On August 6, 2013, OIG released a report with its findings that in a sampling of 100 hospital inpatient claims involving short-stay, canceled elective surgery admissions, 80 did not meet Medicare’s requirement that the admissions be “reasonable and necessary.”  On the basis of this sample, OIG estimated that Medicare overpaid $38.2 million in Part A payments in CYs 2009 and 2010.

The 80 denied claims in OIG’s 100-claim sample represented overpayments totaling $345,717, for which either (1) a clinical condition was not present on admission; or (2) a new condition requiring inpatient care failed to emerge post-admission.  The $38.2 million extrapolated estimate does not take into account any services related to these admissions that might otherwise have been properly billed under Medicare Part B, potentially reducing this figure.  According to OIG, overpayments occurred because of hospitals’ uncertainty regarding Medicare billing requirements for canceled surgeries and hospitals’ inability to confirm whether admissions were “reasonable and necessary” after surgery cancellations.  OIG also points to CMS’s “too restrictive” billing requirements, which prohibit changing a beneficiary’s status from inpatient to outpatient after discharge.

Accordingly, OIG recommends that CMS:

  • Adjust the 80 sample claims;
  • Clarify in its guidance that a clinical condition requiring admission must be present for hospitals to bill Medicare Part A for cancelled surgery admissions;
  • Assist OIG to resolve the remaining 10,915 non-sampled claims and recover overpayments for these claims; and
  • Instruct Medicare administrative contractors to emphasize to hospitals the need for more robust utilization review of claims involving admissions for canceled surgeries.  

CMS generally agreed with OIG’s recommendations, and stated that it will work with OIG to recover overpayments.  A copy of OIG’s Report is available by clicking here.