Hospital Inpatient Fraud
It is when hospitals knowingly fail to be the medical necessity gatekeepers of their own hospital doors that Government Healthcare Programs such as Medicare and Medicaid incur unnecessary costs, and patients are put in serious risk of morbidity. The False Claims Act is also often violated.
Admission of patients when there is a lack of medical necessity is now one of the leading areas of healthcare fraud in the Medicare system. While it is the physician who determines and documents medical necessity, it is the hospital that must verify that the medical records support the determination of the physicians who are admitting patients to inpatient status and observation status in its facility and that the documentation is reflective of the patients’ severity. The Office of Inspector General has made this clear. In OIG Compliance Program Guidance for Hospitals (February 1998), the OIG stated that:
… the OIG recognizes that licensed health care professionals must be able to order any services that are appropriate for the treatment of their patients. However, Medicare and other government and private health care plans will only pay for those services that meet appropriate medical necessity standards (in the case of Medicare, i.e., “reasonable and necessary” services). Providers may not bill for services that do not meet the applicable standards. The hospital is in a unique position to deliver this information to the health care professionals on its staff. Upon request, a hospital should be able to provide documentation, such as patients’ medical records and physicians’ orders, to support the medical necessity of a service that the hospital has provided. The compliance officer should ensure that a clear, comprehensive summary of the “medical necessity” definitions and rules of the various government and private plans is prepared and disseminated appropriately.
Guidance at p. 15.
The United States has routinely intervened in qui tam cases and/or otherwise recouped monies based upon lack of medical necessity for either inpatient or observation services. For example, in December 2007, St. Josephs Hospital in Atlanta, Georgia agreed to pay $26 million to settle allegations concerning lack of medical necessity for certain inpatient care. The hospital falsely claimed Medicare reimbursement for inpatient admissions that were in fact, less costly outpatient visits. On July 1, 2009, DOJ announced that Yale New Haven Hospital had notified the OIG and agreed to enter into a civil settlement to pay nearly $900,000 to resolve allegations that it billed the Medicare program for medically unnecessary Gamma Knife procedures, admitting the patients for overnight stays which were not medically necessary. Upon information and belief, the Department of Justice is conducting a nationwide investigation of hospitals around the country to determine whether their Medicare claims for kyphoplasty are improper when billed as an inpatient procedure instead of an outpatient service.
Of concern to providers and on the radar screen are medical necessity determinations by utilization review of hospitals. Instrumental in the review determination before a fraud investigation ensues are Recovery Auditor Contractors( RACs). Section 302 of the Tax Relief and Health Care Act of 2006 requires the Secretary of the Department of Health and Human Services (the Secretary) to utilize RACs under the Medicare Integrity Program to identify underpayments and overpayments and recoup overpayments under the Medicare program associated with services for which payment is made under part A or B of title XVIII of the Social Security Act. RAC Auditors detect and correct past improper payments, and many of the audits have focused on inpatient medical necessity. States are required to establish programs to contract with one or more Medicaid RACs for the purpose of identifying underpayments and recouping overpayments under the State plan and any waiver of the State plan with respect to all services for which payment is made to any entity under such plan or waiver. Further, the statute requires States to establish programs to contract with Medicaid RACs in a manner consistent with State law, and generally in the same manner as the Secretary contracts with Medicare RACs.