OIG’s 2014 Work Plan: Focus on Hospitals

The U.S. Department of Health and Human Services, Office of Inspector General (“OIG”) recently released its Fiscal Year (FY) 2014 Work Plan.  The Work Plan summarizes the activities in which the OIG plans to focus its efforts during the applicable FY.  Many of the OIG focus areas are ongoing and actively pursued; however the Work Plan covers various new focus areas specific to hospitals.   

Hospital Policies and Practices

The Work Plan includes several new areas of focus that hospitals should be mindful of.  These include the following:

·         New Inpatient Admission Criteria:  The OIG intends to analyze the impact of the “Two-Midnight” rule.  This is a significant area for hospitals as it represents a substantial change in the way hospitals have been accustomed to billing for both inpatient and outpatient services.  Although this Rule has been delayed, Recovery Audit Contractors and Medicare Audit Contractors will still carry out prepayment reviews of hospital admissions between March 31 and September 30 of 2014.

·         Medicare Costs Associated with Defective Medical Devices:  The OIG intends to review claims to identify any costs resulting from additional utilization of medical services associated with defective medical devices.  For example, a provider may utilize a medical device but if such device becomes defective, there may be additional ancillary costs associated with the replacement.

·         Analysis of Salaries Included in Hospital Cost Reports:  The OIG will review data from cost reports to identify salary amounts included in operating costs reported to and reimbursed by Medicare.  Although Medicare does not provide any specific limits, this appears to be addressing executive compensation concerns.  Hospitals should understand that this represents a significant shift towards further scrutiny of executive salaries.

·         Comparison of Provider-Based and Free-Standing Clinics: As mentioned below, provider-based status has been a significant issue for the OIG over the past few years.  Provider-based facilities receive higher payments for services when compared with freestanding facilities.  Therefore, the OIG is reviewing the impact of provider-based status as compared to freestanding facilities.  This focus area could mean potential changes to both provider-based status qualifications and reimbursement for services at such facilities.

The Work Plan includes several areas of focus which have been included in previous years’ plans.  These areas include the following:

·         Reconciliation of Outlier Payments: Outliers are additional payments that Medicare provides to hospitals for beneficiaries who incur unusually high costs.  Consistently, these payments have exceeded the amount intended to be paid.  As a result of reconciliations, hospitals may see an increase in the number of Medicare contractors investigating outlier payments.

·         Impact of Provider­-Based Status:  The OIG continues to review and determine the impact of provider-based status.  This is important as many hospitals allow subordinate facilities to bill as part of the main provider to increase Medicare reimbursement.  Specific requirements must be met to qualify for provider-based status; however the continued scrutiny by the OIG may require hospitals to prepare for any changes to these provision.

·         Critical Access Hospitals – Payment for Swing Bed Services:  The review and comparison of swing-bed services at critical access hospitals to the care received at skilled nursing facilities will continue for the purpose of determining whether Medicare could achieve cost savings.

·         Critical Access Hospitals Beneficiary Costs for Outpatient Services:  The OIG continues to review and determine the costs to Medicare beneficiaries for outpatient services received at critical access hospitals.  Currently, beneficiaries who receive outpatient services pay coinsurance amounts that are computed based upon the hospital’s submitted charge, rather than the costs of the services.

·         Long Term Care Hospitals Billing Patterns:  The OIG intends to identify readmission patterns in long term care hospitals.  The primary concern is that CMS may not have the ability to detect readmissions and appropriately pay the readmissions as interrupted stays instead of as higher paying new admissions.

Billing and Payments 

The OIG has stepped up focus on billing requirements including specifically mentioning the requirement of adequate and supporting documentation within the medical record.  New focus areas related to billing and payment issues for hospitals are as follows:

·         Outpatient Evaluation and Management Services:  The OIG intends to review Medicare outpatient payments made to hospitals for evaluation and management services related to clinic visits billed at the new-patient rate to determine whether they were appropriate.  A “new” patient or “established” patient is an individual who has been seen as a registered inpatient or outpatient of the hospital within the past three (3) years.  Therefore, hospitals should ensure that their policies and billing practices are in line with these requirements.

·         Nationwide Review of Cardiac Catheterization and Heart Biopsies:  The OIG will review payments for right heart catheterizations and heart biopsies during the same operative session to determine if billing requirements have been met.  At times these have been billed separately even though the services would already be included in payments for heart biopsies.  The OIG noted that a bill must be completed accurately, reflecting the necessity of compliant documentation.

