OIG: Hospital stays getting more expensive for Medicare, raising upcoding concerns

Medicare spending costs money
A new watchdog report found that billing for the most severe hospital inpatient stays has increased over a six-year period, sparking new concerns about upcoding. (Getty/zimmytws)

Hospitals increased their Medicare billing for the most severe inpatient stays, sparking concerns from a federal watchdog that facilities could be improperly charging the federal government.

The Department of Health and Human Services’ (HHS') Office of Inspector General (OIG) released a report Wednesday (PDF) that explored payments for severe inpatient stays from federal fiscal 2014 through 2019. The HHS watchdog found that stays at the highest severity level are susceptible to inappropriate billing practices such as upcoding.

“The pandemic has placed unprecedented stress on the country’s healthcare system, making it more important than ever to ensure that Medicare dollars are spent appropriately,” the report said.

The number of inpatient stays at the highest severity level increased almost 20% from 2014 to 2019 and accounted for nearly half of all Medicare spending on inpatient hospital visits.

“The number of stays billed at each of the other severity levels decreased,” the report said. “At the same time, the average length of stays decreased for stays at the highest severity level, while the average length of all stays remained largely the same.”

RELATED: CMS: Estimated improper Medicare payments down $15B since 2016

The average length of stay for a high severity-level diagnosis decreased from 6.9 to 6.4 days from 2014 through 2019.

But the average length of all stays was largely the same, decreasing by about 0.1 days, the OIG said.

The length of stay issue raised questions about the accuracy and appropriateness of the complications billed by the hospital, the OIG added.

“Almost 30% of stays billed at the highest severity level—almost a million of them—lasted a particularly short amount of time,” the report said. “That is, they were more than 20% shorter than the mean length of stay for the assigned [diagnosis code].”

From 2014 to 2019, Medicare payments for stays at the highest severity level increased by more than $10 billion, a 24% hike.

“Overall, Medicare payments for inpatient hospital stays increased by 8% during the same time period,” the report added.

The OIG found that in federal fiscal 2019, which ended in October 2019 before the onset of the pandemic in 2020, Medicare spent $109.8 billion for 8.7 million inpatient stays; nearly half of that was for stays at the highest severity level.

Severe sepsis was the diagnosis most frequently billed in fiscal 2019, as hospitals billed Medicare $7.4 billion.

The OIG recommends the Centers for Medicare & Medicaid Services take targeted reviews of hospital inpatient stays that are vulnerable to upcoding and the hospitals that are the worst offenders of the practice.

The report comes as the COVID-19 pandemic has caused a massive drop in healthcare use as hospitals have had to pause elective procedures at certain times last year and patients have been afraid to get care for fear of contracting the virus.

An analysis released earlier this month from consulting firm Avalere Health found outpatient Medicare fee-for-service claims dropped by 51% in April at the onset of the pandemic compared to the same month in 2019.

There was also a 42% drop for inpatient claims the same month.

While Avalere found that claims started to rise slowly in June, some systems have had to pause elective procedures again due to COVID-19 surges in the fall and winter.