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Even back in March we began to receive a few hints from Inspector General Daniel Levinson of what this Work Plan would entail when he said that the $4 billion in healthcare fraud settlements and court-ordered returns for 2009 was just the “tip of the iceberg.”  To counter this trend, Levinson said the OIG will make the most of its proposed $272 million budget for 2011 to expand its activities in support of the joint Health and Human Services and Department of Justice (HHS-DOJ) Health Care Fraud Prevention and Enforcement Action Team (HEAT), including expanding the OIG-DOJ Medicare Fraud Strike Forces to 13 new locations.


Levinson also said that the OIG also would continue to combat fraud using its “comprehensive strategy of prevention, detection, and enforcement” based on the following five principles: enrollment, payment, compliance, oversight, and response.


Elephant in the Room


The 2011 OIG Work Plan is available now, and in a series of articles I’ll give a more comprehensive view of the Work Plan, breaking down the issues that are covered with descriptions of the work in progress and planned reviews for the OIG to do in fiscal year (FY) 2011.  Now for those of you that have not read the annual Work Plan cover to cover, it may seem to be a daunting task to look at the 159 pages, but when you break down the individual sections, it’s actually a very palatable document—like the advice on how to eat an elephant—one bite at a time.


I’ll focus my attention in this article on Part I: Medicare Parts A and B; in subsequent articles I’ll look at Part III: Medicaid Reviews and Appendix A: Recovery Act Reviews that are all the most relevant issues to RACmonitor readers.


Section I on Medicare Parts A & B for hospitals lists 25 issues, some of which are new to the Work Plan, with some perennial issues that are making yet another appearance this year.


1.   Part A Hospital Capital Payments


The OIG will review Medicare inpatient capital payments that reimburse a hospital’s expenditures for assets such as equipment and facilities. The audits will determine whether capital payments to hospitals are appropriate.


2.   Provider-Based Status for Inpatient and Outpatient Facilities


The reviews will look at cost reports of hospitals claiming provider-based status for inpatient and outpatient facilities. According to 42 CFR § 413.65(d), Medicare may permit hospitals that own and operate multiple provider-based facilities or departments in different sites to operate as a single entity, so long as specific requirements are met. Hospitals that receive this “provider-based status” may receive higher reimbursement when they include the costs of a provider-based entity on their cost reports.


The OIG’s reviews will look at the appropriateness of the provider-based designation and the potential impact on the Medicare program and its beneficiaries of hospitals improperly claiming provider-based status for inpatient and outpatient facilities.


3.   Hospital Payments for Non-physician Outpatient Services Under the Inpatient Prospective Payment System


The reviews will be for the appropriateness of payments for non-physician outpatient services that were provided to beneficiaries shortly before or during Medicare Part A covered stays at acute care hospitals. Inpatient prospective payment system payments to hospitals for inpatient stays are payment in full for hospitals’ operating costs and hospitals generally receive no additional payments for non-physician services, so there should be no non-physician services provided to inpatients under Part B for non-diagnostic services rendered up to three days before the dates of admission.


Prior OIG work in this area has found significant numbers of improper claims.  This is particularly important now with the advent of the MACs which now do both Parts A and B processing and can do the data matching for those claims.



4.   Non-inpatient Prospective Payment System Hospital Payments for Non-physician Outpatient Services


Similar to the previous category, the reviews will look at the appropriateness of payments for non-physician outpatient services that were provided to beneficiaries shortly before or during Medicare Part A covered stays at non-IPPS hospitals. Payments to non-IPPS hospitals for inpatient claims should include diagnostic services and other services related to admission provided during the day immediately preceding the date of the patient’s admission. For non-physician services provided to inpatients, submissions are prohibited for additional claims to Part B for outpatient diagnostic services and admission-related non-diagnostic services rendered up to the day before and on the date of admission.


5.   Critical Access Hospitals


The reviews will look at payments to critical access hospitals that are generally paid 101 percent of the reasonable costs of providing covered CAH services. The reviews will determine whether CAHs have met the CAH designation criteria in the Social Security Act and conditions of participation (CoP) and whether payments to CAHs were in accordance with Medicare requirements.


