Medicare made an estimated $190 million in improper payments to acute-care hospitals for outpatient hospice services between 2017 and 2021.

An audit by the U.S. Department of Health and Human Services Office of the Inspector General (OIG) set out to determine whether Medicare payments to acute-care hospitals for outpatient services provided to hospice enrollees complied with Medicare requirements. OIG found that 70% of those payments were not compliant.

“Our medical reviewer found that Medicare paid acute-care hospitals for outpatient services that palliated or managed hospice enrollees’ terminal illnesses and related conditions,” the OIG report stated. “These services were already covered as part of the hospices’ per diem payments and should have been provided directly by the hospices or under arrangements between the hospices and acute-care hospitals.”

The payment discrepancies occurred for several reasons across the board. For one, OIG found that prepayment edit processes were not properly designed. Most acute-care hospitals reviewed only whether outpatient services palliated or managed terminal illnesses, not related conditions. It also found that Medicare guidance lacks certain details that could aid compliance. Medicare contractors also often did not conduct prepayment or postpayment reviews.

In addition to the $190.1 million in improper payments to providers, Medicare beneficiaries could have saved $43.6 million in deductibles and co-insurance that may have been improperly collected, according to OIG.

A prior OIG audit found that Medicare Part B improperly paid suppliers for durable medical equipment, prosthetics, orthotics and supplies provided to hospice enrollees. This prompted OIG to look deeper into hospice services provided by hospitals.

For the audit, the agency pulled a stratified random sample of 100 outpatient service line items, which it submitted to independent medical reviewer contractors for assessment.

OIG made six recommendations to the U.S. Centers for Medicare & Medicaid Services (CMS) to address these issues:

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 [State Operations Manual] (chapter 11, section 50), and in other CMS or [Medicare Administrative Contractor (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 postpayment reviews of acute-care hospital claims for outpatient services provided to hospice enrollees and billed with condition code 07.

In comments on the report, CMS concurred with five of the recommendations, the exception being the first on system edit processes.

“CMS stated that it has concerns about the feasibility and effectiveness of the type of modifications to the system edits described in our report,” the report indicated. “CMS stated that it is the hospice’s responsibility to identify an individual’s terminal illness and related conditions upon election of the hospice benefit. CMS also stated that determining whether outpatient services are related to an individual’s terminal illness and related conditions requires clinical judgment and is best suited for complex medical review.”