OIG At-Risk Claims Audit: What Are They Looking For?

HHS’ Office of Inspector General (OIG) can conduct audits of claims submitted by hospitals to determine if they are filing the claims in compliance with Medicare regulations. During calendar year (CY) 2011 Medicare paid hospitals $151 billion for services on behalf of beneficiaries, which represented 45 percent of all fee-for-service payments during that year.  To make this job a little easier for the OIG and to focus their efforts on particular types of claims where errors are more common, the OIG has identified types of claims that are more at-risk for noncompliance.  The OIG has not extrapolated the results of these audits to all claims, because the OIG is selecting specific types of claims to review where its findings do not apply to all claims.

At-risk claims. The OIG uses computer matching, data mining, and data analysis to identify claims that are at risk for noncompliance with Medicare billing requirements.  According a recent OIG report, the OIG tries to select claims from the following types of claims to determine if the hospital is in compliance with Medicare regulations.  The types of claims are:

  1. inpatient short stays,
  2. inpatient transfers,
  3. inpatient and outpatient manufacturer credits for replaced medical devices,
  4. inpatient claims with payments greater than $150,000,
  5. inpatient psychiatric facility (IPF) emergency department adjustments,
  6. inpatient claims billed with high-severity-level DRG codes,
  7. inpatient hospital-acquired conditions and present-on-admission indicator reporting,
  8. inpatient and outpatient claims paid in excess of charges,
  9. outpatient claims billed for Lupron injections,
  10. outpatient claims billed with modifiers,
  11. outpatient claims billed with observations services that resulted in outlier payments,
  12. outpatient claims billed with evaluation and management (E & M) services, and
  13. outpatient claims with payments greater than $25,000.

In its audit reports the OIG finds that claims in these area can be for services that are not reasonable and necessary.  Soc. Sec. Act sec. 1862(a)(1)(A) authorizes payment for services that are reasonable and necessary “for the diagnosis or treatment of illness or to improve the functioning of a malformed body part.”  Another common problem with claims in these categories is that providers often do not file sufficient information to determine whether payment is due and justified as required by 42 C.F.R. sec.424.5(a)(6).

Observation status.  A large number of claims reviewed by the OIG are found not be reasonable or necessary because the item being claimed under Part A for payment via the inpatient prospective payment system (IPPS) is for observation or observation services.  The OIG maintains that those claims should be made under Medicare Part B.  With the beginning of FY 2014, however, this maybe changing as CMS has issued a new policy in the Final rule updating IPPS for FY 2014 stating that any Part A claim for observation that spans two midnights is an appropriate Part A claim.  This may change the number of claims the OIG is finding as not reasonable or necessary under Part A.

Manufacturer’s rebates.  Federal regulations at 42 C.F.R. sec. 412.89 and 42 C.F.R. sec. 419.45(a) require reduction in payments made to hospitals for implantable devices that are replacing devices previously implanted and were provided under a warranty or for which the hospital received a credit from the manufacturer.  The regulations stated that a reduction in payment is to occur when (1) the implanted device is replaced without cost to the provider or beneficiary, (2) the provider receives full credit for the cost of the replaced device, or (3) the provider receives partial credit equal to or greater than the cost of the replacement device.  The number of claims the OIG uncovers in this category is not usually large,  but the dollars amounts can be. Providers should be careful when processing these claims. For outpatient services that replace an implanted device for which the hospital has received a credit, the claim should contain the modifier “FB,” and for claims where inpatient services were provided to replace an implanted device where the hospital received a manufacturer’s credit the condition codes 49 or 50 and value code “FD” should be used.

Other areas for hospitals to pay close attention to, because the OIG is looking, is for the correct billing for the Lupron (a medication used to treat prostate cancer as well as other conditions) and  admissions to an IPF owned and located within a hospital where a patient was being treated as an inpatient before they were admitted to the IPF.  OIG audits can result in a determination of  payments for services from these categories as an overpayment.  These overpayment determinations can be avoided if hospitals are aware of whats types of claims the OIG is investigating during its audits. The OIG has not extrapolated the results of these audits to all claims, because the OIG is selecting specific types of claims to review where its findings do not apply to all claims.