Hospitals' Medicare billing practices suggest upcoding, OIG says
Skip to main content
MDHC_Logotype_white
Subscribe
  • My Account
  • Login
  • Subscribe
  • News
    • This Week's News
    • COVID-19
    • Providers
    • Insurance
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • People
    • Regional News
    • Digital Edition
    • CMS issues new guidance to enforce price transparency rule
      Amedisys to expand home health services in North Carolina
      Some healthcare associations moving full steam ahead with conferences starting in summer
      Massachusetts to crack down on highest-cost hospitals, insurers
    • Amedisys to expand home health services in North Carolina
      Some healthcare associations moving full steam ahead with conferences starting in summer
      Massachusetts to crack down on highest-cost hospitals, insurers
      Macomb County, Mich., hospitals reach bed capacity with mix of COVID-19 and medical patients
    • Some healthcare associations moving full steam ahead with conferences starting in summer
      COVID hospitalizations in Michigan top fall surge; Beaumont seeing nurse 'burnout'
      Calls mount for Biden to track U.S. healthcare worker deaths from COVID
      Front-line workers want more assistance after a year of COVID-19
    • California re-opens enrollment for health insurance coverage
      Insurers are partnering to offload the costs of kidney failure patients
      Cigna and Oscar expand their small business partnership
      5 things to know about Agilon Health's proposed IPO
    • J&J vaccine pause a minor blip, but efforts must press on, experts say
      Effort to keep Arkansas Medicaid plan falls short in state Legislature
      A year into pandemic, federal officials design new mask guidelines to better protect more workers
      Long-term care providers concerned by effects of J&J COVID-19 vaccine pause
    • CMS issues new guidance to enforce price transparency rule
      Massachusetts to crack down on highest-cost hospitals, insurers
      Record venture-capital investment brings rise of New York mega startups
      Stocks close mixed as regulators seek pause in J&J vaccine
    • Anthem, Blackstone launch new joint venture
      Healthcare data breaches
      By the Numbers: National health information service providers
      Health systems are navigating the digital divide and vaccine access
    • J&J vaccine pause a minor blip, but efforts must press on, experts say
      A year into pandemic, federal officials design new mask guidelines to better protect more workers
      FDA pauses enforcement of in-person dispensing requirement for abortion pill
      U.S. recommends 'pause' for J&J vaccine over clot reports
    • Redfield joins Big Ass Fans, which promotes controversial COVID-killing technology
      Next Up Podcast: Modern Healthcare's editor Aurora Aguilar talks new content direction
      Novant Health adds chief payor performance officer
      Kaiser Permanente names Comer chief IT officer
    • Midwest
    • Northeast
    • South
    • West
  • Insights
    • ACA 10 Years After
    • Best Practices
    • Special Reports
    • Innovations
    • The Affordable Care Act after 10 years
    • A close-up of a woman receiving a COVID-19 vaccine.
      Providers in underserved communities work toward equitable vaccine distribution
      Josh Bradshaw
      How one rural Illinois county vaccinated 84% of its senior citizens by early March
      Dr. John Fischer
      Patient-reported outcomes tool for hernia surgery helps physicians improve care
      New care model helps primary-care practices treat obesity
    • A family photo of the the Hangens.
      Stressing the already burdened pediatric behavioral health system
      Jennifer Pannone and her daughter Victoria.
      Mental health access for children needs attention
      What's next for on-demand telehealth companies?
      A CalOptima PACE vaccination clinic.
      Will COVID-19 be the catalyst for creating a more sustainable healthcare system?
    • Ryan McGinnis
      Finding efficiencies in the OR using tech
      Dr. Daniel Hall
      UPMC pilots machine learning, telehealth to inform patient transfers
