Medicare overpaid hospitals $502M, OIG says

Sixty hospitals received $502 million in overpayments from Medicare during fiscal years 2011-14, according to Bloomberg Law, which cited a recent report from HHS' Office of Inspector General.

The overpayments at issue stemmed from the criteria CMS uses to review outlier payments, which are made when cost of care exceeds a threshold set by CMS. CMS requires Medicare administrative contractors to review and reconcile the payments only if the following criteria are met: 1) the actual cost-to-charge ratio is 10 percentage points higher or lower than the previous cost-to-charge ratio; and 2) the outlier payments exceed $500,000.

CMS didn't detect the outlier overpayments from fiscal years 2011-14 because they didn't meet the 10-percentage-point threshold, according to the OIG. Most of the cost reports reviewed by the OIG had a ratio of less than 5 percent.

Based on its findings, the OIG recommended that CMS require reconciliation of all hospital cost reports with outlier payments. In comments on the OIG's draft report, CMS concurred with the OIG's recommendation and said it will consider whether to propose any modifications to its outlier reconciliation policy in future rulemaking.

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