OIG Report Finds that the Medicare Program Improperly Paid Acute-Care Hospitals for Outpatient Services Provided to Hospice Enrollees

On November 12, 2024, OIG published a report concluding that the Medicare program overpaid acute-care hospitals an estimated $190 million over five years for outpatient services provided to hospice enrollees.

Audit Overview

OIG’s audit covered $283.7 million in Part B payments to acute-care hospitals for 1.3 million outpatient services billed with condition code 07 and provided to hospice enrollees during the audit period. OIG selected for review a stratified random sample consisting of 100 outpatient service line items. For each sample item, OIG submitted medical records to an independent medical reviewer contractor (medical reviewer) to assess whether the outpatient service palliated or managed the hospice enrollee’s terminal illness and related conditions.

OIG’s Audit Findings

Based on the audit sample, OIG estimated that Medicare could have saved $190.1 million for the audit period if payments had not been made to acute-care hospitals that provided outpatient services to hospice enrollees for services related to the palliation and management of the enrollees’ terminal illnesses and related conditions. OIG also estimated that enrollees could have saved $43.6 million in deductibles and coinsurance that may have been incorrectly collected from them or from someone on their behalf.

OIG’s Recommendations

OIG made six recommendations to CMS to prospectively address the issues identified:

1. Improve system edit processes to help reduce improper payments for outpatient services provided by acute-care hospitals to hospice enrollees.
2. Educate acute-care hospitals to understand that each hospice enrollee’s hospice election statement addendum is available on request, and educate hospices to provide the addendum if requested to help an acute-care hospital assess whether an outpatient service palliated or managed an enrollee’s terminal illness and related conditions.
3. Continue to educate hospices that they should be providing to enrollees virtually all necessary services that palliate or manage terminal illnesses and related conditions either directly or through arrangements.
4. Educate acute-care hospitals to analyze not only whether outpatient services palliated or managed enrollees’ terminal illnesses but also whether outpatient services palliated or managed a condition related to a terminal illness.
5. Clarify the language in the manual, and in other CMS or MAC guidance documents or educational initiatives, if necessary, to specifically mention “related conditions” so that the language is consistent with federal regulations and the Federal Register in stating that services not related to enrollees’ terminal illnesses and related conditions may be billed to Medicare with condition code 07.
6. Direct MACs or other appropriate contractors, such as Recovery Audit Contractors, to: (1) analyze Medicare claims data to identify acute-care hospitals that have aberrant billing patterns for condition code 07, and conduct Targeted Probe and Educate reviews of these acute-care hospitals; and (2) conduct prepayment or post-payment reviews of acute-care hospital claims for outpatient services provided to hospice enrollees and billed with condition code 07.

CMS’s Comments to OIG’s Recommendations

CMS concurred with all but the first recommendation, stating that it has concerns about the feasibility and effectiveness of the type of modifications to the system edits described in the report. After reviewing CMS’s comments, OIG refined its first recommendation by stating, “[i]mproving CMS’s system edit processes could help reduce improper payments going forward.”

A copy of OIG’s report is available here.