News: CMS needs to ensure hospitals bill appropriately, OIG says

The Office of Inspector General (OIG) recently released its annual report detailing its list of top unimplemented recommendations for 2022. One recommendation in particular takes aim at the revenue cycle, HealthLeaders reported.

According to the report, CMS should:

• Recover overpayments of $1 billion resulting from incorrectly assigning severe malnutrition diagnosis codes to inpatient hospital claims,
• Ensure that hospitals bill appropriately moving forward, and
• Conduct targeted reviews of claims at the highest severity level that are vulnerable to upcoding

In a previous audit, the OIG found that hospitals incorrectly billed Medicare for severe malnutrition diagnosis codes for 173 of the 200 claims that were reviewed, resulting in net overpayments of $914,128 for the claims in its sample.

"On the basis of our sample results, we estimated that hospitals received overpayments of $1 billion for incorrect severe malnutrition diagnosis codes for fiscal years 2016 and 2017," the report said.

At the time, the OIG said it also found that hospitals are increasingly billing for inpatient stays at the highest severity level, which is the most expensive. The number of stays at the highest severity level increased almost 20% from fiscal year 2014 through fiscal year 2019, ultimately accounting for nearly half of all Medicare spending on inpatient hospital stays, the report said.

To remedy the situation, the OIG gave CMS a lengthy list of suggestions. While the OIG says CMS has started to take initial steps toward implementing the recommendations, there is more work to be done; thus, landing this issue on the recently released list.

"In response to our recommendation that CMS conduct targeted reviews of Medicare Severity Diagnosis Related Groups and stays that are vulnerable to upcoding, as well as the hospitals that frequently bill them, CMS did not concur but acknowledged that there is more work to be done to determine conclusively which changes in billing are attributable to upcoding," the OIG said.

Further oversight and recovery audit contractor reviews, which are already being conducted, are essential to ensuring that Medicare dollars are spent appropriately, the report noted.

Editor’s note: This article originally appeared in HealthLeaders. To read the OIG’s annual report, click here.