6.   Medicare Excessive Payments


The reviews will look at Medicare claims with high payments to determine whether they were appropriate. Prior OIG reviews have shown that claims with unusually high payments may be incorrect for a variety of reasons. The audits will include certain outpatient claims in which payments exceeded charges and selected Healthcare Common Procedure Coding System (HCPCS) codes for which billings appear to be aberrant but also will review the effectiveness of the claims processing edits used to identify excessive payments.


These next few issues have been controversial payment methodologies for a number of years with Medicare Disproportionate Share Payments, Outlier Payments, and Graduate Medical Education Payments.


7.   Medicare Disproportionate Share Payments


The reviews will look at Medicare DSH payments to hospitals. Medicare makes additional payments to acute care hospitals that serve a significantly disproportionate number of low-income patients. Medicare DSH payments have been steadily increasing so the OIG will determine whether these payments were in accordance with Medicare methodology in the Social Security Act.  They will also examine the total amounts of uncompensated care costs that hospitals incur.


8.   Medicare Outlier Payments


The reviews will look at Medicare outlier payments to determine whether CMS appropriately reconciled the payments. Outliers are additional payments made for beneficiaries who incur unusually high costs. Outlier payment reconciliations must be based on the most recent cost-to-charge ratio from the cost report to properly determine outlier payments. Outlier payments also may be adjusted to reflect the time value of money for overpayments and underpayments.


9.   Duplicate Graduate Medical Education Payments


The reviews will look at provider data from CMS’s Intern and Resident Information System (IRIS) to determine whether duplicate graduate medical education payments have been claimed. Medicare pays teaching hospitals for direct graduate medical education (DGME) and indirect medical education (IME) costs and in the calculation for these payments no intern or resident may be counted by the Medicare program as more than one full-time-equivalent (FTE) employee, which is the purpose of the IRIS system. The audits will also look at the effectiveness of the IRIS system.


10.  Hospital Occupational Mix Data Used To Calculate Inpatient Hospital Wage Indexes


The reviews will look at whether hospitals reported occupational-mix data used to calculate inpatient wage indexes in compliance with Medicare regulations. Hospitals must accurately report data every three years on the occupational mix of their employees in accordance with the Social Security Act.  CMS uses data from the occupational-mix survey to construct an occupational-mix adjustment to its hospital wage indexes. Accurate wage indexes are essential elements of the Medicare prospective payment system (PPS) for hospitals.  The audits will determine the effect on the Medicare program of inaccurate reporting of occupational-mix data.



11.  Medicare Secondary Payer (MSP)/Other Insurance Coverage


The reviews will look at Medicare payments for beneficiaries who have other insurance. For these beneficiaries, Medicare payments are required to be secondary to certain types of insurance coverage.  The reviews will assess the effectiveness of procedures in preventing inappropriate Medicare payments for beneficiaries with other insurance coverage. One example is evaluating procedures for identifying and resolving credit balance situations, which occur when payments from Medicare and other insurers exceed the providers’ charges or the allowed amounts.


12.  Reliability of Hospital-Reported Quality Measure Data


The reviews will look at hospitals’ controls for ensuring the accuracy of data related to quality of care that they submit to CMS for Medicare reimbursement. The Social Security Act requires that hospitals report quality measures for a set of 10 indicators established by the Secretary as of Nov. 1, 2003. The MMA established a reduction in payments of 0.4 percent to hospitals that did not report quality measures to CMS. The Deficit Reduction Act of 2005 (DRA) expanded the payment reduction to two percent effective at the beginning of FY 2007.  The audits will determine whether hospitals have implemented sufficient controls to ensure that their quality measurement data are valid.


13.  Hospital Readmissions


A readmission is defined as a case in which the beneficiary is readmitted to a hospital less than 31 days after being discharged from a hospital. The OIG reviews will examine Medicare claims to determine trends in the number of hospital readmission cases. Based on prior OIG work, CMS implemented an edit in 2004 to reject subsequent claims on behalf of beneficiaries who were readmitted to the same hospital on the same day.  According to CMS regulations, if a same day readmission occurs for symptoms related to or for evaluation or management of the prior stay’s medical condition, the hospital is entitled to only one diagnosis related group (DRG) payment and should combine the original and subsequent stays into a single claim.


