OIG finds issues with IRF payments re: Discharge status

Inpatient rehabilitation facilities (IRFs) have received millions in improper payments due to miscoded claims--and a total lack of action by Medicare contractors to correct the errors, according to a recent report from the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services. So providers could soon see recovery audit contractors (RACs), with an encouraging push from the Centers for Medicare and Medicaid Services (CMS), jump into auditing action.

In "Review of Inpatient Rehabilitation Facilities' Compliance With Medicare's Transfer Regulation During Fiscal Years 2004 Through 2007" (A-04-09-00059), the OIG found IRFs often improperly coded claims subject to the transfer regulation as discharges. In a sample of 220 claims, the patient status code was coded incorrectly on 213 claims, resulting in $1.2 million in overpayments. (Medicare pays IRFs a higher amount for patients who discharge home vs. those who transfer.) Based on the sample, the OIG estimated that IRFs nationwide were overpaid $34 million for the four-year period ended Sept. 30, 2007.

These payment errors occurred despite the fact that CMS implemented a Common Working File edit on April 1, 2007, to identify transfers that are improperly coded as discharges. Apparently the fiscal intermediaries (FIs) didn't adjust identified claims or take action to stop incorrect payments.

In its response to the report, CMS said it would use the fiscal year 2011 update for the IRF prospective payment system to instruct FIs and Medicare administrative contractors (MACs) "to cancel claims (i.e., recover payment)" based on the CWF edits. The agency will conduct contractor management on-site visits and use quality assurance reviews as needed to make sure the FIs and MACs are catching these claims. In addition, CMS also plans to share the report with the RACs and "encourage them to consider these findings as they decide what claims to review."

To learn more:
- access the OIG report here
- read this summary of RAC essentials
- read this RAC Monitor article

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