      A woman being recorded using her inhaler on a smartphone.
      Digital check-ins, connected inhalers help control asthma
      A phone screen showing the question, "Mary we hope this information was helpful and we'd like to keep guiding you. Are you interested in knowing when it's your turn to receive the vaccine?"
      Chatbots, texting campaigns help manage influx of COVID vax questions
  • Transformation
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • Mayo Clinic launches two tech companies
      Diabetes patients at high risk for COVID-19 are managing conditions more effectively
      Nearly 1 in 5 Americans skipped care due to cost last year
      COVID-19 long-haulers need holistic treatment, providers say
    • Amazon gives out $12M under next phase of AWS diagnostics development initiative
      Malpractice premiums peak in 2020, AMA survey shows
      A rendering of a cancer research institute at the University of Southern California that will include 5G.
      Healthcare providers determine how to best use ultrafast 5G
      Two-thirds of largest hospitals aren't complying with price transparency rule
    • Addressing long-standing barriers needed for mental and physical health integration
      A close-up of a woman receiving a COVID-19 vaccine.
      Providers in underserved communities work toward equitable vaccine distribution
      The waiting room of a Kaiser Permanente clinic at a Target location.
      Health systems revamp their approach to retail clinics
      Josh Bradshaw
      How one rural Illinois county vaccinated 84% of its senior citizens by early March
    • When money talks. Why cash pay is becoming more popular
      CMS wants to bump pay for hospices, SNFs next year
      CMMI pauses new Direct Contracting model applications
      CMS wants to boost payments over 2% for inpatient rehab, psych facilities
  • Data/Lists
    • Rankings/Lists
    • Interactive Databases
    • Data Points
    • Health Systems Financials
      Executive Compensation
      Physician Compensation
  • Op-Ed
    • Bold Moves
    • Breaking Bias
    • Commentaries
    • Letters
    • Vital Signs Blog
    • From the Editor
    • Dr. Alan Kaplan
      The risks, rewards of taking organizations 'where they haven’t gone before'
      Wellstar CEO calls adapting for the pandemic her bold move
      Howard P. Kern
      Recognizing the value of telehealth in its infancy
      Dr. Stephen Markovich
      A bold move helped take him from family doctor to OhioHealth CEO
    • Drs. Hal Paz and Joshua J. Joseph
      Mobilized to fight the COVID crisis: a blueprint for community and academic partnerships
      Dr. Stephen Markovich
      Making sure we're aligned along the path to achieving inclusion
      Barry Ostrowsky
      Ending racism is a journey taken together; the starting point must be now
      Laura Lee Hall and Gary Puckrein
      Increased flu vaccination has never been more important for communities of color
    • Five lessons for securing our children's future
      We're losing engaged providers, and healthcare will pay the price
      Bonnie Castillo and John Welton
      Dueling opinions: The role of mandated nurse staffing ratios
      Dr. Chris DeRienzo
      How COVID-19 broke health systems and made them stronger
    • Letters: Eliminating bias in healthcare needs to be ‘deliberate and organic’
      Letters: Maybe dropping out of ACOs is a good thing for patients
      Letters: White House and Congress share blame for lack of national COVID strategy
      Letters: VA making strides to improve state veterans home inspections
    • Sponsored Content Provided By Optum
      How blockchain could ease frustration with the payment process
      Sponsored Content Provided By Optum
      Three steps to better data-sharing for payer and provider CIOs
      Sponsored Content Provided By Optum
      Reduce total cost of care: 6 reasons why providers and payers should tackle the challenge together
      Sponsored Content Provided By Optum
      Why CIOs went from back-office operators to mission-critical innovators
  • Awards
    • Award Programs
    • Nominate
    • Previous Award Programs
    • Other Award Programs
