Health Reform WK-EDGE Sooners’ inability to identify Medicaid hospital HACs costs $118M (1)
Tuesday, April 3, 2018

Sooners’ inability to identify Medicaid hospital HACs costs $118M

By Vanessa M. Cross, J.D., LL.M.

The HHS Office of Inspector General (OIG) found that the Oklahoma Health Care Authority (OHCA), a state Medicaid agency, did not develop procedures to evaluate level of care (LOC) claims for health-care-acquired conditions (HACs). As a result, in reviewing Medicaid inpatient hospital service claims from July 1, 2015 through June 30, 2016 totaling $118,772,076 ($75,305,007 federal share) the OIG could not determine whether the agency appropriately claimed federal reimbursement for LOC claims. The OIG has recommended that the OHCA develop procedures to evaluate LOC claims for HACs and determine whether payments should be reduced for claims reimbursed for this period (OIG Report, No. A-06-16-08004, March 6, 2018).

PPCs not reimbursable. Effective July 1, 2011, the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) prohibits Medicaid payments for services related to provider-preventable conditions (PPCs). CMS delayed enforcement to July 1, 2012 to allow States time to develop and implement new payment policies.

PPC categories. PPCs are certain reasonably preventable conditions caused by medical accidents or errors in a health care setting. According to the OIG, there are two categories of PPCs: HACs and Other PPCs. HACs are conditions acquired in a health care setting that (1) are considered to have a high cost or occur in high volumes or both; (2) result in increased payments for services; and (3) could have been reasonably prevented. Examples of patient HACs include foreign objects retained after surgery and infections at the surgical site. The ACA requires that Medicaid claims must be reduced by the amount attributable to a PPC that causes an increase in payment and that can be reasonably isolated.

Use of diagnosis codes. PPCs can be identified on inpatient hospital claims through certain diagnosis codes, which are used to identify patient's health conditions. These are listed in the International Classification of Diseases, the official system of assigning codes to diagnoses and hospital procedures used in the United States. For each diagnosis code on a claim, inpatient hospitals report one of four present-on-admission (POA) indicator codes. POA codes include: (1) "Y" for conditions present at admission; (2) "N" for conditions not present at admission; (3) "U" for insufficient documentation to determine presence of condition at time of admission; and (4) "W" to indicate that the provider is not able to clinically determine whether the condition was present on admission. Federal regulations and guidance, the Oklahoma State plan, and the Oklahoma Administrative Codes prohibit payment for the portion of claim attributable to an HAC with an "N" or "U" POA code or when the code is missing. No reduction for HACs occurs with POA codes of "Y" or "W."

OIG findings and recommendation. From July 1, 2015 through June 30, 2016, the OIG analyzed OHCA Medicaid claims secondary diagnosis codes for the presence of PPCs. The ACA payment prohibition only applies to secondary diagnosis codes, not primary diagnosis codes. The OIG found that OHCA did not claim federal reimbursement for Other PPCs, but found at least one secondary diagnosis code for a PPC. It reported, however, that HCACs with a POA code of "N," "U," or those missing POA codes were present on 47 inpatient hospital claims, totaling $1,520,227 ($933,393 federal share). OHCA pays Medicaid inpatient hospital claims using either a diagnosis-related group (DRG) or LOC payment method. Although OHCA required POA codes on all inpatient claims, the OIG determined the state agency had not developed procedures to (1) ensure that POA codes were present on LOC claims; and (2) determine the applicable amounts to be paid. As a result, the OIG could not determine whether the OHCA appropriately claimed federal reimbursement for these claims.

The OIG recommended that OHCA develop procedures to evaluate LOC claims for HCACs and determine whether payments should be reduced. In a written comment on the OIG's draft report, the OHCA concurred with the OIG recommendations.

ReportsLetters: OIGReports NewsFeed AgencyNews HealthCareAcquiredConditionNews InpatientFacilityNews MedicaidNews ProgramIntegrityNews QualityNews

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