News | Medicare Compliance RAC OIG

After OIG says hospitals may be engaging in upcoding, CMS and AHA dispute the finding

News | Medicare Compliance RAC OIG

After OIG says hospitals may be engaging in upcoding, CMS and AHA dispute the finding

  • The HHS Office of Inspector General says a significant rise in high-severity inpatient admissions with no corresponding increase in length of stay indicates a possible pattern of upcoding by hospitals in recent years.
  • CMS responded that it disagrees with OIG’s assessment and does not intend to undertake targeted reviews of inpatient admissions as recommended.
  • The American Hospital Association also found fault with the conclusions, saying they do not account for factors such as increases in the complexity of care.

The government agency that works to address waste, fraud and abuse in federal healthcare programs has raised concern about pre-pandemic trends in spending on hospital inpatient care.

The Office of Inspector General at the U.S. Department of Health and Human Services issued a February brief titled “Trend Toward More Expensive Hospital Stays in Medicare Emerged Before COVID-19 and Warrants Further Scrutiny.”

Comparing Medicare Part A inpatient claims in FY14 and FY19, OIG found that hospitals increasingly are billing for inpatient stays at the highest MS-DRG severity level. The number of stays at that level increased by 20% over the five-year period.

Those admissions accounted for 40% of inpatient stays and nearly half ($54.6 billion) of all Medicare spending ($109.8 billion) on inpatient stays by FY19, averaging $15,500 per billed stay.

Meanwhile, the volume of admissions at other severity levels decreased during the five-year period, OIG found, with low-level stays dropping by 22% and medium-level stays by 12%.

LOS trend raises red flags for OIG

Average length of inpatient stays remained largely the same overall, dropping from 6.9 to 6.4 days for stays at the highest level of severity and by 0.1 days for all stays.

OIG questioned why the overall average length of stay (LOS) did not increase along with the volume of claims for stays at the highest severity level, saying that divergence could indicate “inappropriate billing practices, such as upcoding.”

“Given the decrease in the average length of stays at the highest severity level and the indication that beneficiaries in general were not sicker, the increase in stays billed at the highest severity level likely was driven by changes in hospital billing practices rather than by changes in the beneficiary population,” OIG wrote.

Of admissions billed at the highest severity level, OIG found, about 30% were at least 20% shorter than the mean LOS for the assigned MS-DRG.

“Shorter stays are not inherently problematic, but the number of these stays raises questions about the accuracy and appropriateness of the complications billed by the hospital,” OIG wrote.

MS-DRGs with a higher proportion of significantly shorter stays include heart failure and shock (MS-DRG 291), pneumonia (MS-DRG 193) and renal failure (MS-DRG 682), according to OIG.

How to act on the review findings

CMS should conduct “targeted reviews of MS-DRGs and stays that are vulnerable to upcoding, as well as the hospitals that frequently bill them,” OIG wrote.

CMS should use the results of the reviews to recoup overpayments and “to educate hospitals about appropriate billing, modify coding policies, and consider whether further steps should be taken to disincentivize inappropriate billing.”

In response to OIG’s recommendation, CMS stated that it does not see the need to conduct targeted reviews.

CMS’s reply, signed Jan. 11 by Seema Verma, who led the agency during the Trump administration, stated that “in the absence of medical record reviews conducted by the OIG, CMS believes there is more work to be done to conclusively determine if the increase in stays at the highest severity level and the decrease in stays at other severity levels, as well as changes in average length of stay, can be attributed to upcoding.”

The response continued: “CMS will continue to monitor for potential upcoding as part of our comprehensive program integrity strategy and, if needed, take action in a manner that minimizes provider burden.”

AHA says the findings miss the mark

In a statement issued March 2 to HFMA, Ashley Thompson, senior vice president for public policy and development with the American Hospital Association (AHA), noted that hospital patients “require more complex care than ever before, which is not surprising given that more than 133 million Americans have at least one chronic condition.

“In addition, the adoption of electronic medical records and new guidelines have allowed hospitals to more accurately code for services, including previously underreported secondary diagnoses.

“The OIG does not fully account for these factors and relies on outdated metrics, which may be why CMS has said more work needs to be done before targeted reviews are conducted.”

About the Author

Nick Hut

is a senior editor with HFMA, Westchester, Ill. (nhut@hfma.org).

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