Knowledge Base Article

Fiscal Year 2021 Estimated Improper Payment Rates

In mid-November 2021, the Comprehensive Error Rate Testing (CERT) program published the Fiscal Year (FY) 2021 Annual CERT Report. A related Press Release, (link) noted that “CMS’ aggressive corrective actions led to an estimated $20.72 billion in reduction of Medicare Fee-for-Service (FFS) improper payments over seven years.”

While CMS cites an impressive reduction in improper payments over seven years, there was only a slight change from 2020 to 2021.

• Improper Payment Rate
• o FY 2020: 6.27%
• o FY 2021: 6.26%
• Improper Payment Amount
• o FY 2020: $25.74 billion
• o FY 2021: $25.03 billion

As I have noted in past articles, CMS noted in the Press Release that “while fraud and abuse may lead to improper payments, it is important to note that the vast majority of improper payments do not constitute fraud, and improper payment estimates are not fraud rate estimates.”

Fiscal Year 2021 Supplemental Improper Payment Data

The 2021 Supplemental Improper Payment Data Report (link) was published on December 12, 2021. This report highlights common causes of improper payments and includes tables allowing you to drill down into the review findings.

COVID-19 Impact

• From March 27, 2020, until August 10, 2020, CERT program activities were suspended,
• CMS reduced the claim sample size for FY 2021 (claims submitted July 1, 2019, through June 30, 2020), and
• Claims with dates of service within the COVID-19 PHE were reviewed in accordance with all applicable CMS waivers and flexibilities.

“0 or 1 day” Length of Stay Claims

Since implementation of the Two-Midnight Rule, the supplemental data report has included a table comparing improper payments rates for Part A hospital claims by length of stay (LOS). The improper payment rate for “0 or 1 Day” stay claims was highest in 2014 at 37.18% and in 2021 hit an all-time low of 16.8%. However, with the project improper payment rate being $1.5 billion, it is not surprising that Two-Midnight Stays are currently on the OIG Work Plan (link) and Livanta as the National Medicare Claim Review Contractor (link), is focusing their review efforts solely on Short Stay Reviews (SSRs) and Higher Weighted DRG (HWDRG) reviews.

Top 20 Service Types with Highest Improper Payments: Part A Hospital IPPS Table D4 of this report includes the top 20 DRG types with the highest improper payment rate. The table also details the percentage of error by each of the CERT’s major error categories:

• No documentation,
• Insufficient documentation,
• Medical Necessity,
• Incorrect Coding, and
• Other.

Overall, 58.9% of the errors in this table were due to the error category medical necessity. The CERT places a claim into this category when the CERT contractor reviewers receive adequate documentation from the medical records submitted to make an informed decision that the services billed were not medically necessary based upon Medicare coverage and payment policies. One hundred percent of the errors for the following four DRG Types was attributed to medical necessity:

• DRG 069: Transient Ischemia,
• DRGs 308, 309, 310: Cardiac Arrhythmia & Conduction Disorders,
• DRG 312: Syncope, and
• DRG 313: Chest Pain.

Moving Forward

For the Septicemia DRGs 871 and 872, 37.2% of the errors was attributed to “no documentation.” Unfortunately, denied claims due to no documentation is also a frequent issue reported by the Medicare Administrative Contractors (MACs) and the Supplemental Medical Review Contractor (SMRC).

Moving forward, here are ideas and resources to help in your efforts to prevent claims errors:

• Visit the CERT Provider Website (link) to find information about the CERT, how to submit records, sample request letters and much more.
• Become familiar with National and Local Coverage Determinations and Local Coverage Articles that detail indications and limitations of specific services. For example, DRGs 469 and 470 (Major Hip and Knee Joint Replacement or Reattachment of Lower Extremity) had the highest projected improper payment in Table D4 at $724,055,597. The CERT attributed 19.5% of the error to insufficient documentation and 80.3% to medical necessity. CMS has published an MLN Booklet titled Major Joint Replacement (Hip or Knee) (link) that provides guidance on what to document to avoid denied claims.
• Become familiar with and utilize your hospital’s Program for Evaluating Payment Patterns Electronic Report (PEPPER).
• And finally, take the time to review the CERT’s Supplemental Improper Payment Data report annually.