CMS has implemented fraud prevention systems thatwould help identify diagnosis-related group (DRG) upcoding. (Photo:Shutterstock)

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

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

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

As a result of its findings, OIG recommends that the Centers forMedicare & Medicaid Services (CMS) notify providers so they canreturn the overpayments. OIG further recommends that CMS review theremaining claims in the audit that were not selected as a samplefor the report (224,175), identify how many of those wereoverbilled or incorrectly upcoded and collect the overpayment.

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

The OIG report did point out that since the audit periodcovered, CMS has implemented fraud prevention systems that wouldhelp identify diagnosis-related group (DRG) upcoding — when aprovider assigns an inaccurate billing code to a medical procedureor treatment to increase reimbursement.

In a letter comment to the OIG's report, CMS concurred with allof the OIG's findings and said: "CMS has taken action to preventimproper Medicare payments by educating health care providers onproper billing. CMS educates health care providers on appropriateMedicare billing through various channels including the MedicareLeaming[sic] Network, weekly electronic newsletters, and quarterlycompliance newsletters."

Steve Salkin is a managing editor forBenefitsPRO parent company ALM. He can be reached [email protected].

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• How to improve transparency and take control overhealth care costs