The 2014 OIG Work Plan Has Arrived!

The Officer of Inspector General has finally released the 2014 work plan!  Some of the areas of interest for hospitals are as follows:

Reconciliations of Outlier Payments

In the area of Policies and Practices, the OIG will review the Medicare outlier payments to hospitals in order to determine whether CMS performed the necessary reconciliations in a manner timely enough to enable Medicare contractors to perform final settlement of the hospitals’ associated cost reports.

The OIG will also determine whether the Medicare contractors referred all hospitals that meet the criteria for outlier reconciliations to CMS.

Outliers are additional payments that Medicare provides to hospitals for beneficiaries who incur unusually high costs. CMS reconciles outlier payments on the basis of the most recent cost-to-charge ratio from hospitals’ associated cost reports. Outlier payments also may be adjusted to reflect the time value of money for overpayments and underpayments. Without reconciliations and final settlements, the cost reports remain open and funds may not be properly returned to the Medicare Trust Fund. Preserving the Medicare trust fund is a huge concern for us all. The issue date is FY 2014. There will be various reviews; this work is already in progress.

NEW ON THE LIST: New Inpatient Admission Criteria for the Two Midnight Benchmark

This is a new area that the OIG is looking at in regard to the Policies and Practices in order to determine the impact of new inpatient admission criteria on hospital billing, Medicare payments, and beneficiary payments.

This review will also determine how billing varied among hospitals in FY 2014. Previously, the OIG work found overpayments for short inpatient stays, inconsistent billing practices among hospitals, and financial incentives for billing Medicare inappropriately.

This new review is based on the instruction of the two midnight benchmark. Beginning in FY 2014, new criteria states that physicians should admit for inpatient care those beneficiaries who are expected to need at least two nights of hospital care. Beneficiaries whose care is expected to last less than two nights should be treated as outpatients. The new criteria represent a substantial change in the way hospitals bill for inpatient and outpatient stays.

The expected issue date: FY 2015. CMS is still working through the complex processes and hosting open door forum calls to get the instructions clear on what hospitals are supposed to do to be compliant.  Stay tuned for further instructions.

*Subscribe to the CMS open door forum listserv at to receive emails detailing when these calls are going to take place.

NEW ON THE LIST: Medicare Costs Associated With Defective Medical Devices

The OIG will review the policies and practices of  Medicare claims to identify the costs resulting from additional utilization of medical services associated with defective medical devices to determine the impact of the cost on the Medicare Trust Fund. This work is in progress for FY 2014.

Analysis of Salaries Included in Hospital Cost Reports

This is a new area currently under review. The expected issue date is FY 2015, although the OIG work is already in progress. Policies and Practices are being reviewed as well as data from Medicare cost reports and hospitals in order to identify salary amounts included in operating costs reported to, and reimbursed by Medicare.

The goal is to determine the potential impact on the Medicare Trust Fund if the amount of employee compensation that could be submitted to Medicare for reimbursement on future cost reports had limits.

Context—Employee compensation may be included in allowable provider costs only to the extent that it represents reasonable remuneration for managerial, administrative, professional, and other services related to the operation of the facility and furnished in connection with patient care. (CMS’s Provider Reimbursement Manual, Part 1, Pub. No. 15-1, Ch. 9 § 902.2.) Medicare does not provide any specific limits on the salary amounts that can be reported on the hospital cost report.

Impact of Provider-Based Status on Medicare Billing Policies and Practices

The OIG will be determining the impact of subordinate facilities in hospitals billing Medicare as being hospital-based (provider-based) and the extent to which such facilities meet CMS’s criteria.

Context—Provider-based status allows a subordinate facility to bill as part of the main provider. Provider-based status can result in additional Medicare payments for services furnished at provider-based facilities and may increase beneficiaries’ coinsurance liabilities. In 2011, the Medicare Payment Advisory Commission (MedPAC) expressed concerns about the financial incentives presented by provider-based status and stated that Medicare should seek to pay similar amounts for similar services.

The goal is to make this payment system consistent across the board. This work is in progress FY 2014.

NEW ON THE LIST: Comparison of Provider-Based and Free-Standing Clinics

In the area of Policies and Practices the OIG will review and compare Medicare payments for physician office visits in provider-based and free-standing clinics to determine the difference in payments made to the clinics for similar procedures.  The potential impact on the Medicare program of hospitals’ claiming provider-based status for such facilities will also be assessed.

Context—Provider-based facilities often receive higher payments for some services than do freestanding clinics. The requirements to be met for a facility to be treated as a provider-based facility are at 42 CFR § 413.65(d). The expected issue date is FY 2014.

Additionally, the OIG will be looking at Hospital billing and payments for inpatient claims for mechanical ventilation.  Work is in progress now and the expected issue date is CY 2015. Selected inpatient and outpatient billing requirements and payments are being looked at to identify compliance and possible overpayments.

These are just a few of the areas that are being looked at by the OIG for CY 2014. For more information on the OIG Work Plan visit


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