OIG audit finds hospital received more than $400,000 in overpayments for IRF, other inpatient and outpatient services

Carolinas Hospital in Florence, South Carolina, received $431,757 in Medicare overpayments for incorrectly billed inpatient and outpatient services based on a sample of claims, according to an Office of Inspector General (OIG) audit report released November 26. The OIG estimates that, based on the sample, the hospital may have received at least $3.4 million in overpayments.

The OIG reviewed a random sample of 80 inpatient and 20 outpatient claims submitted from 2016 to 2017. The hospital complied with Medicare billing requirements for 55 of the claims but the remaining 45 claims, a mix of inpatient and outpatient claims, contained billing errors that resulted in overpayments. The improperly billed inpatient claims made up the lion’s share of the overpayment at $431,431, while the improperly billed outpatient claims accounted for $326.

Of the incorrectly billed claims:

• 22 inpatient rehabilitation facility (IRF) claims did not meet coverage requirements
• 15 inpatient Medicare Part A claims should have been billed as outpatient or outpatient with observation
• Four inpatient claims and one outpatient claim were incorrectly coded
• Three outpatient claims were subject to the consolidated billing requirements and should have been billed to the appropriate skilled nursing facility rather than Medicare

The OIG recommended that the hospital refund the estimated $3.4 million in overpayments. The agency also recommended that the hospital exercise due diligence by identifying and returning any similar overpayments outside the audit period and strengthen internal controls to ensure compliance with Medicare’s billing and coding requirements.

Carolinas Hospital did not agree with the OIG’s recommendations. The hospital contends that the 22 IRF claims did meet Medicare’s IRF coverage requirements and that the OIG’s physician reviewer for these claims wasn’t board certified in physical medicine and rehabilitation and that it was unclear whether the physician reviewer had the knowledge and experience necessary to reliably evaluate the admitting physicians’ medical decision-making or the appropriateness of the IRF claims.

The hospital also stated that it does not agree that the 15 inpatient claims didn’t meet Medicare criteria for inpatient admission. The hospital also disagreed with the OIG’s use of extrapolation to arrive at the estimated $3.4 million overpayment.

The OIG maintains that its findings are correct, including the use of extrapolation. Carolinas Hospital intends to appeal the claims.

IRF claims have come under increasing scrutiny from regulatory agencies. In a 2018 report the OIG said that most IRF claims are incorrect and urged CMS to implement a prior authorization process for IRF services. At the Health Care Compliance Association’s (HCCA) 2019 Compliance Institute in Boston, representatives from the OIG said that the agency is preparing a portfolio report on IRF services and will include recommendations to CMS on audits, education, and changes to the IRF payment system.

Organizations should review their internal policies to ensure compliance with Medicare’s coverage requirements for IRF services, inpatient admissions, coding, and consolidated billing. Internal audits and staff meetings can help identify compliance risks and provide opportunities for targeted education. Organizations can take specific questions to their Medicare Administrative Contractor.