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September 26, 2017

Medicare improperly paid $51.6M to acute-care hospitals, HHS' OIG says

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Medicare made $51.6 million improper payments to acute-care hospitals for outpatient services provided to beneficiaries who were inpatients at other facilities between January 2013 and August 2016, according to an audit from HHS' Office of Inspector General (OIG).

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The audit also found that the payment mix-up cost Medicare beneficiaries nearly $14.4 million in improper out-of-pocket costs.

Audit details

OIG conducted the latest audit after previous reviews found Medicare inappropriately paid for outpatient services provided to beneficiaries who were inpatients of short-term acute-care hospitals. Those reviews did not encompass outpatient services for beneficiaries who were inpatients at other types of facilities.

The latest audit covered outpatient services provided at acute-care hospitals to beneficiaries while they were inpatients at:

  • Long-term care hospitals (LTCHs);
  • Inpatient rehabilitation facilities (IRFs);
  • Inpatient psychiatric facilities (IPFs); and
  • Critical access hospitals (CAHs).

According to OIG, Medicare typically should not pay the acute-care hospital for those outpatient services. Instead, Medicare should pay only the inpatient facility for all the rendered services, as part of the facility's overall inpatient payment rate. It is then up to the patient's inpatient facility and the acute-care hospital to reach an arrangement for the care provided.

For the latest audit, OIG looked at $51,640,727 in Medicare Part B payments to acute-care hospitals for 129,792 claims that addressed outpatient services provided for beneficiaries who were inpatients at LTCHS, IRFs, IPFs, or CAHs. OIG did not address whether the inpatient facilities paid the acute-care facilities for the episode or whether they included the outpatient services on their Medicare Part A claims.

Key findings

None of the roughly $51.6 million in payments OIG reviewed should have been made, OIG said, as the inpatient facilities were responsible for the payment. Further, OIG found that beneficiaries were asked to pay $14,365,590 in unnecessary deductibles and coinsurance to the acute-care hospitals for the outpatient services.

OIG attributed the improper Medicare payments to the acute-care hospitals to issues with CMS' Common Working File (CWF), which includes system edits to prevent or identify overpayments for outpatient services provided while beneficiaries are inpatients.

Medicare contractors processed the acute-care hospital's outpatient claim before the inpatient facility's inpatient claim in 94 percent of cases, OIG found, accounting for about $48.4 million of the total payments. Meanwhile, in the other 6 percent of cases, contractors processed the inpatient facility's claim first, but the prepayment edit in the CWF failed to deny the acute-care hospital's outpatient claim, according to OIG.

OIG said if CWF edits had been functioning correctly since 2006, Medicare could have saved $99,149,320, while beneficiaries could have saved $28,899,632 in potential improper out-of-pocket payments.


OIG recommended that CMS have Medicare contractors:

  • Recover the $51.6 million in improper payments;
  • Instruct acute-care hospitals to refund beneficiaries the $14.4 million in improper out-of-pocket payments; and
  • Identify improper payments to acute-care hospitals from after the audit period and instruct them to refund beneficiaries any improper out-of-pocket costs they may been charged improperly.

Further, OIG said CMS should address CWF edits to ensure such issues don't occur in the future.

CMS concurred with the recommendations and discussed the actions it has taken or will take to put them in place (Haefner , Becker's Hospital CFO Report, 9/21; Commins, HealthLeaders Media, 9/21; HHS OIG audit, September 2017).

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