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Recently released statistics may prove what risk managers know from firsthand experience: When the government starts showing up at hospitals with armed agents and threatening every conceivable punishment for Medicare overbilling, people tend to pay attention.
It is no surprise that Medicare overbilling has dropped significantly in the past year, on the heels of a fierce campaign by federal regulators to eliminate widespread fraud. Risk managers already could see that the campaign was working, but the numbers released recently by the U.S. Department of Health and Human Services in Washington, DC, show just how successful the campaign has been. Regulators announced that improper Medicare payments to hospitals, doctors, and other health care providers declined dramatically last year to the lowest error rate since the government initiated comprehensive audits three years ago.
The error rate for fiscal year 1998 was an estimated 7.1%, representing estimated improper payments of $12.6 billion, according to a copy of the report obtained by Healthcare Risk Manage ment. That compares with an error rate of 11% in fiscal year 1997, representing an estimated $20.3 billion, and 14% in fiscal year 1996, representing an estimated $23.2 billion in improper payments.
That’s a 45% reduction in improper payments in only two years. Auditors from the Office of the Inspector General arrived at those figures with the support of medical experts, who helped review a comprehensive, statistically valid sample of Medicare fee-for-service claim expenditures and supporting medical records to determine the accuracy and legitimacy of the claims. They looked at a statistical selection of 600 beneficiaries nationwide with 5,540 claims valued at $5.6 million and determined that 915 of the claims did not comply with Medicare laws and regulations.
By projecting the sample results over the universe of Medicare fee-for-service benefit payments, which totaled $176.1 billion during the 1998 fiscal year, the regulators calculated that $12.6 billion was the midpoint in the estimated range of improper payments.
The improper payments ranged from inadvertent mistakes to outright fraud and abuse, but the portion attributable to intentional fraud could not be quantified. Two major problem areas were identified: billing for services that were not medically necessary and upcoding services to secure a higher reimbursement than was justified. Those problems accounted for about $9.3 billion of the estimated $12.6 billion in improper payments. Another $2.1 billion in overpayments was attrib uted to documentation discrepancies, and the remaining $1.2 billion was traced to billing for services not covered by Medicare, along with various other errors.
Hospitals, physicians, and home health agencies accounted for more than 77% of the improper payments, with about 39% of the erroneous claims attributable to hospitals, nearly 26% to physicians, and nearly 13% to home health agencies. The rest of the improper payments were traced to skilled nursing facilities, nonprospective-payment system hospitals, laboratories, end-stage renal disease centers, ambulance companies, ambulatory care centers, durable medical equipment suppliers, and hospices, in that order.
Examples include a community mental health provider that was paid $21,421 for services later determined by medical reviewers to be medically unnecessary. In another case, a skilled nursing facility billed Medicare $10,428 for a 51-day skilled nursing stay by an elderly patient, but medical records showed the patient received maintenance-level, unskilled care. In a third case, a physician billed Medicare $871 for 40 hospital visits when the medical records showed only 18 visits.
[Editor’s note: For more information or a free copy of the report, contact the Department of Health and Human Services at (202) 690-6145 or go to the Web page at http://www.hhs.gov.]