Knowledge Base Article

Saint Thomas Hospital in Nashville, TN has the unique or unfortunate distinction of being the first hospital that the Office of Inspector General (OIG) has extrapolated their Medicare Compliance Review findings. Through extrapolation the payback amount to the Medicare Administrative Contractor increased from $293,359 for the actual records reviewed to an extrapolated amount of $1,092,248.

Background of OIG Medicare Compliance Reviews:

The mission of the OIG is mandated by Public Law and “is to protect the integrity of the Department of Health and Human Services (HHS) programs, as well as the health and welfare of beneficiaries served by the programs. This statutory mission is carried out through a nationwide network of audits, investigations, and inspections conducted by” the Office of Audit Services, Office of Evaluation and Inspections, Office of Investigations and Office of Counsel to the Inspector General.

Hospital specific Medicare Compliance Reviews are performed to review Medicare payments to hospitals for selected claims for inpatient and outpatient services.

The OIG has indicated that they identify claims at risk for noncompliance through computer matching, data mining, and analysis techniques. Examples of risk areas include:

• Inpatient short stays,
• Inpatient claims billed with high severity level DRG codes,
• Inpatient claims pain in excess of charges,
• Inpatient same-day discharges and readmissions,
• Inpatient and outpatient manufacturer credits for replaced medical devices, and
• Outpatient claims with payments greater than $25,000.

Saint Thomas Compliance Review Findings and Recommendations:

In this review, the OIG found that the Hospital complied with Medicare billing requirements for 206 of 250 claims reviewed and that the remaining 44 claims resulted in $293,359 in overpayments to the Hospital. Reasons identified resulting in overpayments included the following:

• Billing claims as Medicare Part A that should have been billed as outpatient or outpatient with observation services,
• Incorrect DRG code assignment,
• Incorrect reporting of medical device credits,
• Billing separately for related discharges and readmissions on the same day; and
• Incorrect HCPCS code assignment.

Complete details can be found in the Medicare Compliance Review of Saint Thomas Hospital for Calendar Years 2009 and 2010.

The OIG made two recommendations:

• First, that the Hospital refund $1,092,248 in estimated overpayments; and
• Second that the Hospital strengthen controls to ensure complete compliance with Medicare billing requirements.

Saint Thomas Says:

Saint Thomas indicated that they were not made aware until “towards the end of the audit process that the sample was statistical and the findings would be estimated.”

Saint Thomas disagreed with the recommendation to refund the $1,092,248 in estimated overpayments and indicated in their comments that “in reviewing the Medicare Compliance Reviews audit reports the OIG has issued in the past two years, all of them were based on a “judgmental” sampling methodology. In some cases, it was noted that some hospitals had no extrapolation even though their overpayment audit results appeared to exceed those of STH.”

Further complicating the OIG findings Saint Thomas found that their “sample frame included several claims that the Recovery Audit Contractors (RAC) had also reviewed. The Hospital believed that including RAC claims in our sample frame, especially claims that the Hospital had already repaid, would result in the Hospital repaying Medicare twice.”

Ultimately, Saint Thomas indicated that they did not agree with the sampling methodology but would make any final payment necessary as a result of the statistical sampling.

The OIG Says:

The OIG indicated “at our entrance conference on June 26, 2012, we informed the Hospital that we would use statistical sampling techniques to select claims for review. In addition, during the course of the audit, we discussed with a Hospital official our plans to “project” the sample results across the population.” Additionally, they indicated that “as this hospital compliance review initiative has matured, we have refined our audit methodologies. Some reviews are statistical sampling and estimation techniques to draw conclusions about a larger portion of a hospital’s claims while other reviews are judgmental sampling. Each hospital review is unique, and the sampling method used in each of these reviews will vary.”

The OIG indicated that they did identify claims in the sample under RAC or Department of Justice (DOJ) review and as such these claims were considered “non-errors.”

Ultimately, the OIG maintained that Saint Thomas should pay bay the $1,092,248 in estimated overpayments.

Key Takeaways for our Clients:

• Be involved with the OIG staff from the beginning of an audit to understand the sampling techniques that will be used,
• Be aware of the potential “risk areas” identified by the OIG and internally assess for potential break-downs in processes; and
• Be aware that the days of paying back overpayments for only the claims reviewed appears to no longer hold true.