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The U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) recently conducted an audit of Mount Sinai Hospital in New York City. After looking at a sample, the OIG found fault with about $1.4 million in claims, and projected that to an overpayment of just under $42 million.

There are several very interesting tidbits to this story. First, much of the money the government is seeking involves claims that are more than 48 months old. Medicare’s reopening regulations prevent the government from reopening a claim after 48 months, absent fraud or similar fault. People often forget about that limitation when discussing the six-year lookback in the 60-day rule. 

In this audit, Mount Sinai’s lawyers did a great job of noting the four-year limit on recovery. In its report, the OIG acknowledges the limitation on the government’s ability to reopen claims, but asserts that Mount Sinai is still obligated to refund the money. 

I strongly disagree. 

The 60-day rule only requires providers and suppliers to refund an “overpayment.” The rule defines an overpayment as money to which, after appropriate reconciliation, the provider or supplier is not entitled. If the government can’t reopen the claim, the provider or supplier is entitled to the money. Therefore, after the reopening period has run its course, there is no overpayment.

A second interesting tidbit involves the statistical sample. The OIG looked at a universe that had $74.5 million in claims. From that, they took a sample of about $4.4 million. The audit concluded with findings that approximately $1.4 million in the sample was overpaid. In other words, about 31.5 percent of the sample was overpaid. 

If you apply that 31.5-percent error rate to the universe of $74.5 million, the overpayment would be about $23.5 million. Somehow, despite using the lower end of the 90-percent confidence interval, the OIG determined that the projected overpayment was nearly $42 million, which is consistent with an error rate of 56 percent. I’m no statistician, but something seems terribly amiss there. Perhaps the stratification of the sample has something to do with this result. Perhaps the result is statistically sound. But I am eager for a true statistician to review the analysis.   

The substantive issues discussed in the report are fairly typical for a hospital review. The government found issue with short stays, inpatient rehabilitation facility (IRF) services, and improper billing for medical devices in situations when the manufacturer gave the hospital a credit on 50 percent or more of the device (Medicare policy calls for the hospital to flag these discounts so that the hospital’s DRG is reduced when the manufacturer provides the device with such a discount). 

The inpatient claims predate the two-midnight rule. Remember that the pre-two-midnight rule guidance was so poorly written that there is a very compelling argument that it shouldn’t form the basis of an overpayment.

Before October 2013 (and actually, until a revision was issued in March 2017), the Benefit Policy Manual noted that “generally, a patient is considered an inpatient if formally admitted as inpatient with the expectation that he or she will remain at least overnight” before adding in another sentence that physicians should “use a 24-hour period as a benchmark.” Except, north of the Arctic Circle during the winter, “overnight” and “24 hours” are not the same thing.

In short, Mount Sinai appears to have a strong basis to defend itself against the allegations in the OIG report. Fortunately, it looks like its lawyers are doing a great job of doing just that. 


David M. Glaser, Esq.

David M. Glaser is a shareholder in Fredrikson & Byron's Health Law Group. David assists clinics, hospitals, and other health care entities negotiate the maze of healthcare regulations, providing advice about risk management, reimbursement, and business planning issues. He has considerable experience in healthcare regulation and litigation, including compliance, criminal and civil fraud investigations, and reimbursement disputes. David's goal is to explain the government's enforcement position, and to analyze whether this position is supported by the law or represents government overreaching. David is a member of the RACmonitor editorial board and is a popular guest on Monitor Mondays.

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