Healthcare Financial News

Department of Health and Human Services (HHS) Inspector General Daniel Levinson on Aug. 25 released a federal audit that found that Medicare officials underestimated the amount of incorrect payments for durable medical equipment (DME) in 2006 and that the miscalculation was caused by the agency’s failure to have auditors follow CMS’s policy for checking claims. The HHS audit reviewed a sample of 363 Medicare DME claims to determine whether auditing contractor AdvanceMed had found all improper payments. CMS had estimated a payment error rate of 7.5 percent, or about $700 million in improper payments. However, the HHS audit found an “error rate” of nearly 29 percent for the sample of DME claims. The report cited 20 payment errors identified by the Medicare audit and 73 errors the contractor had not identified. However, the HHS Office of Inspector General cautioned against applying these findings to the entire Medicare DME program because the sample was not entirely random.

The report faults Medicare officials for allowing AdvanceMed to conduct the review without fully documenting claims from suppliers. According to the audit, more incorrect payments would have been identified if Medicare had told the contractor to follow the agency’s written policy.

In a cover letter for the report, Levinson wrote that Medicare auditors should check a wider range of records related to claims, including physician records and other medical documents verifying the necessity of equipment. Download the report.

The cost of patient care in U.S. hospitals rose just under 1 percent between 2005 and 2006, much slower than the average 5.3 percent per year between 1997 and 2005, according to the latest News and Numbers study from the Agency for Healthcare Research and Quality (AHRQ). However, over the nine-year period from 1997 to 2006, the overall cost for stays in the hospital nearly doubled from $177 billion to $329 billion.

AHRQ’s new analysis also found that nearly half the increase in overall costs (47 percent) was due to the increased intensity of care in the hospital, such as increased use of procedures, technologies, and other interventions. Also, about one-third of the cost increases were due to inflation and 16 percent resulted from an increase in the number of patients due to population growth.

The findings suggest that rapid growth in the adoption of managed care plans and the shift to outpatient care have slowed the growth in the use of inpatient care. Download the report.