Skip to main content

Analysis

OIG Audit Finds Hospital Upcodes Overbilled Medicare by $1B

By John Commins  
   July 15, 2020

Government watchdogs are calling on CMS to recoup the overpayments.

Hospitals upcoded severe malnutrition diagnosis codes on inpatient hospital claims in 2016 and 2017, reaping an estimated $1 billion in overpayments over the span, according to an audit by the Department of Health and Human Services Office of the Inspector General.  

The government watchdogs are calling on the Centers for Medicare and Medicaid Services to collect the money from hospitals.

The estimates come from an OIG random audit of 200 severe malnutrition diagnosis code claims filed by hospitals in fiscal years 2016 and 2017. The auditors found that only 27 of the claims were filed correctly, while the remaining 173 claims were not.

"For nine of these claims, the medical record documentation supported a secondary diagnosis code other than a severe malnutrition diagnosis code, but the error did not change the (diagnostic related group) DRG or payment," the audit said.

"For the remaining 164 claims, hospitals used severe malnutrition diagnosis codes when they should have used codes for other forms of malnutrition or no malnutrition diagnosis code at all, resulting in net overpayments of $914,128," the audit said, adding that based on their sample, "we estimated that hospitals received overpayments of $1.024 billion for FYs 2016 and 2017."

CMS concurred with OIG's recommendations and said it would instruct its contractors to recover the overpayments. However, CMS noted that the overpayments represent less than .5% of the overall payments made for inpatient services during the two-year span.

In a letter to OIG, CMS Administrator Seema Verma said that Medicare has since the audit implemented new fraud prevention measures that identify upcoding.

"Additionally, CMS has taken action to prevent improper Medicare payments by educating health care providers on proper billing," Verma said

Nutritional marasmus (diagnosis code E41) and unspecified severe protein-calorie malnutrition (diagnosis code E43) are two types of severe malnutrition. They are each classified as a type of major complication or comorbidity (MCC), which can result in higher payments

In 2016 and 2017, Medicare paid $3.4 billion for 224,175 claims that contained a severe malnutrition diagnosis code and for which removing the diagnosis code changed the diagnosis-related group (DRG). The OIG random sample of 200 found payments totaling $2.9 million.

The auditors sent the 200 claims to medical and coding review to determine whether the services were medically necessary and properly coded.

"Of the claims that we reviewed, 82% were not correctly billed, which we maintain is significant and needs to be addressed," OIG said. "We continue to recommend that CMS review all claims in our sampling frame that were not part of our sample but were within the reopening period and work with the hospitals to ensure they correctly bill Medicare when using severe malnutrition diagnosis codes."

Earlier OIG audits of severe malnutrition found that hospitals had incorrectly billed Medicare by using severe malnutrition diagnosis codes when they should have used codes for other forms of malnutrition or no malnutrition diagnosis code at all.  

“Of the claims that we reviewed, 82% were not correctly billed, which we maintain is significant and needs to be addressed.”

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.


KEY TAKEAWAYS

The estimates come from an OIG random audit of 200 severe malnutrition diagnosis code claims from 2016 and 2017.

The auditors found that only 27 of the claims were filed correctly, while the remaining 173 claims were not.

CMS concurred with OIG's recommendations and said it would instruct its contractors to recover the overpayments.

CMS Administrator Seema Verma says Medicare has since implemented new fraud prevention measures that identify potential upcoding.


Get the latest on healthcare leadership in your inbox.