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Medicare Hospital Compliance Reviews are Legal and Sound, According to OIG

The Office of Inspector General for the Department of Health and Human Services (OIG) recently defended its practices pertaining to hospital compliance reviews in a published response to a letter from the American Hospital Association (AHA), while simultaneously announcing a voluntary suspension of reviews of inpatient short stay claims after October 1, 2013.[1]

OIG hospital compliance reviews, involving on-site audits by OIG representatives of various “risk areas” for noncompliance with Medicare billing requirements and an evaluation of internal controls, were first mentioned in a 2012 Work Plan. Hospitals at risk for noncompliance are identified through data mining and analysis; estimates of overpayment are based on sampling and extrapolation.

The AHA wrote a letter to the OIG Office of Audit Services in November of last year, taking aim at the use of extrapolated audit findings to estimate Medicare overpayments to hospitals and detailing a number of concerns, legal and other. The AHA argued that audits involving extrapolation overstate overpayment amounts. The AHA also posited that the audit process both introduces Medicare requirements where they do not exist and substitutes Medicare requirements with OIG policies. These include: (1) the need for a physician order as to the medical necessity of a short term, acute care inpatient admission; (2) OIG determinations not to pay for scheduled surgeries that are canceled after a beneficiary is admitted; (3) the rebilling of Medicare Part A claims under Part B; and (4) the review of claims beyond the statute of limitations.

Ultimately, the letter requested that audits and the publication of related reports be halted immediately.

OIG defended each of the controversial practices as legal but also sound, explaining that the reviews highlight vulnerabilities in hospital billing, return improper payments to the Medicare Trust Fund, and are an opportunity for hospital compliance departments to reduce errors and strengthen the culture of compliance at their facilities. That said, the response announced a voluntary suspension of reviews of inpatient short stay claims after October 1, 2013. This is consistent with the current moratorium placed on Recovery Audit Contractors.

Despite the relief offered by the suspension, complacency would be unwise. As OIG continues to develop its competency with and capacity for big data analytics, enabling it to better identify hospitals at risk for various aspects of noncompliance and to review multiple risk areas during a single audit, a more extensive form of police patrol oversight could emerge.

[1] The response from OIG is available here. The original letter from AHA is available here.

Copyright © 2020, Sheppard Mullin Richter & Hampton LLP.


About this Author

Lynsey Mitchel, Attorney, Sheppard Mullin, Corporate Practice

Lynsey Mitchel is an associate in the Corporate Practice Group in the firm's Century City office and is a member of the firm's healthcare practice team.

Areas of Practice

Lynsey represents hospitals, managed care organizations, medical groups, pharmacies, home health providers, medical device retailers and other health care entities and providers. 

Lynsey has deep expertise in HMO regulatory matters and has assisted numerous clients to obtain HMO licensure as health care service plans under California’s Knox-Keene Health Care Service Plan Act. Lynsey...