CMS Will Attempt Recovery of $1.7 Million Overpaid in Psychiatric Patient Miscoding

Cheryl Clark, June 14, 2010

Hundreds of acute care hospitals with psychiatric inpatient units may face federal review to recover an estimated $1.7 million the facilities were overpaid because of incorrect coding, according to a new audit from the Office of Inspector General.

Under Centers for Medicare and Medicaid rules, care for patients who are admitted to psychiatric units is reimbursed at a higher rate to account for emergency department costs even if the patient was not admitted through the emergency department. But there is no higher reimbursement if the patient was cared for as an inpatient in another part of the hospital, and then sent to the psych unit.

Agency personnel reviewed 100 sampled claims for Medicare or Medicaid beneficiaries who had been admitted to the IPF (inpatient psychiatric facility) and found that 75 of them had been incorrectly coded. "Thus Medicare contractors made 3,111 in overpayments to the inpatient psychiatric facilities for emergency department services," says the OIG report.

"Based on these sample results, we estimate that for calendar years 2006 and 2007, Medicare contractors made $1.7 million in overpayments to hospital-based inpatient psychiatric facilities on behalf of beneficiaries who had been admitted to the IPFs upon discharge from the acute-care section of the same hospital," the report says. "These overpayments occurred because the IPFs had inadequate controls to ensure that claims were coded correctly to prevent overpayments for emergency department services."

The Office of Inspector General recommends that CMS instruct its contractors "to immediately reopen the (remaining) 54,702 non-sampled claims, review our information on these claims (which have overpayments estimated at $1.7 million), and recover any overpayments."

It also recommends that Medicare contractors use "source of admission code D" to identify psychiatric unit patients who were discharged from elsewhere in the hospital, and consider conducting periodic reviews of claims after payment.

CMS responded to the OIG report saying it was in agreement with the recommendations and would take corrective action. It will analyze a subset of the 54,702 claims to determine the cost-effectiveness of conducting review of all claims and "will collect applicable overpayments identified during the claims review."

In its audit, the OIG said that Medicare contractors made the 75 improper payments to 69 hospital-based IPFs for claims that the IPFs had billed within incorrect source-of admission codes.

Psychiatric facility officials gave the following reasons for providing incorrect codes.

  • 31 said billing personnel were unaware that the correct code would change the payment
  • 23 said administrative personnel were not aware of CMS's instructions on Code D.
  • 10 said billing personnel made data errors because of staff turnover and need for training
  • Seven said administrative personnel were aware of the code but did not tell their billing personnel
  • Four thought code D was for outpatient claims rather than inpatient claims
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