Knowledge Base Article

Anything can be improved. That is true in all aspects of life, but when you are talking about a large bureaucratic governmental entity, it is a given. But don’t worry; the government has other large, bureaucratic entities to oversee large, bureaucratic entities… Is it a wonder our national budget is out of control?

One of the top priorities of the Office of Inspector General (OIG) is to improve Medicare oversight and reduce fraud, waste, and abuse in the Medicare program. In testimony before the House Ways and Means Committee on May 20, 2014, the OIG Regional Inspector General for Office of Evaluation and Inspections, Jodi D. Nudelman, explained three areas that are key to improving the Medicare program for taxpayers and beneficiaries. Hospitals should pay close attention to these issues as they will likely have an effect on future reimbursement.

The Two-Midnight Hospital Policy Must Be Carefully Evaluated

OIG evaluations of hospitals’ use of observation stays and short inpatient stays prior to the implementation of the new policy showed that Medicare and Medicare beneficiaries paid significantly more for short-stay inpatient care than for observation services even though the conditions treated and the treatment rendered were often the same. There was a wide variation between hospitals on their use of observation versus short inpatient stays. Another concern was that observation care of three nights or more does not meet the criteria to qualify a patient for skilled nursing facility (SNF) care under the Medicare.

It is still unclear whether the new two-midnight policy will increase the number of inpatient admissions or the number of observation stays. The OIG continues to be concerned about the same issues as identified prior to implementation of the new rule. The OIG believes careful evaluation of the impact of the new policy is needed to ensure that policymakers consider payment variations for Medicare and beneficiaries, differing hospital practices, and the impact on post-hospital SNF care.

CMS Should Strengthen its Oversight of RACs and Follow through on Vulnerabilities That Lead to Improper Payments

The OIG recommends that CMS enhance its follow-through on improper payment vulnerabilities identified through RAC audits including evaluating the effectiveness of actions taken to address vulnerabilities. They also recommended that CMS’s evaluations of the Recovery Auditors include information on the RAC’s ability, accuracy, and effectiveness in identifying overpayments.

The Medicare Appeals System Needs Fundamental Changes

Some of the OIG’s concerns with the appeal process were that most appeals were submitted by a small percentage of providers and a large number of denials were overturned at the ALJ level due to differing interpretations of Medicare policies and differences in the content, organization, and format of the case files at the ALJ level from the files at the QIC level of appeal. The OIG recommendations for the appeal process were:

• Clarification of Medicare policies
• Training on Medicare policies
• Standardized, electronic case files
• Increased CMS participation in ALJ hearings
• Quality assurance process to review ALJ decisions

As the OIG testimony concluded, “Clear policies, strong oversight of contractors, and an appeals system that is effective, efficient, and fair are critical to” an effective and efficient Medicare program.