January 2015 Monthly RAC Report: OIG Work Plan

January 12, 2015

Every year the Office of Inspector General (“OIG”) releases its work plan for the following year, in which it outlines new and current initiatives for investigating and auditing programs under the umbrella of the Department of Health and Human Services. On October 31, 2014, the OIG released its Work Plan for Fiscal Year 2015 (“Work Plan”), outlining 19 new initiatives and carrying over many initiatives from previous work plans. Now that 2015 has begun, hospitals should expect the OIG to begin implementing some of the initiatives discussed in the Work Plan, especially considering the OIG’s touting of the nearly $834.7 million in audit receivables and approximately $4.1 billion in investigative receivables recovered in 2014.

Of the 19 new initiatives identified in the Work Plan, 2 deal directly with hospital quality of care and billing issues. The first is that the OIG will review hospital controls over the reporting of wages used to calculate wage indexes for Medicare payments. According to the OIG, its previous review of the wage index revealed hundreds of millions of dollars in incorrectly reported wage data. The second is that the OIG plans to estimate the number of adverse events occurring in long-term-care hospitals, which represent the third most common type of post-acute care facility after skilled nursing facilities and inpatient rehabilitation facilities.

One of the most notable initiatives that carried over from the 2014 Work Plan is the OIG’s review of the two-midnight rule’s effect on hospital billing, Medicare payments, and beneficiary copayments. As hospitals already know, the two-midnight rule requires that beneficiaries be admitted as outpatients if their expected length of stay does not exceed two midnights. Many hospitals have expected this rule, which was implemented in March of 2014, to decrease the amount of inpatient admissions and thus decrease the amount of Medicare payments—the opposite effect forecasted by the Centers for Medicare and Medicaid Services. The issuance of the OIG’s review of the two-midnight rule is not expected until 2016, and should include a discussion of how billing varied among hospitals in 2014.

Some of the other notable initiatives that carried over from previous work plans include, but are not limited to, the following:

  • Medicare costs associated with defective medical devices: The OIG will identify the costs resulting from additional use of medical services associated with defective medical devices and determine the effect on the Medicare Trust Fund.
  • Analysis of salaries included in hospital cost reports: Employee compensation may be included in allowable provider costs, but only to the extent that it represents reasonable remuneration for managerial, administrative, professional, and other services related to the operation of the facility and furnished in connection with patient care.
  • Payment policy for swing-bed services in critical access hospitals: Swing beds are inpatient beds that can be used interchangeably for either acute care or skilled nursing services. Critical access hospitals may receive reimbursement equal to 101% of the reasonable cost of services and may have up to 25 inpatient beds that can be used for acute care or swing-bed services. The law does not establish limitations on the length of stay for swing beds, but the OIG plans to compare reimbursement for swing-bed services at critical access hospitals to the same level of care obtained at traditional skilled nursing facilities to determine whether Medicare could achieve cost savings through a more cost effective payment methodology.
  • Outpatient evaluation and management services billed at the new-patient rate: A preliminary review of Medicare outpatient payments made to hospitals for evaluation and management services for clinic visits billed at the new-patient rate identified overpayments due to hospitals using new-patient codes for established patients (According to federal regulations, an “established patient” is one that has been registered as an inpatient or outpatient at the hospital within the previous 3 years).
  • Nationwide review of cardiac catheterizations and endomyocardial biopsies: Previous OIG reviews have identified inappropriate payments in which hospitals double billed right heart catheterizations (Hospitals first would include the heart cath within their bill for endomyocardial biopsies, and second would then include the same heart cath within a separate bill for the heart cath itself).
  • Inpatient rehabilitation facilities (“IRFs”) – Adverse events: IRF care provided 11% of post-acute facility care and accounted for $7 billion in Medicare expenditures in 2011. The OIG will estimate the national rate of adverse and temporary harm events for Medicare beneficiaries receiving IRF care.

Hospitals should be aware of the OIG’s upcoming initiatives and take proactive steps to stay ahead of the OIG so to avoid overpayment liability and fraud investigations. If you have any questions about the Work Plan and how it may affect your facility, please contact Larry McCarty at larry.mccarty@phelps.com or Jeff Moore at jeff.moore@phelps.com.