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OIG Reports Cancelled Elective Surgeries Cost Medicare $38.2 Million in 2009 and 2010

On August 5, 2013, the Department of Health and Human Services Office of Inspector General (OIG) released a report stating that Medicare received an estimated $38.2 million in prospective Part A inpatient hospital payments in calendar years 2009 and 2010 for short-stay, canceled elective surgery admissions that were not reasonable and necessary.

The report was initiated in response to the OIG’s review of several hospitals which indicated that short-stay inpatient claims involving canceled elective surgeries often did not meet Medicare requirements for Part A prospective payments because the admissions were not reasonable and necessary. The OIG’s report reviewed admissions from a sample of 100 hospitals and found that 80 out of the 100 made payments totaling $345,717 for hospital inpatient claims involving canceled elective surgeries when a clinical condition did not exist on admission or a new condition did not satisfy Medicare’s requirements that the admissions be reasonable and necessary. On the basis of the sample results, the OIG concluded that Medicare made an estimated $38.2 million as a result of these unreasonable and unnecessary claims.

In the report, the OIG offered three possible reasons for why these payments occurred:
1. The hospitals were unclear about the Medicare requirements for billing canceled inpatient surgeries.
2. The Centers for Medicare & Medicaid Services (CMS) billing requirements are too restrictive with regard to changing a beneficiary’s status from inpatient to outpatient after discharge.
3. Hospitals do not always have adequate utilization review controls to confirm whether admissions were reasonable and necessary after elective surgeries had been cancelled.

The OIG offered the following recommendations to CMS in order to address the issue:
1. Adjust the 80 sampled claims representing overpayments of $345,717 to the extent allowed under the law;
2. Strengthen guidance to better explain the Medicare rule that a clinical condition requiring inpatient care must exist for hospitals to bill for Part A prospective payments for elective surgeries that were canceled, which could result in savings totaling $38.2 million over a 2-year period (but hospital Part B rebilling would reduce this estimate);
3. Work with the Office of the Inspector General to resolve the remaining 10,915 non-sampled claims and recover overpayments to the extent feasible and allowed under the law;
4. Instruct Medicare administrative contractors to emphasize to hospitals the need for stronger utilization review controls for claims that include admissions for elective surgeries that did not occur.

According to the report, CMS “generally agreed” with its recommendations. However, CMS provided several comments and suggestions of its own in its response to the report. First, CMS explained that only 53 – not 80 – claims with overpayments remain eligible for reopening and adjustment. In response to the second recommendation, CMS stated that it has proposed a new rule for FY 2014 in which it will address the issue. CMS also suggested that the OIG present an annual rather than 2-year figure “to avoid misunderstanding that this amount of savings could be recovered annually.” CMS concurred with the third recommendation and noted that developing a strategy to address non-sampled claims is “already an approved Recovery Auditor review issue.” Finally, CMS did not concur with the OIG’s fourth recommendation. However, CMS stated that it has taken action to address the OIG’s concern.

To see the full OIG report with CMS’ response, click here.

For more information about this topic, contact Jessica Gustafson, Esq. or Abby Pendleton, Esq. at (248) 996-8510.

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