 100-04 Ch. 3, §140.3 Billing Requirements Under IRF PPS 

The additional government audits will be conducted by the Supplemental Medical Review Contractor (SMRC). They will perform data analysis and conduct medical record reviews on claims billed with Type of Bill (TOB) 11X, with Revenue (REV) Code 0024. 

Cataract Surgery 

The SMRC has also audited cataract surgery services. Cataracts are the leading cause of blindness in the U.S. They also can lead to blurred or distorted vision, glare, color vision defects, and a decline of contrast sensitivity and depth perception. 

For consideration of cataract surgery, cataract patients must have an impairment of visual function due to cataract(s), resulting in the decreased ability to conduct activities of daily living such as reading, viewing television, driving, or meeting occupational or vocational expectations. Improving visual function and quality of life have increased the demand for cataract surgery. 

The SMRC has conducted medical record reviews on claims billed with Current Procedural Terminology (CPT) codes 66982, 66984, 66987, 66988, and 66989. The SMRC audited claims organized in the following two groups that would directly affect hospitals: 

• Medicare Part B of A claims with 13X (outpatient hospital) type of bill (TOB) 

• Medicare Part B of A claims with 85X (critical access hospital) TOB.  
  
  

Conclusion 

As hospital compliance and auditing professionals review their audit plans, they should consider the applicability of the above audits to their own hospitals. It may make sense to proactively audit similar claims internally as a part of the hospital’s compliance program activity. 

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