    • Voting Open - 50 Most Influential Clinical Executives
      Nominations Open - Top 25 Innovators
      Nominations Open May 24 - Top 25 Emerging Leaders
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • Best Places to Work in Healthcare
    • Health Care Hall of Fame
    • Healthcare Marketing Impact Awards
    • Top 25 Emerging Leaders
    • Top 25 Innovators
    • Minorities in Healthcare
      • - Luminaries
      • - Top 25 Minority Leaders
      • - Minorities to Watch
    • Women in Healthcare
      • - Luminaries
      • - Top 25 Women Leaders
      • - Women to Watch
    • Excellence in Nursing Awards
    • Design Awards
    • Top 25 COOs in Healthcare
    • 100 Top Hospitals
    • ACHE Awards
  • Events
    • Conferences
    • Galas
    • Webinars
    • COVID-19 Event Tracker
    • emburse certify modern healthcare custom media webinar logo lockup
      Sponsored Content Provided By Emburse
      Webinar: Making it easy to manage costs
      virtualmed staff modern healthcare custom media logo lockup
      Sponsored Content Provided By VirtualMed Staff
      Webinar: Best practices for creating a successful telepsychiatry program
      telehealth visit man touching neck while speaking to doctor on computer
      Sponsored Content Provided By Accumen
      Webinar: How telehealth has evolved into a standard of care
      modern healthcare custom media and trimedx custom webinar logo lockup
      Sponsored Content Provided By TRIMEDX
      Webinar: Bridging the gap between clinicians and administration to improve capital equipment planning
    • Women Leaders in Healthcare Conference
    • Social Determinants of Health Symposium
    • Healthcare Transformation Summit
    • Leadership Symposium
    • Virtual Briefings
      • - Hospital of the Future
      • - Mental Health
      • - Patient Safety & Quality
      • - Strategic Marketing
      • - Virtual Health
      • - Workplace of the Future
    • Best Places to Work Awards Gala
    • Health Care Hall of Fame Gala
    • Top 25 Minority Leaders Gala
    • Top 25 Women Leaders Gala
  • Listen
    • Podcast - Next Up
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Video Series - The Check Up
    • Sponsored Video Series - One on One
    • Next Up Podcast: Modern Healthcare's editor Aurora Aguilar talks new content direction
      Dr. Chris DeRienzo
      Next Up Podcast: Building team spirit in the wake of COVID-19
      Mikelle Moore
      Next Up Podcast: Mikelle Moore on recognizing all hospital workers during the pandemic
      Empty boardroom
      Next Up Podcast: What's going to happen tomorrow? Succession planning during emergencies
    • Beyond the Byline: Kids' unchecked mental health needs pose long-term consequences
      Beyond the Byline: How COVID-19 has impacted hospital finances
      An older man sitting on a hospital bed with his back toward the camera.
      Beyond the Byline: Upcoding could explain why hospitals are increasingly billing for the most complex treatment
      Beyond the Byline: Insurers are betting on virtual-first plans as COVID-19 shifts care pathways
    • James garvert neustar healthcare insider podcast image
      Building on basics
      Healthcare Insider Podcast Episode Art - Premier
      Why Roger Weems and other consultants are leaving the big firms to join Premier
      James garvert neustar healthcare insider podcast image
      Outreach during COVID-19
      ann barnes healthcare insider podcast image
      Leading with intention to promote diversity and inclusion
    • The Check Up: Dr. James E.K. Hildreth
      The Check Up: Dr. James E.K. Hildreth of Meharry Medical College
      The Check Up: Matt Eyles
      The Check Up: Matt Eyles of AHIP
      The Check Up: Dr. Tom Shanley
      The Check Up: Dr. Tom Shanley of Lurie Children’s Hospital of Chicago
      The Check Up: Dr. Harold Paz
      The Check Up: Dr. Harold Paz of Wexner Medical Center at Ohio State University
    • ivana naeymi-rad one on one intelligent medical objects
      Video: Ivana Naeymi Rad of Intelligent Medical Objects
  • MORE +
    • Advertise
    • Media Kit
    • Newsletters
    • Jobs
    • People on the Move
    • Reprints & Licensing
MENU
Transformation Hub

