iProtean—OIG Releases Its Annual Report on Fraud and Abuse

The HHS Office of Inspector General (OIG) released its annual report on healthcare fraud and abuse last week. According to the report, 71 hospitals and health systems paid $163.4 million to settle healthcare fraud allegations in FY 2013.


Some of the more notable results included:

  • Winning or negotiating more than $2.6 billion in healthcare fraud judgments and settlements
  • Total recoveries that included $2.85 billion in Medicare funds and more than $576 million in federal Medicaid money
  • Convictions of 718 defendants for healthcare fraud-related crimes
  • 1,083 new civil healthcare fraud investigations opened by the Justice Department and 1,079 civil healthcare fraud matters pending at the end of the fiscal year
  • Exclusion of 3,214 individuals and entities from Medicare (i.e., providers criminally convicted for Medicare- or Medicaid-related crimes)


A health system in Florida negotiated the largest settlement—$26 million— to the state of Florida and the federal government. The settlement resulted from allegations that six of its healthcare facilities submitted false claims to Medicare, Medicaid and other federal healthcare programs for inpatient procedures that should have been billed as outpatient services.


The fraud collections did not include funds recovered by contract auditors, such as recovery audit contractors (RACs). In prior years, RACs identified half of all claims they reviewed as having resulted in improper payments, totaling $1.3 billion.


Update on “Two-Midnight” Rule

On an issue related to denials for inpatient stays, CMS auditors will double check all Medicare inpatient claims that were denied payment under the new “two-midnight” rule since October 1. The new rule says patients need to be in a hospital bed for two nights, the so-called “two midnights,” to qualify for inpatient care. (See iProtean newsletters October 1, 2013 and January 28, 2014; “Medicare calls for review of ‘two-midnight’ denials,” Modern Healthcare.com, February 26, 2014.))


It has been reported that the policy is difficult to implement, and clarifications issued on Sept. 5 and Jan. 30 are raising new complications. CMS said that “Medicare contractors may have denied claims for reasons no longer supported under the latest updates. Therefore, it wants to review all denials under the new rule so far. Those reviews will be handled outside the normal appeals process for payment denials.”


CMS has not given the number of claims that may have been denied under the two-midnight rule, but it said its contractors had requested 29,000 medical records to audit as of February 7. It isn’t clear how many Medicare inpatient claims will be affected by the re-reviews.


CMS has asked hospitals to work with their local Medicare contractors to make sure denials under the two-midnight rule have undergone re-review before using the formal Medicare appeals process. It also is waiving the normal 120-day window to appeal for denials under the two-midnight rule, but only for decisions that pre-date the Jan. 30 rules, according to the updated policy announced last week.


(Sources: “Hospitals Paid $163 Million to Resolve Fraud Allegations in FY13,” HFMA Weekly News, February 26, 2013; The Department of Health sand Human Services and The Department of Justice Health Care Fraud and Abuse Control Program Annual Report for Fiscal Year 2013, http://oig.hhs.gov/publications/docs/hcfac/FY2013-hcfac.pdf; “Medicare calls for review of ‘two-midnight’ denials,” Modern Healthcare.com, February 26, 2014)


iProtean subscribers, a new advanced Quality course, The Importance of Physician Leaders, will soon be in your library. Expert faculty Brian Wong, M.D., Todd Sagin, M.D. and Tom Atchison, Ed.D. discuss the rationale for developing physician leaders in the hospital setting and the role of physician leaders, leadership characteristics including strategic thinking, holding physicians accountable, training physicians leaders, coaching and building teams, leaders as problem solvers and the role of the board. Look for a program summary and preview video in your inbox later this week!


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