Providers are permitted to override the edit in certain situations. The reviews will test the effectiveness of that edit and will also determine the extent of oversight of readmission cases.  Quality improvement organizations (QIO) are required to review hospital readmission cases to determine whether the hospital services met professional standards of care.


14.  Hospital Admissions With Conditions Coded Present-on-Admission


The reviews will look at Medicare claims to determine which types of facilities are most frequently transferring patients with certain diagnoses that were coded as being present when patients were admitted, referred to as present on admission (POA).  Acute care hospitals are required to report on their Medicare claims which diagnoses were present when patients were admitted. For certain diagnoses specified by CMS, hospitals receive a lower payment if the specified diagnoses were acquired in the hospital. The audits will also determine whether specific providers transferred a high number of patients to hospitals with POA diagnoses.


15.  Early Implementation of Medicare’s Policy for Hospital-Acquired Conditions


The reviews will examine the early implementation of CMS’s hospital acquired conditions (HAC) policy. CMS implemented the HAC policy on Oct. 1, 2008. The HAC policy prevents additional payment under Medicare’s hospital IPPS for certain conditions or complications that are determined to be reasonably preventable. The audits will look at Medicare claims data to identify the number of beneficiary stays associated with HACs and determine their impact on reimbursement. The audits will also verify the accuracy of POA indicators, which are used for identifying HACs.


16.  Responses to Adverse Events in Hospitals by Medicare Oversight Entities


The reviews will look at responses of State survey and certification agencies, Medicare accreditors, and CMS to allegations of adverse events in hospitals. An “adverse event” is defined as harm to a patient as a result of medical care. Various Medicare oversight entities have authority to investigate adverse events in hospitals to determine whether those hospitals have taken corrective actions and are in compliance with Medicare standards.  The reviews will identify and analyze potential overlaps, conflicts and gaps in responses and identify opportunities for Medicare oversight entities to improve the quality of oversight and responses to adverse events.



17.  Hospital Reporting for Adverse Events


The reviews will look at the type of information hospitals’ internal incident reporting systems capture about adverse events. Most hospitals have incident reporting systems that enable medical and hospital staff members to report information about patient safety incidents when they occur and to use reported information to prevent recurrence, hold staff members accountable, and notify families. Using data collected for a 2010 OIG study examining the national incidence of adverse events among hospitalized Medicare beneficiaries, the audits will determine the extent to which hospital systems captured adverse events and reported the information to external patient safety oversight entities.


18.  Hospital Reporting for Restraint- and Seclusion-Related Deaths


The reviews will look at hospital reported restraint and seclusion related deaths to determine the volume of reports and their outcome. The Patient’s Rights Hospital Condition of Participation rule requires that hospitals report to CMS each death that occurs while a patient is in restraint or seclusion, as well as each death that occurs within 24 hours after a patient has been removed from restraint or seclusion. CMS regional staff members determine whether a death requires an investigation by a State agency. A 2006 OIG report found problems with the restraint and seclusion reporting process and stated that the reporting requirements and reporting process may hinder the effectiveness of CMS’s and State agencies’ efforts to identify and respond to restraint and seclusion related deaths. The audits will also determine the outcome of State investigations of restraint and seclusion deaths and the action the State agencies took against hospitals.


19.  Medicare Brachytherapy Reimbursement


The reviews will look at payments for brachytherapy, a form of radiotherapy where a radiation source is placed inside or next to the area requiring treatment, to determine whether the payments are in compliance with Medicare requirements. According to the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), Medicare pays for radioactive source devices used in treatment of certain forms of cancer.


20.  Payments for Diagnostic Radiology Services in Hospital Emergency Departments


The reviews will look at Medicare Part B paid claims and medical records for interpretations and reports of diagnostic radiology services (x-rays, CTs, and MRIs) performed in hospital emergency departments to determine the appropriateness of payments. Interpretations and reports furnished by physicians are reimbursed according to the Medicare Physician Fee Schedule (MPFS) provided that the conditions for payment for radiology services are met. In its March 2005 testimony before Congress, the Medicare Payment Advisory Commission (MedPAC), reported concerns about the increasing cost of imaging services for Medicare beneficiaries and potential overuse of diagnostic radiology services. In 2008, Medicare reimbursed physicians about $227 million for imaging interpretations performed in emergency departments. The reviews will determine whether diagnostic radiology interpretations and reports contributed to the diagnoses and treatment of beneficiaries receiving care in emergency departments.


