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On July 20, the Office of Inspector General (OIG) released a report that found that hospitals are overbilling or upcoding hospitals to the tune of $1 billion.

OIG reviewed 200 claims made to Medicare that included a diagnosis of severe malnutrition and had a discharge date between Oct. 1, 2015 and Sept. 30, 2017 and found that 173 of them were not correctly billed under Medicare's billing requirements. (OIG audited 224,175 inpatient claims in total and pulled a random sample of 200 for medical and coding review).

In all but nine of those instances, OIG's audit revealed that hospitals used the "severe" malnutrition diagnosis when other forms of malnutrition, or none at all, should have been the diagnosis for which payment was submitted. The difference between these diagnoses amounted to $914,128 in overpayments made to the hospitals, and OIG estimates an overpayment of $1B for Fiscal Years 2016 and 2017.

As a result of its findings, OIG recommends that the Centers for Medicare & Medicaid Services (CMS) notify providers so they can return the overpayments. OIG further recommends that CMS review the remaining claims in the audit that were not selected as a sample for the report (224,175), identify how many of those were overbilled or incorrectly upcoded and collect the overpayment.

Upon reviewing a draft of OIG's report, CMS that the overpayments identified by OIG represented only .5% of the overall payments made during the audit period. OIG responded that percentage-wise, of the sample bills that were reviewed, 832% proved to be billed incorrectly, which OIG "maintain[s] is significant and needs to be addressed."

The OIG report did point out that since the audit period covered, CMS has implemented fraud prevention systems that would help identify diagnosis-related group (DRG) upcoding — when a provider assigns an inaccurate billing code to a medical procedure or treatment to increase reimbursement.

In a letter comment to the OIG's report, CMS concurred with all of the OIG's findings and said: "CMS has taken action to prevent improper Medicare payments by educating health care providers on proper billing. CMS educates health care providers on appropriate Medicare billing through various channels including the Medicare Leaming[sic] Network, weekly electronic newsletters, and quarterly compliance newsletters."

Steve Salkin is a managing editor for BenefitsPRO parent company ALM. He can be reached at ssalkin@alm.com.

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Report: Overbilling and upcoding by hospitals cost Medicare $1 billion

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