Improper Outpatient Payments for Inpatients at other Facilities

on Tuesday, 23 January 2018. All News Items | Outpatient Services | Billing

Pain and Embarrassment

Reviewed in a previous article, published August 2017, was information from an Office of Inspector General (OIG) Report about outpatient services provided shortly before or during inpatient stays. This report and the associated article focused on issues of non-compliance with the 3-day window rule and outpatient services billed separately when the Medicare beneficiary was an inpatient at the same or another acute-care hospital. The OIG review did not cover outpatient services provided to beneficiaries who were inpatients of other types of facilities. A recent OIG report remedies that and examines outpatient payments for patients who were inpatients of long-term-care hospitals (LTCHs), inpatient rehabilitation facilities (IRFs), inpatient psychiatric facilities (IPFs), and critical access hospitals (CAHs).  The bad news is that none of the almost 130,000 claims totaling $51,640,727 in Medicare outpatient payments that were reviewed by the OIG should have been paid.

Medicare pays LTCHs, IRFs, and IPFs under a prospective payment system (PPS) specific to the particular type of facility.  CAHs are paid on a reasonable cost basis. These types of facilities must provide all services furnished during an inpatient stay directly or under arrangements. This includes surgeries, diagnostic testing, emergency department visits, infusions, and ambulance transportation.  If an inpatient of one of these facilities receives outpatient services from an acute-care hospital under arrangements, then the inpatient facility must include those outpatient services on its inpatient Medicare claim. The acute-care hospital should receive payment from the patient’s inpatient facility and must not submit an outpatient claim to Medicare.

Here are some statistics on the overpayments by type of inpatient facility and type of service.

Overpayment Statistics
Facility TypeOverpayment in MillionsOverpayment PercentageType of ServiceOverpayment in MillionsOverpayment Percentage
LTCH $18.6 36% Surgery $20.7 40%
IRF $18.4 36% E&M $10.6 21%
IPF $12.4 24% Diagnostic $10.0 19%
CAH $2.2 4% Therapeutic $6.3 12%
      Other $4.1 8%

The purpose of OIG audits is to identify problems and correct processes going forward. The end result of correctly billed and paid claims is a good thing, but the immediate recoupment of overpayments causes pain for the involved providers. This audit recommends CMS recover the $51 M in overpayments as well as having the hospitals refund approximately $14 M to beneficiaries.

There is also some pain, or at least some embarrassment, for Medicare as well since they should have caught these duplicate claims to begin with and not made the improper payments. However, Medicare’s edits were not working properly – edits alerted when the inpatient claim was received after an overlapping outpatient claim was paid, but the contractors did not understand the alert required them to take the action of recovering the outpatient overpayment – both claims were paid. When the outpatient claim was received after the inpatient claim was paid, the edits failed to deny the outpatient claim and again, both claims were paid.  To make matters even worse, the OIG estimates that, “If the Common Working File (CWF) edits had been working properly since CY 2006, Medicare could have saved $99,149,320, and beneficiaries could have saved $28,899,632 in deductibles and coinsurance that may have been incorrectly collected from them or someone on their behalf.” This may result in more pain for providers as the OIG recommended Medicare contractors identify improper payments after the OIG audit period, recover overpayments and have hospitals refund associated co-payments.

Other recommendations from the OIG are for CMS to correct the CWF edits to prevent future overpayments related to this issue and for “Medicare contractors to more effectively educate acute-care hospitals not to bill Medicare for outpatient services they provided to beneficiaries who were inpatients of other facilities, but rather to provide those services under arrangements and look to the inpatient facilities for payment.”  To that end, CMS has already reissued Special Edition MLN Article SE17033.

Maybe proper processing edits and correct claim submissions will save everyone some pain and embarrassment.

Article by Debbie Rubio

Debbie Rubio, BS, MT (ASCP), is the Manager of Regulatory Affairs and Compliance at Medical Management Plus, Inc.  Debbie has over twenty-seven years of experience in healthcare including nine years as the Clinical Compliance Coordinator at a large multi-facility health system.  In her current position, Debbie monitors, interprets and communicates current and upcoming regulatory and compliance issues as they relate to specific entities concerning Medicare and other payers.  You may contact Debbie at This email address is being protected from spambots. You need JavaScript enabled to view it..

This material was compiled to share information.  MMP, Inc. is not offering legal advice.  Every reasonable effort has been taken to ensure the information is accurate and useful.

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