OIG Audit Finds $190M in Improper Medicare Payments

WASHINGTON—The Office of the Inspector General (OIG) conducted an audit to determine whether Medicare Part B properly paid for durable medical equipment, prosthetics, orthotics and supplies to hospice enrollees from the time period of 2017 through 2021. This audit took place in order to follow up on a prior OIG audit, which found Medicare Part B improperly paid suppliers for such supplies. OIG said the purpose of this new audit was to determine whether Medicare payments made to acute-care hospitals for provided outpatient services to hospice enrollees complied with Medicare’s requirements.

How OIG Did This Audit

The audit reviewed $283.7 million in Part B payments made to acute-care hospitals for 1.3 million outpatient services that were billed with the condition code 07—which indicates a service is not related to an enrollee’s terminal illness or related conditions—and were provided to hospice enrollees during the OIG’s audit period. OIG reviewed a stratified random sample that consisted of 100 outpatient service line items. For each sample item, OIG submitted medical records to an independent medical reviewer contractor in order to assess whether the outpatient service palliated or managed the enrollee’s terminal illness or related conditions.

What OIG Found

For 30 of the 100 sample items, payments made to acute-care hospitals for outpatient services provided to hospice enrollees complied with Medicare’s requirements. However, for the remaining 70 sample items, the payments did not comply with Medicare’s requirements. Specifically, OIG’s medical reviewer found that Medicare paid acute-care hospitals for outpatient services that palliated or managed hospice enrollees’ terminal illnesses and related conditions. Additionally, these outpatient services were already covered by hospice per diem payments and should have been provided directly by the hospices or under arrangements between the hospices and acute-care hospitals. 

As a result, Medicare improperly paid the acute-care hospitals due to the following: 

• The prepayment edit processes were not properly designed
• Most acute-care hospitals only reviewed whether outpatient services palliated or managed terminal illnesses, not related conditions
• Medicare guidance lacked details
• Medicare contractors did not conduct prepayment or postpayment reviews

The audit determined that Medicare improperly paid acute-care hospitals an estimated $190 million for outpatient services provided to hospice enrollees. Based on the sample results, OIG estimated that Medicare could have saved $190.1 million during this audit period if the payments had not been made to acute-care hospitals. Additionally, OIG estimated enrollees could have saved $43.6 million in deductibles and coinsurance that may have been incorrectly collected from them or from someone on their behalf.

What OIG Recommends 

OIG made six recommendations to the Centers for Medicare and Medicaid Services (CMS), three of which are listed below.

• CMS should improve system edit processes in an effort to help reduce improper payments for outpatient services provided by acute-care hospitals to hospice enrollees.
• CMS should educate acute-care hospitals to analyze whether outpatient services palliated or managed conditions related to enrollees’ terminal illnesses.
• CMs should clarify Medicare’s guidances to specifically mention “related conditions.”

OIG said that CMS concurred with five of the six recommendations, but did not concur with its first recommendation. In response to OIG’s first recommendation, CMS said it was concerned about the feasibility and effectiveness of modifications to the system edits that were described in the OIG report. After reviewing CMS’ comments, OIG refined its first recommendation. OIG recommended improving CMS’ system edit processes, because doing so could help reduce improper payments in the future.