OIG: Medicare Overpaid $267M for Hospital In-Patient Claims with Post-Acute Transfers to Home Health Services

Hospitals improperly coding for post-discharge services contribute to hundreds of millions of dollars in Medicare overpayments. And the majority of incorrect payments are often related to home health services.

That’s according to a new audit report from the Department of Health and Human Services (HHS) Office of Inspector General (OIG).

The purpose of the OIG audit was to determine if payments met the standards of Medicare’s post-acute care transfer policy. As part of the audit, OIG examined almost 90,000 in-patient claims filed in fiscal years 2016 and 2017, totaling $948 million.


Auditors took a sample of 150 claims and found that Medicare only paid three correctly. Meanwhile, 147 incorrectly paid claims received $722,288 in overpayments.

Overall, that means Medicare may have incorrectly paid $267 million for hospital services over a two-year period, according to OIG. About $218 million of that amount was related to the improper coding of a discharge directly to home, audit found.

“Medicare improperly paid most in-patient claims subject to the transfer policy when beneficiaries resumed home health services within three days of discharge but the hospitals failed to code the in-patient claim as a discharge to home with home health services or when the hospitals applied condition codes 42 (home health not related to in-patient stay) or 43 (home health not within three days of discharge),” OIG auditors noted.


In order to address Medicare overpayments, OIG recommends that the Centers for Medicare & Medicaid Services (CMS) reprocess the claims to recover some of the funds from hospitals that were disbursed within the past four years.

Among other things, OIG also recommended that CMS “correct its related system edits, improve its provider education related to the Medicare transfer policy and use data analytics to identify hospitals disproportionally using condition code 42.”

Additionally, OIG recommends that CMS should reduce the need for “clinical judgment” with claims under the post-acute-care transfer policy.

One way to achieve this would be to consider all home health services within three days of discharge to be related to in-patient hospital services, according to the report. Doing so would have saved an estimated $46.6 million during the review period.

In response to OIG recommendations, CMS stated it will require its Medicare contractors to recover the identified overpayments, reprocess the remaining in-patient claims and review a sample of the remaining in-patient claims.

In addition, CMS has modified its Common Working File (CWF) system for verification, validation and payment authorization.

CMS has also made efforts to educate health care providers on proper billing.

“CMS educates health care providers on appropriate Medicare billing through various channels, including the Medicare Learning Network, weekly electronic newsletters and quarterly compliance newsletters,” CMS Administrator Seema Verma said in a statement to OIG. “For example, CMS published an informational booklet in February 2019 regarding the acute care hospital in-patient prospective payment system, which included information on the transfer policy and related payment adjustments.”

CMS disagreed with OIG’s suggestion related to reducing the need for clinical judgment.

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