Hospital disputes OIG audit findings that estimate more than $22 million in overpayments for IRF and DRG errors

Community Hospital in Munster, Indiana, is disputing an Office of Inspector General (OIG) report that found DRG assignment errors and incorrect inpatient rehabilitation facility (IRF) claims, resulting in an projected $22,051,602 in overpayments.

Out of a sample of 170 claims for 2015 and 2016, the OIG’s auditors found that 86 did not fully comply with Medicare’s billing requirements. All of the incorrect claims were inpatient—63 incorrect IRF claims and 23 incorrectly billed DRG codes—resulting in a net overpayment of $1,266,758.

Certain coverage and documentation requirements must be met for IRF care to be considered reasonable and necessary, and if the claim is not deemed reasonable and necessary the entire payment will be in error, the report said. For IRF care to be considered reasonable and necessary, documentation must support a reasonable expectation that at the time of admission to the IRF the patient:

• Actively participated in and significantly benefitted from the intensive rehabilitation therapy program
• Generally required an intensive rehabilitation therapy program
• Required an intensive and coordinated interdisciplinary approach to rehabilitation
• Required supervision by a rehabilitation physician
• Required the active and ongoing therapeutic intervention of multiple therapy disciplines

One of the primary distinctions between an IRF and other rehabilitation settings is the intensity of rehabilitation therapy services provided. Therefore, documentation of a reasonable expectation that the patient required IRF-level services is key. In addition, patients admitted to an IRF must be able to complete 15 hours of intensive, IRF-level therapy per week.

For the incorrectly billed IRF claims, the OIG’s auditors did not find evidence in the medical record that the admissions met Medicare’s criteria. Community Hospital declined to provide a cause for the errors because it believes that the OIG’s audit methodology is flawed and that the claims did meet Medicare requirements.

For the 23 claims billed with incorrect DRG codes, the OIG’s auditors found that Community Hospital had used incorrect diagnosis codes to determine the DRG codes. Community Hospital generally agreed with the OIG’s findings in this area and attributed the errors to outdated clinical documentation handbooks the coders used when coding claims.

The OIG recommends that the hospital refund the overpayments, identify any additional overpayments received outside of the audit period, and strengthen controls to ensure compliance with Medicare requirements. Community Hospital stated that it does not believe that Medicare has the right to enforce compliance with criteria described in the Medicare Benefit Policy Manual, including IRF criteria. The hospital also said that the OIG had no cause to audit Community Hospital and the audit methodology and the extrapolation to estimate total overpayments based on a sample are flawed. The OIG responded to say that hospitals are selected using a risk-based approach that identifies hospital claims that are most at risk for noncompliance and that both the audit methodology and extrapolation are in line with accepted practice.