21.  Hospitals’ Compliance With Medicare Conditions of Participation for Intensity-Modulated and Image-Guided Radiation Therapy Services


The reviews will look at hospitals’ compliance with Medicare requirements concerning the safety and quality of intensity modulated radiation therapy (IMRT) and image guided radiation therapy (IGRT) services. Therapeutic radiological services, such as IMRT and IGRT, must meet professionally approved standards for safety and personnel qualification. Hospitals must maintain appropriate radiologic services to ensure safety for patients and personnel in compliance with Medicare CoP. The audits will also assess CMS’s oversight of IMRT and IGRT services provided in hospitals.


22.  Medicare Inpatient and Outpatient Hospital Claims for the Replacement of Medical Devices


The reviews will determine whether hospitals submitted inpatient and outpatient claims that included procedures for the insertion of replacement medical devices in compliance with Medicare regulations. The Social Security Act excludes from Medicare coverage an item or a service for which neither the beneficiary nor anyone on his or her behalf has an obligation to pay. Medicare is not responsible for the full cost of the replaced medical device if the hospital receives a partial or full credit from the manufacturer either because the manufacturer recalled the device or because the device is covered under warranty. Hospitals are required to use modifiers on their inpatient and outpatient claims when they receive credit from the manufacturer of 50 percent or more for a replacement device.



23.  Observation Services During Outpatient Visits


The reviews will look at Medicare payments for observation services provided during outpatient visits in hospitals that are covered under Part B.  The reviews will assess whether and to what extent hospitals’ use of observation services affects the care Medicare beneficiaries receive and their ability to pay out of pocket expenses for health care services.


24.  Hospital Inpatient Outlier Payments


The reviews will examine hospital inpatient outlier payments where Medicare pays hospitals supplemental, or outlier payments for patients incurring extraordinarily high costs. In 2009, outlier payments represented about five percent of total Medicare inpatient payments, or about $6 billion per year. Recent whistleblower lawsuits have resulted in millions of dollars in settlements from hospitals charged with inflating Medicare claims to qualify for outlier payments. The reviews will look at trends of outlier payments nationally and identify characteristics of hospitals with high or increasing rates of outlier payments.


25.  Inpatient Rehabilitation Facility Transmission of Patient Assessment Instruments


The reviews will determine whether inpatient rehabilitation facilities (IRFs) received reduced payments for claims with patient assessment instruments that were transmitted to CMS’s National Assessment Collection Database more than 27 days after the beneficiaries’ discharges. The patient assessment instrument is used to gather data to determine payment for each Medicare patient admitted to an IRF. The regulations provide that if patient assessments are not encoded and transmitted within defined time limits, payments be reduced. If an IRF transmits the instrument more than 27 calendar days from (and including) the beneficiary’s discharge date, the IRF’s payment rate should be reduced by 25 percent.


About the Author


Carla’s background includes over twenty years in hospital and physician practice operations, particularly in reimbursement and billing functions.  In the last 2-1/2 years, Carla has been in sales and operations for a compliance software compliance company. Prior to that, she was the Vice President of Compliance for a national revenue cycle solutions company and was in the Reimbursement Training Department with HCA. For several years she headed up the Part A Fraud Investigation Unit for a CMS Program Safeguard Contractor (PSC) where she was successful in the prosecution of several national cases. She has worked with anumber of clients in California and Florida with Recovery Audit Contractors (RACs) in setting up processes and appeals during thedemonstration project and has worked with clients now for their preparation for the RAC permanent project as well as MIC, ZPIC, and other governmental audits.  Carla is actively involved in professional associations such as the Health Care Compliance Association (HCCA) and the Healthcare Financial Management Association (HFMA).  She received her MBA in Health Care Management from the University of Phoenix in 2005 and now teaches several healthcare-related courses as an adjunct faculty member.


Contact the Author




The 2011 OIG Work Plan is available from the OIG website at: http://oig.hhs.gov/publications/Work Plan/2011/FY11_Work Plan-All.pdf.



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