Annual report to HHS for improving Medicare, Medicaid, and related services

HHS should undertake steps to (1) guard against fraud, waste, and abuse, (2) help beneficiaries and providers, and (3) implement better payment policies, according to the Office of Inspector General’s (OIG) annual report on the top unimplemented recommendations from the previous year. While the report ranged far and wide in its recommendations, including a suggestion to the FDA to improve food safety inspections, the bulk of the report was dedicated to addressing fraud, waste, and abuse in Medicare and Medicaid (OIG Report, July 22, 2019).


Each year, the OIG creates a report that focuses on what it contends are the top recommendations for improvement in HHS programs that were not implemented over the past year. This report offers suggestions to both HHS and the FDA on where they should direct their reform efforts for maximum benefit.

The OIG made the following recommendation pertaining to fraud, waste, and abuse.

Inpatient rehab facilities 

In 2013, Medicare paid $5.7 billion to inpatient rehabilitation facilities (IRF) for care to beneficiaries that was not reasonable and necessary. The errors, the OIG said, were due in part to the fact that the payments to the IRFs were not properly aligned with the costs. The current system gives the IRFs a financial incentive to admit patients inappropriately. CMS is apparently evaluating the payment system, which includes a recently issued final year 2019 IRF prospective payment system final rule to update policies and payment rates for fiscal year 2019.

‘Least costly alternative’ Part B drugs

If the least costly alternative requirement had not been rescinded for Part B drugs, Medicare would have saved $33.3 million in one year ($264.6 to $231.3 million). Once the requirement was removed, utilization patterns shifted dramatically in favor of costlier products.

Part D drug oversight

Medicare Part D spending on compounded topical drugs soared from $13.2 million in 2010 to $232.5 million in 2016. Questionable billing practices seem to be concentrated in a few metropolitan areas. OIG has identified prescribers with troubling order patterns. States are hamstrung in their ability to prevent drug overpayments. State agencies need to know the 340B ceiling prices and which Medicaid claims are associated with 340B drugs to ensure that the claims are paid correctly.

Managed care organization improvements

OIG believes that a significant amount of underreporting of fraud and abuse is occurring in Medicaid involving managed care organizations. For example, even where a managed care organization discovers fraud or abuse, OIG says that it will handle the situation by itself (terminating the contract) rather than report it to CMS. CMS must do more to ensure that the organizations identify and refer fraud and abuse to the state.

Help beneficiaries and providers

In addition, the OIG recommended that CMS analyze the impact of counting time as an outpatient toward the 3-night requirement for skilled nursing facility services (SNF). Beneficiaries with similar post-hospital care needs have different access to SNF services depending upon whether they were outpatients or inpatients because of the requirement that the beneficiary spend at least three nights as an inpatient to obtain post-hospital SNF Medicare coverage. Furthermore, CMS paid an estimated $84.2 million in improper payments between 2013 and 2015 because SNFs incorrectly determined whether the 3-night requirement was met. CMS should consider changes to make the system fairer, which could include counting time as an outpatient.


The OIG had a single recommendation for the FDA, noting that deficiencies exist in the FDA’s electronic recall data system. The FDA relies too much on voluntary corrections by facilities. Just over half the facilities that were inspected and should have received warning letters actually received warning letters. The FDA also frequently fails to conduct timely follow-up inspections to ensure compliance. The OIG suggested that the FDA act to address these shortcomings.

Compare websites for IRFs and LTCHs have launched

The quality of patient care that inpatient rehabilitation and long-term care facilities provide to patients can vary greatly from facility to facility. To allow patients, family members, and health care providers to get a snapshot of the quality of care each inpatient rehabilitation facility (IRF) and long-term care hospital (LTCH) facility provides, CMS has announced the launch of the IRF Compare and LTCH Compare websites.

It is hoped that the information on IRF and LTCH Compare will help patients make more informed decisions about where they get their health care and encourage these facilities to improve the quality of care they provide. IRF Compare currently contains data from approximately 87 percent of all IRFs and LTCH Compare contains data from approximately 97 percent of all LTCHs.

Basis for establishment

These Compare websites were created to fulfill the requirements of the LTCH Quality Reporting and the IRF Quality Reporting Programs, which were established by section 3004(a) and (b) of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), respectively, and required the Secretary of HHS to establish procedures for making quality data submitted by IRFs and LTCHs available to the public.

Current quality measures

Currently, there are two quality measures that are being displayed on the IRF and LTCH Compare websites: (1) the percent of residents or patients with pressure ulcers that are new or worsened (short stay); and (2) the all-cause unplanned readmission percentage for 30 days post discharge.

IRF data for the percent of residents or patients with new or worsened pressure ulcers was collected and submitted to CMS via the IRF Patient Assessment Instrument. The national measure for new or worsened pressure ulcers in IRFs is 0.8 percent. Data for the all-cause unplanned readmission measure for 30 days post-discharge is based on Medicare fee-for-service claims submitted by IRFs and other hospital providers. The IRF national average for all-cause readmission 30 days post discharge is 13.06 percent.

LTCH data for the percent of residents or patients with new or worsened pressure ulcers was collected and submitted to CMS via the LTCH Continuity Assessment Record & Evaluation Data Set, which is an assessment-based data collection instrument created by CMS. The national measure for new or worsened pressure ulcers is 1.8 percent for LTCHs. Data for the all-cause unplanned readmission measure for 30 days post discharge from LTCHs is based on Medicare fee-for-service claims submitted by LTCH and other hospital providers. The national average for all-cause readmission 30 days post discharge is 24.61 percent for LTCHs.

Healthcare-acquired infections to be added soon

The Centers for Disease Control and Prevention (CDC) is currently making efforts to implement a new national baseline for healthcare-acquired infections (HAIs) that are reported to CMS via the CDC’s National Healthcare Safety Network (NHSN). As such, CMS will wait until spring 2017 to begin publishing HAI data on the IRF and LTCH Compare websites.

Review of data

CMS encourages IRFs and LTCHs to review their data as provided in their preview reports.If they disagree with performance data contained within their preview reports, they have an opportunity to request review of that data by CMS. The process for submitting a request is outlined on CMS’ IRF Quality Public Reporting and LTCH Quality Public Reporting webpages.

Spring 2017 data for IRFs are ready for review

The IRF QRP provider preview reports are now available for review and are scheduled for a spring 2017 posting. IRFs should review their performance data on each quality measure based on Quarter 2-2015 to Quarter 1-2016 data prior to its public display on IRF Compare in the spring of 2017.

IRFs have 30 days (from December 11, 2016 through January 10, 2017) to review their performance data. Corrections to the underlying data will not be permitted during this time; but IRFs may request CMS review of the data contained within their preview report, should they believe it to be inaccurate.