On December 12, 2019, OIG released a report finding that CMS made an estimated $94 million in incorrect Medicare incentive payments to acute-care hospitals for using electronic health records (EHRs) over an audit period from January 1, 2013, through September 30, 2017. Based on its audit findings, OIG estimated that CMS made incorrect net incentive payments of $93.6 million, or less than one percent of the $10.8 billion in total EHR incentive payments CMS made to acute-care hospitals during the audit period.

The Health Information Technology for Economic and Clinical Health Act (HITECH Act) established the Medicare EHR incentive program in 2009 to promote the adoption of EHRs and to improve healthcare quality, safety, and efficiency through the promotion of health information technology and electronic health information exchange. The EHR incentive program provides Medicare incentive payments to acute care and critical access hospitals that demonstrate “meaningful use” of certified EHR technology. As of September 30, 2017, Medicare had made approximately $15.2 billion in EHR incentive payments to eligible hospitals.

To determine whether CMS made EHR incentive payments to acute-care hospitals in accordance with Federal requirements, OIG conducted an audit covering $10.8 billion in 8,297 Medicare EHR net incentive payments made to acute-care hospitals from January 1, 2013, through September 30, 2017. OIG selected a statistical sample of 99 net incentive payments (totaling $152.2 million), of which 53 were final and 46 were non-final payments. OIG noted that a separate OIG audit would focus on Medicare EHR incentive payments made to critical-access hospitals.

OIG’s report found that CMS did not always make Medicare EHR incentive payments to acute-care hospitals in accordance with Federal requirements. Specifically, of the 99 net incentive payments sampled, OIG found that 50 net incentive payments were incorrect, totaling $1.3 million, or less than one percent of the $152.2 million in payments reviewed. OIG found that the incorrect net incentive payments occurred because (1) the Medicare administrative contractors (MACs) did not review the supporting documentation for all hospitals to identify errors in the hospitals’ cost-report numbers used to calculate the incentive payments; and (2) CMS did not include labor and delivery services in the incentive payment calculations, resulting in inflated incentive payments to hospitals.

OIG’s report made the following recommendations to CMS to address the 50 incorrect net incentive payments identified in OIG’s sample:

(1) that CMS recover from acute-care hospitals, in accordance with CMS policies, the portion of the $1.3 million in incorrect payments within the reopening period; and

(2) for the remaining portion of the $1.3 million outside of the reopening and recovery periods, that CMS notify the acute-care hospitals associated with the incorrect payments so that those hospitals can exercise reasonable diligence to investigate and return any identified similar incorrect payments in accordance with the 60-day rule.

To attempt recovery of the $94 million in estimated incorrect incentive payments made during the audit period, and to ensure that all final and non-final payments made after the audit period are correct, OIG made the following additional recommendations to CMS:

(3) that CMS instruct the MACs to review all hospitals’ supporting documentation to identify errors in the hospitals’ cost-report numbers used to calculate the incentive payments, including supporting documentation for labor and delivery inpatient bed-days for cost reports with reporting periods beginning on or after October 1, 2013; and

(4) that CMS revise the incentive payment calculations to include labor and delivery inpatient bed-days reported on line 32 in column 8 of Worksheet S-3, part I, of hospitals’ Medicare cost reports for all incentive payments that were calculated using cost reports with reporting periods beginning on or after October 1, 2013.

OIG’s report indicated that CMS concurred with its recommendations and described actions that it planned to take to address OIG’s recommendations. Regarding OIG’s first recommendation, CMS stated that it considers only final payments to be the payments of record upon which recoupment should be initiated and would use OIG’s findings to ask the MACs to make corrections to the impacted cost reports used for calculating non-final net incentive payments. Regarding OIG’s third and fourth recommendations, CMS stated that it concurred with these recommendations to the extent they apply to non-final payments.

After reviewing CMS’s comments, OIG maintained that its findings and recommendations were valid. Regarding its first recommendation, OIG responded that whether CMS initiates recoupment on final payments or asks the MACs to adjust cost reports for non-final payments, these actions should recover incorrect Medicare EHR incentive payments to acute-care hospitals for both final and non-final payments. Regarding its third and fourth recommendations, OIG responded that CMS should implement both of these recommendations for final and non-final incentive payments, noting that 63 percent of the total overpayments OIG identified were final payments.

A copy of OIG’s report is available here.