Hospitals worry about compliance as outpatient fraud probes intensify
Hundreds of facilities settle charges of outpatient false billing
The barrage of bad news hitting hospitals concerning alleged Medicare outpatient billing fraud has left providers stunned and has kept the industry wondering, "When will it all end?" But fraud-and-abuse watchers are advising hospitals and outpatient facilities to expect little positive change to occur over the next year. In fact, things are likely to get worse, they warn.
Consequently, outpatient providers especially those affiliated with large integrated delivery systems should act quickly to implement effective internal safeguards, such as compliance programs, to prevent prosecution, say veteran outpatient managers.
Some compliance efforts fall short
However, despite making gains in compliance within these areas, many hospitals are questioning whether they’ve come far enough. While many are struggling to upgrade their information systems a key part of most compliance efforts for some, technology hasn’t kept pace.
"A lot of organizations face whether to update their systems, which is an enormous and expensive undertaking. But until that’s done, you can’t be sure of anything," says Charlotte L. Kohler, RN, CPA, CPAM, who oversees ambulatory care as vice president of diversified services with Lutherville, MD-based HelixHealth, a five-hospital integrated system.
Sooner or later, providers will have to decide. Based on recent developments, Medicare fraud and abuse enforcement in the outpatient sector is likely to heat up further with specific ambulatory services that include facility-based home health and laboratory services singled out for prosecution.
Coinciding with a devastating probe, begun six years ago, of hospital preadmission billing practices, the U.S. Department of Justice (DOJ) recently expanded a nationwide investigation of Medicare outpatient laboratory charges. DOJ was joined in the effort by the U.S. Department of Health and Human Services (HHS).
In what some have dubbed "labscam," between 2,000 to 5,000 hospitals have been targeted by HHS’s Office of Inspector General (OIG) for illegally unbundling Medicare and Medicaid outpatient lab charges.
Legislation fuels fraud probes
So far, the focus of the investigation has been on hospitals in Illinois, Ohio, Pennsylvania, Virginia, and most New England states. The initiative is formally known as the Lab Unbundling Project.
Last year, the Clinton Administration stepped up enforcement efforts by committing $106 million to uncovering Medicare fraud and abuse, while Congress formalized the effort through the Health Care Insurance Portability and Accountability Act of 1996.
"The government has opened its eyes to the importance of the outpatient sector in generating revenues, and hospitals are really scared by the scrutiny," says Andrei Costantino, a manager with Parente, Randolph, Orlando, and Carey, a Harrisburg, PA, health care accounting firm advising some hospitals caught in the probe.
Publicly, outpatient administrators are expressing calm over the government’s actions. But privately, they’re angry and concerned, observers say.
"The feds are pushing to collect damages for false claims that in most cases aren’t false. It’s grossly unfair," says attorney Michael D. Kendall, JD, echoing administrators’ sentiments. Kendall has represented Boston-area hospitals in one inquiry as a partner in that city with the law firm McDermott, Will, and Emery.
To date, several Boston-area hospitals have settled with the OIG on charges that they violated the federal False Claims Act by over billing Medicare for outpatient non-physician services. Eighty-three hospitals were required to pay a total of $3.4 million in fines ranging from $2,000 to $400,000, Kendall says.
Fed claimed double-billing
The government’s allegations involved a specific Medicare law that requires hospitals to bundle outpatient services that occur within three days of an inpatient admission. The facilities were accused of having bundled the charges into the inpatient bill, as required, and billing for the services separately a second time.
The law has been incorrectly dubbed by the health care industry as the 72-hour DRG Window-rule.
Officials at the Health Care Financing Administration (HCFA) maintain that the use of the term "72-hour window" in referring to the bundling law is misleading. The proper term is a "three-day window." The law requires that preadmission testing be bundled into the inpatient charges within three days not 72 hours of an admission. "It has always been a three-day window and continues to be so," according to one HCFA official who asked not to be identified in accordance with agency policy.
Under the three-day rule, the day officially begins at one minute passed midnight. "If I’m admitted to the hospital at 8 p.m. on a Thursday, the rule covers a three-day period back to 12:01 a.m., Monday. A 72-hour window would only set the clock back to 8 p.m., Monday, which would be incorrect," according to the HCFA official.
The distinction is important, HCFA says. If a provider fails to bundle charges for services performed between 12:01 a.m. and 8 p.m. on Monday and bills separately for these services, the billing could raise red flags, HCFA says.
With regard to the federal probe, the DOJ has settled similar allegations involving preadmission billings with dozens of Pennsylvania hospitals and has expanded the initiative to facilities in six other states, including California, Connecticut, Maine, New Hampshire, Rhode Island, and Vermont.
But the law has been difficult to apply in some instances, says Kohler of HelixHealth. Hospital mergers and the growth of ever-larger delivery systems have complicated the process of accurately tracking outpatient charges and bundling appropriately, Kohler says.
Law allegedly falls short
"In a system of five hospitals, can the preadmission testing be done across separate facilities with separate Medicare numbers and still fall under the [three-day window] law?" Kohler asks. Until there’s an answer, the network is making certain that all preadmission services get done at the same facility, Kohler says.
Smaller providers also are grappling with distinctions. At York (PA) Hospital, for example, reimbursement personnel constantly pore over reams of pre-submission and post-submission claims data searching for errors that might prove costly. But the audits and reviews aren’t fool-proof, acknowledges Jan Witzke, MT(ASP), an outpatient laboratory division manager at York. Late charges can sneak into a pre-existing outpatient bill and bypass the computer’s inpatient billing safety net.
Or facilities with different computer systems will fail to capture charges correctly and produce a separate outpatient bill. "In the past, [these] errors were just caught and corrected. Today, they can be viewed as fraudulent," says Linda S. Sheaffer, CPAM, York’s director of patient administrative services.
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