OIG says Cincinnati system owes $9.8M after 'extrapolation' audit

HHS' Office of Inspector General has told the University of Cincinnati Medical Center it must refund more than $9.8 million in Medicare payments stemming from a variety of alleged inpatient billing errors, a figure hospital officials said would have a “devastating effect” on operations.

The agency audited 228 sample claims (PDF) submitted to Medicare in 2010 and 2011 from the 695-bed teaching hospital, according to its June report. The claims mostly involved those labeled as high-risk for errors, such as medical necessity for short inpatient stays and high-severity diagnosis-related codes. OIG officials alleged 56% of the sampled claims had errors and then extrapolated from those findings to more than 2,700 claims the hospital billed during the same time period. That method of determining overall errors by taking a sample and then projecting it to an entire database is raising eyebrows.

“This is the next wave of (the OIG's) extrapolation experiment. I think it's the next example of the way in which the OIG is pursuing the audits and its intent to use extrapolation,” said George Breen, an attorney within the healthcare practice of Epstein Becker Green.

The audit, which began in 2012, initially said UCMC owed $9.9 million. However, the OIG refined its total slightly after the hospital disputed the results. The new total stands at $9.8 million—still far above most compliance reviews, which generally find overpayments ranging from the low six figures to $1 million to $2 million.

Medicare compliance reviews have proliferated the past few years under the OIG's watch. Since January, for example, the agency has released results of 29 compliance reviews, most of which involve audits of general inpatient short stays and incidences of outlier billing for kwashiorkor, a rare malnutrition condition.

OIG officials would not comment beyond what was in the report. In the hospital's 16-page response letter to the OIG, dated December 2013, UCMC CEO Lee Ann Liska criticized how the government extrapolated results from a small sample size.

“We are very disappointed and alarmed that the OIG has determined that extrapolation (which is what the OIG has done, despite the OIG's refusal to use that word in conversations with UCMC) is appropriate in this case,” Liska wrote, adding that each claim varies by patient and depends on physician judgment at the time of the encounter.

Dr. Richard Lofgren, president and CEO of UC Health, UCMC's parent, released a memo to employees Friday morning, reiterating the system's stance that the OIG's audit was flawed. UC Health intends to appeal a majority of the findings.

“Although the OIG has alleged that some inpatient admissions were not necessary, it has not alleged that UCMC billed for any services that were not actually rendered,” Lofgren wrote. “To the contrary, the services provided to the Medicare beneficiaries whose claims were selected for review in this audit were medically necessary and appropriate.”

Earlier this month, the American Hospital Association sent a letter to HHS, calling the hospital compliance reviews “entirely redundant” and burdensome. The trade group said providers already deal with Medicare recovery audit contractors for separate reviews, and the extrapolation process doesn't account for the potential rebilling of claims for Medicare Part B payments.

However, the OIG has said the data-mining is improving Medicare billing and it would preferably audit all hospitals.

“If we had adequate funds, we'd like to get all 3,600 hospitals because we really do think it is helping hospitals comply with the rules,” Brian Ritchie, an assistant inspector general with HHS, told Modern Healthcare in 2012.

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