2016 OIG Work Plan: Hospital Considerations

Compliance remains a major focus of the Department of Health and Human Services. Through CMS, the OIG and others, oversight of Medicare and Medicaid reimbursement continues to expand. This article summarizes and provides an overview of the recently released 2016 Office of Inspector General (OIG) work plan.

The 2016 OIG work plan relative to possible healthcare fraud and abuse was published in October 2015. The document is filled with new topics and proposed audit activities as well as continuation of audit activities on subjects from years past.

The objectives related to the plan are fairly straightforward:

  • Investigate entities that bill or allege to have billed for services not rendered
  • Identify providers that manipulate payment by claim coding in an effort to inflate reimbursement
  • Identify false claims violations, including billing for unnecessary services
  • Identify improper incentive and/or bonus payments realized from quality reporting

Hospital Concerns and Guidance

Provider Based Entities

This is the new “bottomless pit” for the OIG, given the potential for non-compliance with eligibility requirements and billing related issues and opportunities. On the table for review in this work plan are:

  • Payment differences between provider based entities and free standing clinics, especially with the recent passage of the 2016 Budget deal, whereby off campus provider based payment differences have been eliminated for new entities.
  • Additional beneficiary payment liability.

Review of Inpatient and Outpatient Payments (PPS)

The OIG proposes to use their sophisticated data mining tools as well as computer system matching programs to select claims failing to conform to specific CMS billing requirements. They will focus on those failures to comply with billing instructions that result in hospital overpayments.

This type of review is broad and, without more specific criteria, hospitals will be open to an aggregate of potential review issues. Hospitals are advised to monitor and review billing requirements as published in the Internet Only Manuals.

Under OIG review are:

  • Overall billing complexity
  • Medical necessity and coverage issues
  • Coding accuracy
  • National correct coding initiatives rules
  • Use of Outpatient PPS modifiers

Hospitals should consider the following:

  • Assure staff skills and knowledge base
  • Perform self-audits
  • Formalize a CMS change management process
  • Ensure timely charge master maintenance
  • Purchase of software claim scrubbers that mimic Medicare code editors to prevent payment related errors in advance of claim submission

Cost Outliers

The OIG plans to review outlier payments to hospitals to ensure CMS performed necessary reconciliations. These payments are based on hospital cost-to-charge ratios and may also reflect the time value of money, so under scrutiny will likely be the policies and procedures related to price setting along with the medical necessity of services billed.

Outpatient Hospital Dental Claims

Medicare considers dental services to be excluded from Medicare coverage. The plan is to investigate hospital outpatient claims adjudicated to payment for dental related services and possible provider overpayments.

Hospitals should assure procedures are in place in the billing office to prevent claim submissions to Medicare for non-covered statutory excluded services. This process should include screening for non-covered services but also related and incidental services associated with these non-covered services.

Medicare 72-Hour Window

Certain items, supplies and services furnished to inpatients are covered under Part A and should not be billed separately to Part B. Commonly referred to as the 72 hour window, certain services billed within three days of an inpatient admission (or 1 day in the case of inpatient psychiatric or rehabilitation) must be bundled on the inpatient claim. The OIG will be reviewing these situations to ensure compliance with the bundling provisions.

Two-Midnight Rule

The OIG will review hospital compliance with the two-midnight rule when admitting and billing the inpatient Part A stay. Of particular likely interest will be the use of observation bed services as well as physician certification and their explicit orders and signature.

Mandated Quality Reporting

The OIG will be reviewing the extent to which CMS validated hospital impatient quality reporting data in the areas of meaningful use, PQRS, quality reporting, HPSA and primary care bonuses, etc. Hospitals should consider validation audits to assure the accuracy of reporting based on their documentation.

Anesthesia Professional Billing

The OIG has a concern that anesthesia services are being reported as personally performed when, in fact, they are only medically directed. The improper use of modifiers may inappropriately increase payment. Hospitals should perform an internal review of their use of anesthesia modifier reporting and also ensure appropriate identification of the actual provider rendering the service.

Other OIG Concerns

There are many other topics and items of interest to the OIG, including, but not limited to, the following:

  • Outpatient physical therapy
  • Hospital wage data
  • Laboratory services
  • Radiation therapy
  • Ambulance services
  • Medicare payment for drugs – Part B vs Part D
  • DME
  • And so much more……


The OIG reported expected recoveries of approximately $3 billion for FY 2015 related to investigative recoverables. Another $20.6 billion in savings was identified related to legislative, regulatory or administrative actions that were supported by OIG recommendations. It further accomplished 4,112 individual/entity exclusions from participation, 925 criminal actions and 682 civil actions. It is increasing its use of its extensive database to data mine for more efficiency and effectiveness in pinpointing its oversight efforts.

It is clear, based on the successes described in its semi-annual report to Congress and on its website, that the OIG will remain extremely active in its audit and review activities of all provider types.

The Department of Health and Human Services, through its agencies, continues its oversight of Medicare and Medicaid payments to healthcare providers across the continuum of care. The future appears no different and, in fact, appears to include even more oversight than currently exists. Providers should carefully review and analyze each of the many work plans and rules that have been published in the past few months and incorporate review and analysis into their compliance plans.

Disclaimer of Liability: This publication is intended to provide general information to our clients and friends. It does not constitute accounting, tax, investment, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.

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