United States: 2014 OIG Work Plan Released: Our Observations On Enforcement

Last Updated: February 24 2014
Article by Jason S. Greis

The Office of the Inspector General ("OIG") of the Department of Health and Human Services ("HHS") recently released its Work Plan for Fiscal Year 2014 (the "Work Plan").  Usually issued in October, budget pressures delayed this year's release.  The Work Plan provides an annual view into the OIG's planned areas of focus for investigation and enforcement activities in the coming year.  Below are a few interesting observations from this year's Work Plan.

  1. Provider-Based Facilities and Site of Service Billing Errors.  The OIG intends to continue its focus on provider-based facilities.  Provider-based facilities are hospital outpatient departments and are often located off-campus.  These facilities tend to be paid more than free-standing clinics for similar Medicare services in recognition of the generally higher levels of overhead and infrastructure necessary to qualify as a hospital-based facility. Unlike physician practice clinics, services at a provider-based facility are reimbursed both a technical fee (from the hospital) and professional fees (from the physician).  Past OIG reports have documented cases of incorrect billing to obtain additional monies (e.g., filing claims with a provider-based site of service for technical fees, while reporting a physician office site of service for professional fees). The OIG plans to further investigate such improper place of service billing and study differential payments between provider-based and free-standing clinics. From an enforcement perspective, the OIG appears most concerned about abusive practices resulting in improper provider-based payments. From a policy perspective, the OIG's concerns echo those articulated by MedPAC in the past – namely, that Medicare should seek to pay similar amounts for similar services. The OIG is expected to issue its report on the impact of provider-based reimbursement on Medicare later this year.  Providers operating provider-based facilities should continue to ensure that they comply with all of the Medicare provider-based rules.  In addition, hospitals may wish to consider adding site of service billing reviews to their annual compliance audits, if not already included.
  2. Compounding Pharmacy Practices.  The OIG intends to review Medicare's oversight of pharmaceutical compounding in Medicare-participating acute care hospitals and how State agencies and accrediting organizations evaluate such pharmacy services in hospitals.  Further, the OIG will examine the Medicare Administrative Contractors' (MACs') policies and procedures for reviewing and processing Part B claims for compounded drugs and assess the appropriateness of such claims.  Compounded drugs must be produced in accordance with the Federal Food, Drug and Cosmetic Act (FFDCA) in order for the compounded drugs to be eligible for coverage under Medicare Part B. 
  3. Payments for Pharmaceuticals.  The OIG intends to review the potential savings Medicare Part B might achieve if Medicare were able to participate in shared savings for 340B purchased drugs.  Currently, Medicare Part B providers who purchase drugs under the 340B program may retain the difference between the average-sales-price based payment received from Medicare and the amount the Part B provider spent purchasing the drug in the 340B program. Previous OIG studies showed that some Medicaid state agencies have developed strategies and shared in the savings of the discounts on 340B drugs and now the OIG will study whether there is the potential for Medicare to emulate the savings achieved by some Medicaid state agencies.   In a similar vein, the OIG has previously determined that Part D sponsors and State Medicaid agencies paid pharmacies roughly the same amount for brand-name drugs, however, the Medicaid rebate amounts exceeded by a substantial margin the Part D rebate amounts resulting in lower drug program costs for Medicaid.  In 2014, the OIG will compare pharmacy reimbursement and rebate amounts for a sample of brand-name drugs paid by Medicare Part D and by Medicaid.
  4. Hospital Quality and Safety.  The OIG intends to review two new subject areas regarding hospital quality of care and safety: emergency preparedness and hospital privileging. Currently, CMS's Conditions of Participation (CoPs) require hospitals to have adequate medical and nursing staff during emergencies.  Further, CMS has issued a Proposed Rule that revises CMS's CoPs to require hospitals to develop an emergency preparedness plan utilizing an all-hazards approach.  Hurricane Sandy dramatically affected multiple hospitals in the New York City area and the OIG intends to assess and describe hospital preparedness and response during Hurricane Sandy.  Specifically, the OIG will review Hurricane Sandy affected hospitals' participation in the Public Health Emergency Preparedness Cooperative Agreements program and the Hospital Preparedness Program.  Second, the OIG will determine how hospitals assess medical staff candidates prior to granting initial privileges.  The OIG intends to complete this review because robust hospital privileging programs has been found to contribute to patient safety. 
  5. Hospital Cost Control Reviews.  The OIG also intends to review contractor employee salaries charged to Medicare to determine whether contractors applied a regulatory required senior executive compensation benchmark.  A "senior executive" is defined as the top five compensated employees of each organizational segment.  The OIG aims to determine the potential cost savings if contractors were required to apply the same benchmark to all employee compensation.
