By Robert B. Barnett Jr., J.D.
Medicare inappropriately paid acute-care hospitals $51.6 million over a 41-month period for outpatient services provided to beneficiaries who were inpatients at facilities other than other acute-care hospitals, according to an HHS Office of Inspector General (OIG) report. As a result, the acute-care hospitals were paid twice for the same service—once by the inpatient facility that contracted with them to provide the outpatient service and again by Medicare through direct reimbursement. Had the system edits that should have caught the errors not begun failing in 2006, Medicare could have saved almost $100 million and beneficiaries could have save $28.9 million in deductibles and coinsurance (OIG Report, No. A-09-16-02026, September 18, 2017).
Double-billing. The OIG previously discovered that Medicare erroneously paid acute-care hospitals for outpatient services provided to beneficiaries who were inpatients at other acute-care hospitals. This new report sought to determine whether the same thing was happening where the beneficiaries were inpatients at facilities other than acute-care hospitals, such as at long-term-care hospitals, inpatient rehabilitation facilities, inpatient psychiatric facilities, and critical access hospitals. The OIG concluded that the same double-billing was occurring at facilities other than acute-care hospitals. The 41-month period that OIG audited was from January 1, 2013, through August 31, 2016.
If the system were working properly, the inpatient facility would contract with the acute-care hospital to provide an outpatient service to a Medicare beneficiary that it, the inpatient facility, did not provide. Under that arrangement, the inpatient facility would pay the outpatient acute-care facility for the services provided, and the inpatient facility would then seek Medicare reimbursement for both the inpatient and the outpatient costs. Medicare, therefore, would make a single payment to the inpatient facility for both the inpatient and the outpatient services. Under the system as it was actually working, Medicare paid the inpatient facility for both the inpatient and the outpatient services and then also paid the acute-care facility a second time for the outpatient services.
System failures. All Medicare contractor claims are sent to CMS’ Common Working File for verification, validation, and authorization. The Common Working File contains system edits designed to prevent overpayments for outpatient services provided during inpatient stays. The OIG discovered, however, that the system was failing to prevent the double-payments. In 94 percent of the cases that OIG examined, the Medicare contractor filed the acute-care hospital’s outpatient claim before the inpatient facility filed its claim. Even though the post-payment edits alerted the Medicare contractor to recover the improper payment, the contractor failed to act.
According to the OIG, the contractors failed to act because they did not understand that the alert required them to recover the overpayment. In the other 6 percent of cases, where the outpatient claim was filed later than the inpatient claim, the prepayment edit, which should have denied the claim because it was already paid, failed.
The report concluded that, while CMS provided general instructions to Medicare contractors on the controls that exist to prevent overpayments due to overlapping inpatient and outpatient claims, CMS failed to effectively educate inpatient facilities and acute-care hospitals about their responsibilities when inpatient and outpatient services are provided to the same beneficiary. In addition to its findings that Medicare could have saved almost $100 million and beneficiaries could have save $28.9 million in deductibles and coinsurance between 2006 and 2015, had the system been working, the OIG noted that the amount of the annual Medicare overpayments had been increasing in recent years. In fact, the overpayments had quadrupled between 2006 and 2015.
Recommendations. As a result of its findings, the OIG has made the following recommendations to CMS:
- recover the $51.6 million in improper payments from the acute-care hospitals;
- instruct the acute-care hospitals to refund beneficiaries up to $14.3 million in deductibles and coinsurance that were incorrectly collected from them;
- identify and recover any improper payments that occurred after the audit period, and instruct the acute-care hospitals to refund deductibles and coinsurance improperly collected during that period;
- correct the edits to prevent future overpayments; and
- instruct the Medicare contractors to improve education to acute-care hospitals.
CMS response. CMS concurred with the recommendations and provided the OIG with information on actions it intends to take to address the recommendations.
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