Exceptionally Costly Services Exceed

Exceptionally Costly Services Exceed


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BACKGROUND: The Centers for Medicare and Medicaid Services (CMS) administers the Medicare program. CMS employs Medicare contractors, including Wisconsin Physicians Service (WPS), to process and pay hospital outpatient claims using the Fiscal Intermediary Shared System (FISS).

CMS implemented an outpatient prospective payment system (OPPS) for hospital outpatient services. Under the OPPS, Medicare pays for hospital outpatient services on a rate-per-service basis that varies according to the assigned ambulatory payment classification group. Under the OPPS, outlier payments are available when exceptionally costly services exceed established thresholds.

Common medical devices implanted during outpatient procedures include cardiac devices, joint replacement devices, and infusion pumps. Generally, a provider implants only one cardiac device during an outpatient surgical procedure. Under the OPPS, payments to hospitals for medical devices are “packaged” into the payments for the procedures to insert devices. Hospitals are required to report the number of device units and related charges accurately on their claims. The failure to report device units and related charges accurately could result in incorrect outlier payments.

Our audit covered $32,860 in Medicare outlier payments to hospitals for 14 claims for outpatient procedures that included the insertion of more than one of the same type of medical device. The 14 claims had dates of service during calendar years (CY) 2008 and 2009.

OBJECTIVE: Our objective was to determine whether Medicare paid hospitals correctly for outpatient claims processed by WPS that included procedures for the insertion of multiple units of the same type of medical device.

SUMMARY OF FINDINGS: Of the 14 claims that we reviewed, Medicare paid eight correctly for outpatient claims processed by WPS that included procedures for the insertion of multiple units of the same type of medical device. However, for the remaining six claims, Medicare did not pay hospitals correctly. These incorrect payments were due to hospitals overstating the number of units and related charges, resulting in excessive or unwarranted outlier payments.

For the six claims, WPS made overpayments to hospitals totaling $17,996. Incorrect payments occurred because hospitals had inadequate controls to ensure that they billed accurately for claims that included the insertion of medical devices. In addition, Medicare payment controls in the FISS were not always adequate to prevent or detect incorrect payments. (Department of Health and Human Services, Office of Inspector General, 2012, p. i)


Reflect on the information presented in this case study and answer the following questions:

  • As an executive for the WPS Insurance Corporation, recommend a proposal to the board of directors as a response from the Office of Inspector General (OIG).
  • Propose what WPS could do with CMS to improve the process.
  • Discuss how this situation could be different if it involved a commercial payer rather than Medicare.

part 2 


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WHY WE DID THIS STUDY: From 2008–2012, we conducted a series of studies about hospital adverse events, defined as harm resulting from medical care. This work included a congressionally mandated study to determine a national incidence rate for adverse events in hospitals. As part of this work, we developed methods to identify adverse events, determine the extent to which events are preventable, and measure the cost of events to the Medicare program. This study continues that work by evaluating post-acute care provided in skilled nursing facilities (SNF).

SNF post-acute care is intended to help beneficiaries improve health and functioning following a hospitalization and is second only to hospital care among inpatient costs to Medicare. Although various health care stakeholders have in recent years paid substantial attention to patient safety in hospitals, less is known about resident safety in skilled nursing facilities (SNFs).

HOW WE DID THIS STUDY: This study estimates the national incidence rate, preventability, and cost of adverse events in SNFs by using a two-stage medical record review to identify events for a sample of 653 Medicare beneficiaries discharged from hospitals to SNFs for post-acute care. Sample beneficiaries had SNF stays of 35 days or less.

WHAT WE FOUND: An estimated 22 percent of Medicare beneficiaries experienced adverse events during their SNF stays. An additional 11 percent of Medicare beneficiaries experienced temporary harm events during their SNF stays. Physician reviewers determined that 59 percent of these adverse events and temporary harm events were clearly or likely preventable. They attributed much of the preventable harm to substandard treatment, inadequate resident monitoring, and failure or delay of necessary care. Over half of the residents who experienced harm returned to a hospital for treatment, with an estimated cost to Medicare of $208 million in August 2011. This equates to $2.8 billion spent on hospital treatment for harm caused in SNFs in FY 2011. (Department of Health and Human Services, Office of Inspector General, 2014b, Executive summary, paras. 1–3)


For this case study address the following:

  • Summarize on the information presented in this case study.
  • Then, placing yourself in the position of the nursing home administrator, describe what would you expect CMS to determine SNFs to do as a result of the findings.

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