Increased Enforcement Activity Expected Relating to Healthcare Provider Billing Upcoding

Nelson Mullins Riley & Scarborough LLP
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Nelson Mullins Riley & Scarborough LLP

A pair of recent reports issued by the Health and Human Services Office of Inspector General (“OIG”) and Cotiviti, a Centers for Medicare and Medicaid Services (“CMS”) Recovery Audit Contractor (“RAC”), indicate a resumed regulatory focus on hospital and physician practice upcoding as government enforcement priorities expand beyond COVID-specific issues.

Specifically, OIG found a significant increase in the percentage of highest severity hospital inpatient stays in recent years as determined by the Medicare Severity Diagnosis Related Group ("MS-DRG") identified on claims. The report indicates that some stays billed at the highest MS-DRG could be the result of inappropriate billing and upcoding of severity. Analyzing inpatient hospital stays from FY 2014 through FY 2019, the number of inpatient stays at the highest severity level increased almost 20 percent, ultimately accounting for nearly half of all Medicare spending on inpatient hospital stays.[1] Accordingly, the number of stays billed at lower severity levels decreased while the average length of hospital stays remained the same. OIG stated that this data trend, combined with identifiable outliers, evidences that inpatient stays are ripe for upcoding and merit examination.

Similarly, Cotiviti[2] examined Evaluation and Management (E/M) services billed by physicians and physician practices in the same time period and found a significant increase in high level E/M claims and a corresponding decrease in lower-level claims.[3] Cotiviti found that there is a “major likelihood of over-coding” given such an increase.

These reports signal that hospitals and physician practices can broadly expect to face enhanced, proactive scrutiny of level of care billing and coding. Significantly, these trends pre-date the COVID-19 pandemic and align with established enforcement priorities. The OIG and Cotiviti reports are an explicit invitation for CMS, Department of Justice (“DOJ”), RACs, and Uniform Program Integrity Contractors (“UPICs”) to undertake auditing and review of potential bad actors and to bring appropriate enforcement actions. RACs have the prerogative to initiate post-payment reviews, and DOJ has increasingly relied upon data mining to identify statistical outliers to instigate investigations. Cotiviti can be expected to make upcoding a priority in post-payment reviews.

As hospitals and physician practices update their compliance programs and set audit priorities for 2022, it is advisable to include audits relating to level of care billing and coding. Including these audits as a priority will allow providers to:

  • Identify troubling patterns early,
  • Critically review the available data,
  • Engage relevant experts, and
  • Proactively manage any known risk.

These activities will enhance the effectiveness of a provider’s compliance program, adding credibility to an important function that the government finds critically important.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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