Medicare overpaid hospitals $267M, OIG says

Medicare overpaid hospitals more than $267 million over a two-year period for inpatient claims with post-acute care transfers to home health services, according to a report from HHS' Office of Inspector General. 

The inspector general did the review after prior audits identified overpayments because hospitals did not comply with Medicare's post-acute care transfer policy. Subsequent analysis indicated hospitals may be using condition codes to bypass CMS' system edits to receive higher reimbursements for inpatients transferred to home health services, the OIG said. 

For fiscal years 2016 and 2017, the OIG examined a sample of 150 claims at risk of overpayment and had an independent medical review contractor review the medical records. 

"Medicare improperly paid most inpatient claims subject to the transfer policy when beneficiaries resumed home health services within three days of discharge but the hospitals failed to code the inpatient claim as a discharge to home with home health services or when the hospitals applied condition codes 42 (home health not related to inpatient stay) or 43 (home health not within three days of discharge)," the OIG said. 

Of the 150 claims in the sample, Medicare properly paid three and improperly paid 147 with $722,288 in overpayments. 

"Medicare should have paid these inpatient claims using a graduated per diem rate rather than full payment," the OIG said. 

Based on its sample results, the OIG estimated that Medicare improperly paid $267 million to hospitals over the two-year period. 

The inspector general made several recommendations, including that CMS recover a portion of the overpayments, reprocess the remaining inpatient claims in the OIG's sample frame with an incorrect patient discharge status or condition code, correct its related system edits and consider reducing the need for clinical judgment when processing claims under the post-acute care transfer policy. 

CMS concurred with most of the OIG's recommendations, according to the report. 

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