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Key Take-aways: 

• Hospitals that bill a high percentage of stays at the highest severity level, and those that have a high percentage of high severity stays based on a single diagnosis, should expect a higher level of scrutiny regarding their billing practices. 
• It is expected that the OIG will continue to recommend that CMS conduct targeted reviews to identify stays involving upcoding and hospitals with patterns of upcoding.

The Office of the Inspector General (OIG) has issued a report finding that hospitals are increasingly billing for in-patient stays at the highest severity (most expensive) level. The report found that the number of stays at the highest severity level increased almost 20% from 2014 through 2019, highlighting concern that hospital stays at the highest severity level are vulnerable to inappropriate billing practices, such as upcoding. Based on these findings the OIG recommends that the Centers for Medicare & Medicaid Services (CMS) conduct targeted reviews of Medicare Severity Diagnosis Related Groups (MS-DRGs) and stays that are vulnerable to upcoding. The COVID-19 pandemic had no impact on these numbers, as these findings are based on data relating to “pre-pandemic” hospital care. As a result of this report, hospitals with a history of billing comparatively higher percentages of hospital stays at the higher severity level should expect increased government scrutiny regarding their billing practices.   

The report analyzed Medicare Part A claims for in-patient hospital stays from 2014 through 2019. It identified trends in hospital billing and Medicare payments for stays at the highest severity level as determined by the MS-DRG. The OIG found:

1. the number of stays at the highest severity level increased almost 20% from 2014 through 2019; and,
2. the average length of stay decreased for stays at the highest severity level, while the average length of all stays remained largely the same.   

Although the report acknowledged that shorter stays for care at the highest severity level are not inherently problematic, it expressed a couple of concerns:

1. the increasing number of short yet high severity stays raises questions about the accuracy of complications billed by the hospital; and,
2. 54% of the stays billed at the highest severity rate in 2019 reached that level based on just one diagnosis, even though most stays involve multiple diagnoses. The specific concern is that if that one high severity diagnosis was incorrect, the higher payment would not have been warranted. 

OIG’s report did not find uniformity across the hospitals involved in the study. Overall, the report found almost 30% of stays at the highest severity level were particularly short, 5% of hospitals billed between 54% and 100% of their stays at the highest severity level with a comparatively short length of stay. With this finding in mind, those hospitals that bill a high percentage of stays at the highest level, and those that have a high percentage of high severity stays based on a single diagnosis, should expect a higher level of scrutiny regarding their billing practices. 

Interestingly, CMS did not concur in OIG’s recommendation that CMS conduct targeted reviews of MS-DRGs and stays that are vulnerable to upcoding. CMS did acknowledge, however, that there is more work to be done to determine conclusively which changes in billing are attributable to upcoding. It is expected that OIG will continue to recommend that CMS conduct targeted reviews to identify stays involving upcoding and hospitals with patterns of upcoding.

The full report:  Trend Toward More Expensive Inpatient Hospital Stays in Medicare Emerged Before COVID-19 and Warrants Further Scrutiny can be found here.