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Reimbursement and Payment Highlights from the HHS OIG's Work Plan*

Written by Stephen Bentfield and Karen Lovitch

As reported in an earlier post, the U.S. Department of Health and Human Services Office of Inspector General (OIG) has released its Work Plan for Fiscal Year 2013 (Work Plan). Although many of OIG’s focus areas remain unchanged from previous years, the FY 2013 Work Plan includes many new and notable reviews and activities related to Medicare and Medicaid reimbursement and payment.  Two areas of particular focus in this year’s Work Plan are reviews related to hospital billing and payment issues and the ongoing implementation of Affordable Care Act (ACA) requirements. 

Medicare Reviews

For FY 2013, OIG has added several new reviews of Medicare payments and services.  Activities include:

  • Analyzing the potential impact of non-hospital-owned physician practices billing Medicare as provider-based physician practices.  Billing as a provider-based physician practice could result in additional Medicare payments for services furnished at the provider-based facilities and increased beneficiary coinsurance liabilities.  As part of this review, OIG will also examine the extent to which practices billing under the provider-based status comply with billing requirements imposed by the Centers for Medicare & Medicaid Services (CMS).
  • Identifying possible cost savings arising from hospitals’ compliance with Medicare’s transfer policy and whether Medicare paid for beneficiary discharges (which result in the full diagnosis-related group (DRG) payment to the hospital) that should have been coded as transfers (which are paid at a graduated per diem rate).  OIG also will examine the effectiveness of the Medicare Administrative Contractors’ claims processing edits to identify claims that are subject to the transfer policy.
  • Reviewing the impact on Medicare costs associated with inpatient hospital claims for canceled surgical procedures.  This activity stems from OIG’s prior review of Medicare claims that revealed possible double payments for such procedures; i.e., an initial prospective payment system (PPS) payment for the cancelled procedure, followed by a second, higher PPS payment to the same hospital for the rescheduled procedure.  The OIG notes that the cancelled procedures often were the principal reason for the initial hospital admission, but beneficiaries received few, if any, inpatient services during the short stay.
  • Examining the impact on Medicare spending from the conversion of ambulatory surgical centers (ASCs) to hospital outpatient departments following the acquisition of an ASC by a hospital.  OIG notes that outpatient surgical services performed in an outpatient department receive higher Medicare reimbursement than similar services performed in ASCs.
  • Identifying potential cost savings resulting from new payment methodologies for swing-bed services at critical access hospitals (as compared to the same level of care obtained at a skilled nursing facility).
  • Examining the requirements and processes employed by accreditation organizations in reviewing and granting accreditation to durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) suppliers.  DMEPOS suppliers must meet each of Medicare’s quality standards to become accredited and must comply with Medicare’s quality standards to maintain billing privileges.
  • Analyzing possible wasteful spending for vacuum erection systems by comparing the current Medicare fee schedule amount with amounts charged by non-Medicare payors, such as private insurance and the Department of Veterans Affairs (VA).
  • Identifying potential savings for supplies used with continuous positive airway pressure (CPAP) machines.  For this review, OIG will compare Medicare’s existing supply replacement schedules for CPAP supplies with schedules used under Medicaid, VA, and Federal Employee Health Benefits programs.
  • Analyzing possible Medicare savings for Part-B covered drugs infused through medical equipment by comparing the provider’s acquisition cost for the infused drugs, which are paid based on average wholesale price (AWP), with payments for such drugs had they been based on average sale price.  OIG previously found that the AWPs for Part B-covered drugs often greatly exceeded the drugs’ actual costs.

Medicaid Reviews

OIG’s Medicaid-related reviews in FY 2013 continue to focus on, among other issues, prescription drugs.  Of note is the planned examination of potential Medicaid savings related to home blood-glucose test strips that could arise through alternative payment methods such as rebates, competitive bidding, or other means.  OIG previously found that state Medicaid programs were able to reduce net payments for blood-glucose test strips through negotiated rebates with manufacturers, while CMS reduced Part B rates in selected areas through competitive bidding.

ACA Reviews

OIG’s review of the ongoing implementation of the ACA spans several new focus areas, and they include:

  • Analyzing possible savings associated with bundling outpatient services delivered up to 14 days prior to inpatient hospital admissions into the DRG payment for the inpatient stay (as compared to the 3-day window that currently applies).  Under the so-called “DRG window” policy, Medicare does not pay separately for preadmission services when they are delivered in a setting owned or operated by the admitting hospital.
  • Reviewing the extent to which home health agencies are complying with the ACA’s requirement that physicians (or certain practitioners working with them) have had face-to-face encounters with beneficiaries whom they have certified as eligible for home health services.
  • Analyzing whether Medicare can achieve savings through rental of certain power mobility devices (PMD) rather than a lump-sum purchase.  The ACA eliminated the option of a lump-sum purchase for certain PMDs.
  • Determining how often on-site visits (which are now required for moderate and high risk providers and suppliers as a result of the ACA) occur as part of the Medicare enrollment or reenrollment process.

OIG plans to post its Outlook 2013 webcast on October 24, 2012.  In the mean time, a copy of the OIG’s FY 2013 Work Plan is available on the OIG’s web site.

*Copyright 2012 American Health Lawyers Association, Washington, D.C.  Reprint permission granted.



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Karen S. Lovitch

Chair, Health Law Practice & Co-Chair, Health Care Enforcement Defense Practice

Karen advises industry clients on regulatory, transactional, operational, and enforcement matters. She has deep experience handling FCA investigations and qui tam litigation for laboratories and diagnostics companies.