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OIG Recommends Recovery of Medicare Overpayments Made in Violation of 72 Hour Rule

May 7, 2020

The U.S. Department of Health and Human Services (“HHS”) Office of Inspector General (“OIG”) recently released a report stating that Medicare made $11.7 million in overpayments to hospital outpatient providers for nonphysician services furnished shortly before or during inpatient stays during 2016 and 2017. These incorrect payments resulted in beneficiaries incurring $2.7 million in coinsurance and deductible liabilities.

Medicare requires most nonphysician outpatient services (e.g., emergency room services, laboratory tests, x-rays) that are provided within three days before the date of admission, on the date of admission, or during the hospital stay be included in the Inpatient Prospective Payment System (“IPPS”) payment (“72 Hour Rule”).[1]

Through prior audits, the OIG had identified significant overpayments to hospital outpatient providers for nonphysician services provided within three days before a patient’s admission to the hospital or during IPPS stays and had recommended that the Centers for Medicare & Medicaid Services (“CMS”) recover overpayments and implement measures to prevent this from reoccurring. Despite CMS’s implementation of such measures, the OIG believed that these overpayments were still occurring and launched a follow-up audit. Through this audit, the OIG determined that Medicare made these incorrect payments to outpatient providers for 40,984 nonphysician outpatient services that were provided nationwide and that either should have been furnished directly by the hospital or billed through the hospital “under arrangements.” These services included surgical procedures, evaluation and management services, radiology services, laboratory services, injections, and orthotics and prosthetic services. The OIG determined that these incorrect payments occurred because the CMS Common Working File (“CWF”) edits did not include all the necessary information to accurately identify potentially improper claims.

As a result, the OIG recommended that CMS: (i) ensure that all necessary information is included in the CWF edits to prevent overpayments for nonphysician outpatient services provided within three days before a patient’s date of admission to the hospital, on the date of admission, or during IPPS stays; (ii) direct the Medicare administrative contractors (the “MACs”) to recover the overpayments resulting from the incorrectly billed services; (iii) direct the MACs to instruct the outpatient providers to refund the deductible and coinsurance amounts that were incorrectly collected from beneficiaries as a result of these overpayments; (iv) direct the MACs to notify providers of potential overpayments so that the providers can exercise reasonable diligence to identify, report, and return any overpayments; and (v) direct the MACs to educate outpatient providers on how to correctly bill nonphysician outpatient services provided within three days before the date of admission, on the date of admission, or during IPPS stays.

If you have any Medicare billing questions, please do not hesitate to contact any member of the Health Law Practice Group at Shipman & Goodwin LLP.


[1] 42 CFR § 412.2(c)(5).

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