Where healthcare challenges find solutions

  • Patients
  • Operations
  • Care Delivery
  • Payment
Operations
February 25, 2021 03:01 PM

Hospitals' Medicare billing practices suggest upcoding, OIG says

Alex Kacik
  • Tweet
  • Share
  • Share
  • Email
  • More
    Print
    Modern Healthcare Illustration / Getty Images

    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 year 2014 through the 2019 fiscal year, an HHS' Office of Inspector General analysis of Medicare Part A claims revealed. The average length of stay decreased for those cases, which suggests 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 average length of all stays combined 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 FY 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 reviewing the data brief.

    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 Massachusetts Hospital Association said that the expansion of electronic health records and the implementation of ICD-10 has allowed healthcare providers to "more accurately and granularly capture patient acuity and previously under-reported conditions."

    But upcoding practices precede the advent of EHRs and the emphasis on outpatient care. Prior to the EMR, many emergency department charts were hand-written and had poor documentation, often resulting in "presumptive" coding that was based on the service provided without regard for documentation, research shows.

    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 2009, two healthcare entities paid more than $10 million to settle allegations that they fraudulently billed Medicare for more complex evaluation and management services. 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 ED services because coding was "higher than reasonable and necessary to adequately care for the patient's needs," a 2012 Medicare audit 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've gone to an outpatient facility.

    Similar to the most recent OIG report, the Massachusetts Health Policy Commission found that coding severity had gone up in recent years while length of stay and critical care treatment levels had decreased.

    "This is a known phenomenon," David Auerbach, senior director of research and cost trends at the commission, said during an HPC board meeting in 2019 while discussing the report. "There are industries and consultants who have formed to take advantage of these higher payments and higher severity levels."

    EHRs have made it easier for providers to add more diagnoses to cases, which increases the severity. Meanwhile, hospitals continue to invest in revenue cycle specialists who focus on "coding optimization."

    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 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 that 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."

    As courts continue to sift through the gray area between "coding optimization" and fraud, the OIG recommended that CMS conduct targeted reviews of highest severity stays and the hospitals that frequently bill for them, particularly when they only list one major complication.

    While CMS said that it wouldn't do 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.

    "If the documentation is there, that is the key—all Medicare is getting is the code," Bryan said. "It will take going into the medical record to see what is behind that code."

    Tags: Operations, This Week in Healthcare, Finance, Revenue Cycle, Operations, Enforcement & Compliance, Transformation, Transformation Hub
    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    Amazon gives out $12M under next phase of AWS diagnostics development initiative
    Amazon gives out $12M under next phase of AWS diagnostics development initiative
    Malpractice premiums peak in 2020, AMA survey shows
    Malpractice premiums peak in 2020, AMA survey shows
    Sponsored Content
    Get Newsletters

    Sign up for enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today
    MH Magazine Cover

    MH magazine offers content that sheds light on healthcare leaders’ complex choices and touch points—from strategy, governance, leadership development and finance to operations, clinical care, and marketing.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS
    • Instagram

    Our Mission

    Modern Healthcare empowers industry leaders to succeed by providing unbiased reporting of the news, insights, analysis and data.

    MDHC_Logotype_white
    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Advertise with Us
    • Ad Choices Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • News
      • This Week's News
      • COVID-19
      • Providers
      • Insurance
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition
    • Insights
      • ACA 10 Years After
      • Best Practices
      • Special Reports
      • Innovations
    • Transformation
      • Patients
      • Operations
      • Care Delivery
      • Payment
    • Data/Lists
      • Rankings/Lists
      • Interactive Databases
      • Data Points
    • Op-Ed
      • Bold Moves
      • Breaking Bias
      • Commentaries
      • Letters
      • Vital Signs Blog
      • From the Editor
    • Awards
      • Award Programs
        • 100 Most Influential People
        • 50 Most Influential Clinical Executives
        • Best Places to Work in Healthcare
        • Health Care Hall of Fame
        • Healthcare Marketing Impact Awards
        • Top 25 Emerging Leaders
        • Top 25 Innovators
        • Minorities in Healthcare
          • - Luminaries
          • - Top 25 Minority Leaders
          • - Minorities to Watch
        • Women in Healthcare
          • - Luminaries
          • - Top 25 Women Leaders
          • - Women to Watch
      • Nominate
      • Previous Award Programs
        • Excellence in Nursing Awards
        • Design Awards
        • Top 25 COOs in Healthcare
      • Other Award Programs
        • 100 Top Hospitals
        • ACHE Awards
    • Events
      • Conferences
        • Women Leaders in Healthcare Conference
        • Social Determinants of Health Symposium
        • Healthcare Transformation Summit
        • Leadership Symposium
        • Virtual Briefings
          • - Hospital of the Future
          • - Mental Health
          • - Patient Safety & Quality
          • - Strategic Marketing
          • - Virtual Health
          • - Workplace of the Future
      • Galas
        • Best Places to Work Awards Gala
        • Health Care Hall of Fame Gala
        • Top 25 Minority Leaders Gala
        • Top 25 Women Leaders Gala
      • Webinars
      • COVID-19 Event Tracker
    • Listen
      • Podcast - Next Up
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Video Series - The Check Up
      • Sponsored Video Series - One on One
    • MORE +
      • Advertise
      • Media Kit
      • Newsletters
      • Jobs
      • People on the Move
      • Reprints & Licensing