OIG: CMS must press Congress to overhaul Medicare's hospital wage index to prevent fraud

CMS still needs to adopt several major reforms to combat Medicare and Medicaid waste and fraud, a report from Health and Human Services' watchdog said. (Image: Getty Images)

The Trump administration must press Congress to get new powers to penalize hospitals that submit incorrect payment data as a way to clamp down on Medicare and Medicaid fraud, the Department of Health and Human Services’ watchdog said.

HHS’ Office of Inspector General released a report on Tuesday outlining 25 previous recommendations to combat waste and fraud that have not been adopted by the Centers for Medicare & Medicaid Services.

Chief among the recommendations is that CMS should press Congress to get the authority to penalize hospitals that submit inaccurate or incomplete wage data via the hospital wage index, which is used to adjust Medicare payment rates to account for local differences in hospital wages.

“Wage indexes may not always accurately reflect local labor prices, thus Medicare payments to hospitals and other providers may not appropriately adjust to reflect local labor prices,” the OIG report said.

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Reviews conducted by Medicare administrative contractors, which is an insurer who processes Medicare claims for a geographic area, also don’t always identify inaccuracies in the wage data.

The OIG previously made the recommendation to CMS in November 2018. But OIG said it hadn’t received a decision from CMS on how to respond to the recommendation.

The watchdog did note that President Trump’s fiscal year 2021 budget does also for authority for CMS to test wage index reform.

Other key recommendations in the report include:

  • Providing targeted oversight of Medicare administrative contractors. OIG found back in December 2019 that billions of Medicare Advantage risk-adjusted payments are based solely on chart reviews. OIG questioned whether the payment data to CMS was complete and the validity of diagnoses on solely chart reviews. CMS said back in February it will release encounter data exchange reports later this year to require MAOs to provide written explanations for detect errors.
  • Creating a strategy to ensure that Part D doesn’t pay for drugs that should be covered under Medicare Part A’s hospice benefit. OIG found in August 2019 that Part D plans paid for $160 million for drugs in 2016 that should have been paid under the Part A hospice benefit. OIG said that no progress has been made implementing any recommendations to fix the discrepancy.
  • Ensuring that states can pay correctly for drugs purchased under the 340B discount program and billed to Medicaid. CMS should require claim-level methods to identify 340B drugs and share the official 340B ceiling prices. OIG reported a lack of transparency on both 340B ceiling prices and Medicaid claims associated with 340B-purchased drugs. States also have trouble differentiating claims for 340B-purchased drugs because the states use methods that operate at a broader, provider level, the report said. State Medicaid agencies need 340B ceiling prices to understand which clamis are associated with 340B drugs so they can correctly pay claims, OIG added. CMS has responded it doesn’t have the federal authority to require claim-level methods to help states identify 340B drugs.