OIG's Hospital Compliance Reviews Burdensome and Wasteful, Association Says

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By James Swann  

June 3 — The Department of Health and Human Services Office of Inspector General's hospital compliance reviews impose an unwarranted burden on hospitals and waste the OIG's resources and should be stopped immediately, the American Hospital Association said in a June 2 letter to the HHS.

The letter, signed by AHA Executive Director Rick Pollack, said the OIG reviews overlap with existing Recovery Audit Contractor (RAC) reviews, resulting in hospitals being audited by multiple contractors.

“Surely the OIG has better use for its resources than re-reviewing the very same claims that are being reviewed by one or more Medicare contractors,” the letter said.

The letter referenced 10 OIG hospital compliance reviews released in 2013 and 2014, all focused on inpatient short stays, and said that “in several cases, the OIG admitted that it had inadvertently audited the very same claims that already had been reviewed by a RAC.”

In all 10 compliance reviews, the OIG ended up retaining a medical review contractor to evaluate claims for medical necessity, the letter said, wasting OIG resources.

The hospital compliance initiative, originally included in the OIG's fiscal year 2012 work plan, audits Medicare payments made to hospitals for inpatient and outpatient claims.

Extrapolation Issues

The OIG's use of extrapolation to calculate estimated overpayments in the 10 reviews represented a misinterpretation of Medicare requirements, the AHA letter said.

For example, in several of the audits, the OIG said claims were paid in error because the medical record didn't contain a signed order from a physician for the patient's admission. However, from the founding of Medicare in 1967 through Oct. 1, 2013, the Centers for Medicare & Medicaid Services never required a signed order for Medicare Part A payment, the letter said.

“In other words, the OIG invented a physician order requirement that simply did not exist during the time period relevant to the claims being audited and incorrectly denied claims on that basis,” the letter said.

Some of the OIG reviews also misinterpreted Section 1870 of the Social Security Act, which “establishes a presumption that a hospital is ‘without fault' ‘in the absence of evidence to the contrary,' when the Secretary's determination that there was an overpayment is made after the third year following the year in which the Part A payment was originally made.”

Four of the compliance reviews published in 2013 examined claims from 2009, and four of the reviews published in 2014 examined claims from 2010.

Instead of heeding the requirements of Section 1870 and deeming the hospitals “without fault,” the OIG said they were at fault but provided no evidence to back up its assertion, the letter said.

For two of the reviews, hospitals objected that claims from 2009 were being reviewed, but the OIG said the hospitals were at fault because they should have known the Medicare policies and requirements.

“That would mean, in the OIG's view, that every time there is an overpayment because a hospital incorrectly applied one of the thousands of Medicare manual provisions, the hospital is at fault and can be subject to audit and recovery of overpayments long after the fact,” the AHA said.

Claims Reopening

Additional findings from the OIG's hospital compliance reviews also were contradicted by existing Medicare policy, the AHA said.

In four of the reviews, the OIG said Medicare Administrative Contractors (MACs) should reopen the identified claims and recover the overpayments, but the claims were more than four years old at the time of the review's publication.

Medicare regulations prevent MACs from reopening claims that have been settled for more than four years unless there is credible evidence of fraud.

In the aforementioned four cases, the OIG admitted there was no evidence of fraud, but still asked for the claims to be reopened and revised.

The AHA said the four-year limit for reopening claims was designed to give hospitals assurance that claims were finalized.

“Allowing a MAC to reopen any claim, regardless of the amount of time that has passed since the claim was paid, based only on an OIG finding that some claims were paid improperly, nullifies the fraud or ‘similar fault' limitation and renders those assurances meaningless,” the letter said.

Overpayment Collection

Beyond the identified flaws with the OIG's use of extrapolation and abuse of the claims reopening period, the AHA said MACs aren't allowed to recover overpayments based on extrapolation “because that would violate the statutory limits on the use of extrapolation and CMS's own rules related to the recovery of alleged overpayments.”

According to the Medicare statute, MACs are barred from making use of extrapolation unless the HHS secretary rules that there are sustained payment errors or that educational efforts haven't corrected the payment errors, the letter said. The HHS secretary hasn't issued any such rulings for any of the 10 compliance reviews, it said.

“Instead, CMS and its MACs are adopting the OIG's estimated extrapolated overpayment amount as the MAC's own and issuing a demand letter for those estimated amounts,” the AHA said.

To contact the reporter on this story: James Swann in Washington at jswann1@bna.com

To contact the editor responsible for this story: Ward Pimley at wpimley@bna.com