Articles on Compliance Strategies

Featured Health Business Daily Story November 16, 2007

OIG Officials Say Time Has Come to Scrutinize Hospital Capital Payments and CMS's Oversight of JCAHO Accreditation

Reprinted from REPORT ON MEDICARE COMPLIANCE, the nation's leading source of news and strategic information on false claims, overpayments, compliance programs, billing errors and other Medicare compliance issues.

The HHS Office of Inspector General (OIG) hasn't examined hospital capital payments for a decade or more, which is a big reason why they are a target of the 2008 OIG Work Plan, according to George Reeb, OIG's assistant inspector general (IG) for CMS. OIG will look at capital payments from both CMS policy and hospital compliance perspectives, Reeb said Oct. 25 in a Health Care Compliance Assn. audioconference on the OIG Work Plan's hospital-related items.

Capital payments refer to Medicare spending on assets like equipment and facilities. In the Work Plan, OIG said it will "determine whether capital payments to hospitals are appropriate. We will examine the methodology used to update capital rates and analyze the appropriateness of the payment level."

When a patient is discharged, the hospital gets a DRG payment, plus a payment for capital. Both types of payments are updated annually. OIG plans to conduct an "overall analysis of capital payments," Reeb said. "Our interest now is on the update factor that is used to increase capital payments, and what is the basis that CMS uses and the applicability for those component parts relative to what hospitals use capital funds for."

Though it seems like big-picture stuff, OIG also plans to look at individual hospital behavior as well. "The compliance [aspect] is still there," Reeb said. "We not only want to see if proper payments are being made and whether they should be recovered, but also if the program policy in place makes sense."

Another Work Plan item that's new this year: OIG's plan to evaluate CMS's oversight of JCAHO's accreditation process. JCAHO accreditation counts as compliance with the Medicare conditions of participation, so JCAHO accredits about 80% of the nation's Medicare-participating hospitals.

Brian Ritchie, OIG's assistant IG for evaluations and inspections, said that OIG decided to review the accreditation process partly because it hasn't been done in a while and partly because JCAHO recently implemented a self-evaluation process. Hospitals assess their performance halfway through the 18-month accreditation cycle and develop improvement plans.

Here are some of the other Work Plan items discussed in the audioconference:

• Payments to hospitals for new services and technologies: This is a prime risk area to include in your compliance auditing, said attorney Steve Ortquist, who is with the law firm Meade and Roach, LLP. Starting in 2003, he said, Congress made additional funding available for new technology separate from DRGs if it substantially improved diagnosis or treatment and if it was billed at the lesser of 50% of the additional cost of caring for the patient or 50% of the cost of the new technology.

The Work Plan review will in part be a claims review, Ortquist said. OIG will determine if payments for new services and technologies were justified, which depends on whether the cost of care exceeds the DRG by 75% of one standard deviation of the cost, he said.

• Long-term-care hospital (LTCH) payments for interrupted stays: This occurs when patients leave LTCHs for a specific time period, but then return. CMS plans to check out the accuracy of payments for these situations. For example, the patient might be transferred to an acute-care hospital. But there is only one DRG payment for the LTCH, so hospitals have to check whether patients were put in the LTCH when they really belonged in the acute-care hospital, said Georgeann Edford, president of Coding Compliance Solutions, LLC. There is a compliance risk also in the fact that LTCH patients are paid for at 100% of patient-care costs or 120% of the regular inpatient prospective payment system DRG.
• Bad debt: It's not a new issue, but it's in flux, and there are several compliance angles, Ortquist said. For one thing, when hospitals write off bad debt and are reimbursed for it, but then they subsequently collect the money, is Medicare properly credited? "Also, from a bad-debt perspective, it's important to define uncollected versus bad debt versus charity care," he said. "They may overlap. I would encourage you to review those definitions to ensure everyone is speaking the same language in the organization." And remember, it's not acceptable for the hospital to automatically waive payment because it doesn't have a proper advance beneficiary notice procedure.

How OIG Work Plan Is Developed

Reeb said audits and evaluations are done with fairly current data. "We usually use national files that CMS maintains or sometimes [files from] the fiscal intermediary," Reeb said. "We probably use 2007" claims. Ritchie said OIG "relies on a lot of complete periods," so the data may be from all of 2006 or the first half of 2007.

Carol Lessans, the OIG official responsible for the Work Plan, said it includes 320 "ongoing and forward-looking exams" in areas "where we believe the OIG's resources are best directed to accomplish our mission."

The goal of the Work Plan partly is to let "stakeholders" (e.g., providers) know "what we are thinking. We want stakeholders to increase the efficiency and effectiveness of their areas," she said.

The Work Plan is carried out by auditors from the OIG Office of Audit Services (OAS) and evaluators from the OIG Office of Evaluation and Inspection (OEI), Lessans said. There are differences between the two sets of reviewers. OAS typically audits at the provider level and issues a summary report expressing conclusions drawn, "while OEI is more national in scope from the outset while data gathering on a provider level as needed," she said.

OAS auditors have three goals: identify and recover misspent funds; develop areas where program area change could produce recommendations to put funds to better use; and identify issues that need program change to improve the delivery of care and reduce fraud, waste and abuse, among other things.

OEI evaluators "look at vulnerabilities to fraud, waste and abuse and issues that affect program administration. These are broad and issue-oriented and generally are national in scope," Lessans said. Examples are Medicare-reimbursement analyses, pricing comparisons, compliance reviews, and quality control and assurance.

Not every Work Plan target is predictable. OIG has to go with the flow, as "HHS operates in a dynamic environment," Lessans said. For example, OIG responds to issues ranging from Hurricane Katrina to food safety to bird flu.

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