Hospitals’ Medicare billing practices suggest upcoding, OIG says
HOSPITALS ARE INCREASINGLY billing Medicare for the most complex treatment even though data indicate that patients aren’t sicker, according to a new government report.
The number of inpatient stays billed at the highest severity codes increased nearly 20% from fiscal 2014 through fiscal 2019, an HHS’ Office of Inspector General analysis of Medicare Part A claims revealed. The average length of stay decreased for those cases, suggesting that hospitals may be upcoding, the OIG said.
“The implication is that the population being hospitalized hasn’t changed very much—they’re not actually sicker as the billing rate suggests,” said Rachel Bryan, co-author of the study and program analyst at the OIG.
As hospitals billed Medicare for the most complex care, which indicates that a patient has at least one other major secondary illness like sepsis, the number of stays billed at each of the other severity levels decreased. While the average length of stay decreased for highest-severity codes, the combined average remained largely the same, the OIG found.
The government watchdog group offered an example with a hospital that billed Medicare for heart failure and shock with a major complication. Though the mean length of stay for that case is four days, it lasted only two. If Medicare was billed for only a minor complication, the payment would have been closer to $6,200 instead of $9,100.
Collectively, Medicare paid hospitals approximately $14.5 billion for stays that lasted a relatively short amount of time. That is $4.9 billion more than it would have paid if these cases had been billed at the next lower severity level.
Moreover, 54% of the bills for the most complex treatment reached that level because of only one major complication, which is a red flag for potential upcoding, investigators said.
In one case, a hospital submitted a diagnosis for pneumonia and 24 secondary diagnoses, 23 of which were either minor complications or not complications at all. There is a $2,800 difference between the highest severity and next lowest severity code.
“Billions of taxpayer dollars are tied up in billing and coding decisions, and there is significant variation among hospitals that bill at the highest severity,” Bryan said, noting that nearly half of the $109.8 billion Medicare spent for inpatient hospital stays in fiscal 2019 was for stays billed at the highest severity level. “To us, these are all indications that stays with certain characteristics are subject to inappropriate billing practices such as upcoding and merit targeted oversight on CMS’ part.”
The American Hospital Association said it is still reviewing the data brief.
While CMS doesn’t plan to conduct targeted investigations until there was conclusive evidence linking billing changes and upcoding, the agency said it would share the findings with its contractors and keep an eye out for red flags.
“The implication is that the population being hospitalized hasn’t changed very much— they’re not actually sicker as the billing rate suggests.”
Rachel Bryan, co-author of the study and program analyst at the OIG.
Providers have argued that they had “under-coded” for years and the recent increase in coding severity reflects patients’ acuity and complexity more accurately. They also argue that length of stay is not an adequate indicator of patient acuity given that technology and treatment pathways have expedited care.
In response to a 2019 report from the Massachusetts Health Policy Commission that saw similar trends in coding and length of stay, the state hospital association said that the expansion of electronic health records and the implementation of ICD-10 allowed healthcare providers to “more accurately and granularly capture patient acuity and previously under-reported conditions.”
But upcoding has long been a concern for industry watchdogs. Throughout the 2000s, the Medicare Payment Advisory Commission and OIG warned that the Medicare Advantage program and evaluation and management services were vulnerable to upcoding. Meanwhile, several healthcare providers reached federal settlements over upcoding allegations.
In 2019, Sutter Health agreed to pay $30 million to settle allegations that the Sacramento, Calif.-based health system submitted inflated diagnosis codes for Medicare Advantage beneficiaries. Prime Healthcare also paid $65 million in 2018 to resolve upcoding allegations.
Emergency services have been another area of concern. Emergency departments in Texas and Oklahoma overbilled for $45.14 of $100 paid for services because coding was “higher than reasonable and necessary to adequately care for the patient’s needs,” a 2013 study found.
Envision Healthcare Corp.’s EmCare agreed to pay $29.8 million in 2017 to resolve claims that it admitted patients to the hospital when they should have gone to an outpatient facility.
CMS has tended to respond to “coding creep” by coming up with adjustments in payment rates to offset it, said Paul Ginsburg, Leonard D. Schaeffer chair in health policy studies at the Brookings Institution and director of the USC-Brookings Schaeffer Initiative for Health Policy.
“That works on the average, but the incentive for aggressive coding remains,” he said. “Some that have less resources to invest in coding come out behind.”
Baylor Scott & White Health won a False Claims Act case in 2019, when a federal court ruled that the health system’s alleged upcoding scheme was consistent with the government’s own “encouragement” of hospitals to use the billing codes to glean as much reimbursement as possible from Medicare.
The court cited a CMS regulation that stated the agency “does not believe there is anything inappropriate, unethical or otherwise wrong with hospitals taking full advantage of coding opportunities to maximize Medicare payment that is supported by documentation in the medical record.” ●