  6. Review of Long-Term Care Hospital (LTCH) Interrupted Stay Payments.  The OIG will continue its investigation of readmission patterns in LTCHs to determine the extent to which Medicare has overpaid LTCHs for higher paying new stay cases when they should have instead been paid as interrupted stays.  An interrupted stay occurs when a patient is discharged from an LTCH for treatment and services that are not available at the LTCH (e.g., at a skilled nursing facility, inpatient rehabilitation facility, general acute care hospital) and is subsequently readmitted within a specific number of days.  If patients are readmitted to the LTCH after a specific number of days, the stays are billed as new admissions rather than interrupted stays and the LTCHs will receive two Medicare payments.  The OIG will also evaluate the extent to which co-located LTCHs readmit patients from the providers with which they are co-located in an effort to determine the extent to which Medicare made improper payments.  This investigation stems from CMS's acknowledged difficulty in detecting readmissions and to appropriately pay the readmissions as interrupted stays instead of as higher paying new admissions. 
  7. Ambulatory Surgical Center ("ASC") vs. HOPD Payments.  The OIG will continue its efforts to review the appropriateness of the ASC payment system (currently modeled on the hospital outpatient prospective payment system ("PPS")) compared with hospital outpatient department ("HOPD") payments.  Although the payment systems are similar, MedPAC has found that Medicare pays hospital outpatient departments (on average) 78 percent more than it pays ASCs for the performance of similar surgical services. The OIG will evaluate whether patient acuity and other factors justify divergent rates for similar services provided in the different environments.  The OIG is expected to release its report later this year.
  8. End Stage Renal Disease ("ESRD") Bundled Payments.  The OIG will continue reviewing payments for ESRD Services and drugs under its bundled PPS rate.  CMS has been implementing an ESRD PPS over a four-year transition period.  As part of the PPS rate, CMS utilizes Bureau of Labor Statistics' ("BLS") wage and price proxy data for annual updates.  Previously, the OIG questioned the accuracy of the BLS' data to measure a facility's costs in acquiring ESRD drugs.  The OIG's review of payment accuracy comes as ESRD facilities adjust to lower payments beginning in calendar year 2014.  The OIG's findings may impact future calls for ESRD payment changes. 
  9. Anesthesia Service Billing for Personally Performed Services.  The OIG continues its investigation into billing anesthesia services as personally performed by an anesthesiologist (service code "AA") in contrast with services under his or her medical direction (service code "QK").  Medicare pays for AA-coded services at a rate that can be up to double the rate for QK-coded services.  The OIG fears this incentivizes improperly billed AA services when the anesthesiologist does not actually personally perform the service.  Meanwhile, the industry hopes the report also helps to highlight certain payment ambiguities in the 20 year old service codes, including how to bill a service that begins as medically directed but ends as personally performed.
  10. Laboratory Tests Billing Under Part B.  The OIG will continue reviewing Part B clinical laboratory tests for questionable billing practices.  Medicare covers most lab tests and pays 100% of allowable charges.  Past OIG reports have suggested Medicare pays 18% to 30% more than other insurers for these tests.  Such high reimbursement may be one reason Medicare payments for lab services grew 92% between 1998 and 2008.  According to a past OIG report, paying equivalent to the lowest insurer in 2011 for 20 common tests would have saved taxpayers approximately $910 million.  In an area with growing costs and potentially recognizable savings, the OIG will likely target this area for the foreseeable future.
  11. Hospital Networks Security.  The OIG has added a new research initiative focused on hospitals' control of networked medical devices.  These devices often contain large amounts of sensitive electronic protected health information ("PHI").  One would not be surprised that the OIG is concerned in light of recent high-profile data security breaches.  This should be a signal to all health care providers (and not just hospitals) that steps should be taken to safeguard PHI. 
  12. Medicaid Dental Services.  The OIG continues to focus on Medicaid pediatric dental services.  Medicaid covers comprehensive dental care for 30 million low-income children through the program's early and periodic screening, diagnosis, and treatment program.  Past OIG reports found three out of four children had not received all of their required screenings.  The OIG plans to determine if CMS's response has been effective.  In addition, the OIG will continue investigations into inappropriate Medicaid dental billing.  Past reports found 31% of dental services "resulted in improper payments" (albeit, most were documentation errors).  Last year, Senators Baucus and Grassley released a report on a similar topic, suggesting continued interest among key policymakers to reform these Medicaid benefits.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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