For inpatient claims with certain Medicare Severity Diagnosis-Related Groups (MS-DRGs), Medicare requires that beneficiaries have received 96 or more hours of mechanical ventilation. For 137 of the 200 claims we reviewed, Medicare payments to hospitals complied with Medicare requirements; the beneficiaries had received 96 or more consecutive hours of mechanical ventilation. However, for the 63 remaining claims, Medicare payments to hospitals did not comply with requirements. Consequently, the claims were assigned incorrectly to MS DRGs 207 and 870, resulting in $1.5 million of overpayments. The hospitals confirmed that these claims were improperly billed and generally attributed the errors to incorrectly counting the number of hours that beneficiaries had received mechanical ventilation or to clerical errors in selecting the appropriate procedure code.

The existing length-of-stay edit did not identify the improper billing of claims with mechanical ventilation because the edit was limited to beneficiary lengths of stay that were 4 days or fewer. Specifically, Medicare’s claim processing edit focused on the beginning and ending dates of the beneficiary’s hospitalization rather than the date that mechanical ventilation started. Had the edit focused on the date that mechanical ventilation started, it would have been able to identify additional claims at risk for billing errors by using that date rather than the beginning date of the hospitalization.

On the basis of our sample results for the 2-year audit period, we estimated that the hospitals received (1) overpayments of $3.7 million for claims with a potential procedure length of 4 days or fewer and (2) overpayments of $15.9 million for claims with a potential procedure length of 5 days.

We recommended that the Centers for Medicare & Medicaid Services (CMS) (1) ensure that the Medicare contractors recover the $1.5 million in identified overpayments for the sampled claims; (2) revise the length-of-stay edit to take into account the mechanical ventilation start date for claims with a potential procedure length of 4 days or fewer, which could result in savings of an estimated $3.7 million over a 2-year period; (3) provide additional guidance to hospitals on the correct billing of mechanical ventilation claims, emphasizing correct billing of claims with a potential procedure length of 5 days, which could result in savings of an estimated $15.9 million over a 2 year period; (4) review the remaining nonsampled claims during the audit period and recover the overpayments to the extent feasible and allowed under the law; and (5) direct the Medicare contractors to review any claims for which procedure code 96.72 was used with a potential procedure length of 5 days or fewer and recover any overpayments after our audit period. CMS concurred with all of our recommendations and provided information on actions that it had taken or planned to take to address our recommendations.

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