·         Payments for Patients Diagnosed with Kwashiorkor: Kwashiorkor is a form of severe protein malnutrition that affects children living in specific areas and is not typically found in the United States.  Nevertheless, the OIG intends to review Medicare payments made to hospitals for claims that include this diagnosis.  Above all, the OIG intends to scrutinize whether such diagnosis is adequately supported by documentation in the medical record.

·         Bone Marrow or Stem Cell Transplants:  Transplantations are covered under Medicare only for specific diagnoses.  The OIG will evaluate whether procedures codes are accompanied with the diagnosis codes to meet specific coverage criteria.

·         Indirect Medical Education Payments:  Teaching hospitals with residents receive additional payments for each Medicare discharge to reflect the higher indirect patient care costs; however such payments are calculated using the hospital’s ratio of resident full-time equivalents to available beds.  The OIG intends to determine if payments have been made in accordance with Federal regulations and guidelines.  Teaching hospitals must ensure that the applicable requirements are being met, reducing the likelihood that the hospital is receiving excess reimbursement.

The Work Plan includes several areas of focus under billing and payments which have been included in previous years’ plans.  These areas include the following:

·         Inpatient Claims for Mechanical Ventilation:  The OIG continues to review Medicare payments for inpatient hospital claims with certain Medicare Severity Diagnosis Related Group assignments that require mechanical ventilation.  A patient though, is required to receive 96 hours or more of mechanical ventilation.  The OIG will be reviewing this requirement to see whether improper payments occurred.

·         Selected Inpatient and Outpatient Billing Requirements:  Generally, the OIG will focus on billing requirements and recommended recovery of overpayments to determine hospital compliance.  This will include surveys or interviews with hospital leadership and compliance officers to ensure compliance programs are being enforced.

·         Duplicate Graduate Medical Education Payments:  No intern or resident may be counted as more than one full time equivalent employee in the methodology for receiving reimbursement of graduate medical education costs.  The OIG will continue to review data to determine whether hospitals received duplicate or excessive graduate medical education payments.

·         Outpatient Dental Claims: Dental services are generally excluded from Medicare coverage, however the OIG will continue to review payments to hospitals to determine whether such payments were made in accordance with Medicare requirements.

Quality of Care and Safety

With respect to quality of care and safety in hospitals, the OIG has issued new focus areas related to oversight of pharmaceutical compounding and hospital privileging.  The following focus areas should be on the radar of hospitals for this FY:

·         Oversight of Pharmaceutical Compounding:  Most hospitals compound drugs on-site, or create a prescription drug tailored to the individual patient.  Medicare is responsible for the safety of this process and the OIG intends to assess such pharmacy services in hospitals for any potential oversight issues.

·         Oversight of Hospital Privileging:  The OIG intends to determine how hospitals assess medical staff candidates prior to granting initial privileges.  The OIG notes that the hospital’s governing body must ensure that physicians and other licensed independent practitioners are accountable.  Their belief is that strengthened privileging programs will yield significant contributions to patient safety.

·         Hurricane Sandy Emergency Preparedness Case Study:  The OIG intends to assess the hospital preparedness and response during Hurricane Sandy.  The OIG notes that CMS’s Conditions of Participation require hospitals to develop and maintain an environment that ensures the safety and well-being of patients during disasters.  Hospitals should note this case study is limited to the counties affected, but the increased focus on emergency preparedness may be a more widespread issue further into the future.

The Work Plan includes areas of focus under quality of care and safety which have been included in previous years’ plans.  These areas include the following:

·         Participation in Projects with Quality Improvement Organizations:  CMS is required to enter into contracts with quality improvement organizations and the OIG intends to determine the extent and nature of participation in the quality improvement projects.

·         Inpatient Rehabilitation Adverse Events:  The OIG intends to continue focus on adverse and temporary harm events for Medicare beneficiaries receiving post-acute care in inpatient rehabilitation facilities.  This review will also include an analysis of prevention and the associated costs to Medicare.

By reviewing the focus areas identified in the Work Plan, hospitals can determine where to focus their compliance program efforts.  If you have any questions regarding the Work Plan or any issues that may impact your organization please contact Bob Wade at bwade@kdlegal.com or Alex Krouse at akrouse@kdlegal.com.