OIG finds ‘significantly reduced’ improper payments to acute care hospitals

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An audit of inappropriate Medicare payments to acute care hospitals has found that such improper payments are on the decline: While hospitals logged $39.3 million in improper Medicare Part B payments from 2016 to 2021, that’s a decrease from the $51.6 million in alleged overpayments that occurred between 2013 and 2016.

That’s according to newly released information from the Department of Health and Human Services’ Office of the Inspector General (OIG), which stressed that the overpayments still should not have taken place because the beneficiaries were already in other facilities.

The new audit identified $39.3 million in Medicare Part B payments to acute-care hospitals for outpatient services provided to beneficiaries who were inpatients of certain other facilities during the period in question. The OIG identified patient claims from long-term care hospitals (LTCHs), inpatient rehabilitation facilities (IRFs), inpatient psychiatric facilities (IPFs) and critical access hospitals (CAHs), and used the beneficiary information and service dates to identify outpatient claims from acute-care hospitals that overlapped with the identified inpatient claims.

None of the $39.3 million should have been paid because the inpatient facilities were responsible for payment, the OIG found.

Each type of inpatient facility covered by the audit must directly provide all services furnished during an inpatient stay or arrange for services to be provided on an outpatient basis by an acute-care hospital and include those outpatient services on its inpatient claims submitted to Medicare, the agency said.

Before May 2019, the system edits were not working properly. But after the Centers for Medicare and Medicaid modified the edits in May 2019, only $3.4 million (less than 9% of the $39.3 million in improper payments for the entire audit period) was inappropriately paid to acute-care hospitals from June 2019 through December 2021.


The OIG is recommending that CMS direct Medicare contractors to recover the portion of the $39.3 million in improper payments that are within the four-year reopening period. It also wants CMS to instruct acute-care hospitals to refund beneficiaries up to $9.8 million in deductible and coinsurance amounts that may have been incorrectly collected from them or from someone on their behalf.

The agency also wants CMS to direct Medicare contractors to recover any improper payments after the audit period, and to continue to review the system edits to determine whether any refinements are necessary to prevent overpayments to acute-care hospitals for outpatient services provided to beneficiaries who are inpatients of other facilities. The report included one other unspecified recommendation.

CMS concurred with four of the five recommendations and provided information on corrective actions it planned to take. For the remaining recommendation, CMS said that it will review data submitted for the audit period and consider how to best address any remaining improper payments made after the audit period.


In November 2021, CMS announced that aggressive corrective actions have led to an estimated $20.72 billion reduction of Medicare fee-for-service improper payments over seven years.
Improper payments can be overpayments or underpayments, or payments in which there was insufficient information to determine whether a payment was proper or not, CMS said. Most improper payments involve situations in which a state or provider missed an administrative step. 

While fraud and abuse may lead to improper payments, CMS said it is important to note that the vast majority of improper payments do not constitute fraud and improper payment estimates are not fraud rate estimates.

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