The Office of the Inspector General for the Department of Health and Human Services(“OIG”) responded to concerns expressed by the American Hospital Association (“AHA”) regarding the OIG’s hospital compliance reviews, particularly regarding Medicare Part A.  In a letter released publicly on January 22, 2015, the OIG defended its practices, describing the review of Medicare Part A payments as essential to ensuring that federal funds are spent appropriately.

The OIG began performing hospital compliance reviews as part of its fiscal year 2012 work plan. In a November 2014 letter, the AHA raised four main concerns about the reviews: (1) the OIG required a written physician order for inpatient admission (when there is no such requirement by CMS); (2) the OIG determined that canceled surgeries could not be billed as an inpatient stay without any legal basis; (3) the OIG ignored the possibility of offsetting of Medicare Part A payments through Part B payments; and (4) the OIG inappropriately reviewed claims beyond the 4-year statute of limitations used by CMS.

The AHA argued that the OIG unfairly extrapolated data on overpayment amounts based on these flawed interpretations of Medicare rules, resulting in overestimated overpayment amounts and leaving hospitals with a long and costly path for appeal. The AHA demanded that the OIG end extrapolating the audit findings.

In its response, the OIG defended its practices, including the correct application of Medicare requirements and utilization of valid methodologies to estimate overpayments. The OIG stated that it will continue to conduct reviews in the same manner. However, the OIG announced that it has ended reviews of inpatient short stay claims after October 1, 2013, in light of the changing rules in this area. While the OIG looks forward to “continuing productive dialogue” on the topics raised in the AHA’s letter, hospitals may look forward to the OIG completing its reviews in progress, including the review of short-stay claims prior to October 1, 2013, without significant changes in methodology. Hospitals are well-advised to review ongoing compliance efforts, both to avoid errors and to better prepare for OIG and other reviews.