Administrative Memos

200306

FROM: Theodore O. Will, Chief Executive Officer
DATE: Aug 18, 2003
SUBJECT: Update Regarding Inpatient Payment Errors In Medicare Prospective Payment System (PPS) Hospitals
IPRO CONTACTS:

Kathy Terry, Ph.D., Senior Director, Medicare/Federal Health Care Assessment, 516-326-7767, Ext. 364

The Centers for Medicare and Medicaid Services (CMS) recently released the 7th Scope of Work (SOW) baseline payment error rate percentages. The baseline percentage for New York State (NYS) is significantly higher than the national; specifically, NY is 8.26% +/- 1.44 (absolute dollar error rate followed by the 1.5 standard deviation) compared to a national rate of 4.1%. The National baseline payment error rate percentages ranged from 1.19% to 8.26%, with NYS having the highest payment error rate. Neighboring state error rates ranged from 4% to 6%. New Jersey, Connecticut, and Pennsylvania had error rates of 5%, 6%, and 4%, respectively.¹

To assist hospitals with reducing the outlier NYS payment error rate, IPRO has scheduled meetings in our Lake Success Corporate office to discuss root cause analyses for hospital payment errors. While these meetings are open to all NYS hospitals, select outlier hospitals will be required to attend. In addition, outlier hospitals will be required to submit a performance improvement plan. At a minimum, the plan must include:

A hospital-specific payment error root cause analysis;
the area(s) for improvement identified by this analysis;
the methodology for measuring improvement;
the methodology that will be utilized to assure that the improvement will be sustained.

Enclosed please find a hospital-specific report (Attachment I) that details the medical records that have been denied along with information on the monies recouped for these selected cases for your hospital. Please note that these records have proceeded through the full case review process including hospital notification and an opportunity for discussion/response. The enclosed report is distributed to enable hospitals to identify patterns of payment error issues within their facility in addition to highlighting the costliness of payment errors for your facility. Attachment II provides details on the Payment Error Root Cause Analysis/Performance Improvement meetings. This attachment will also specify if your hospital must attend one of these meetings. As stated previously all hospitals are welcome to participate even if you are not required to do so.

HOSPITAL FOLLOW-UP:

Outlier hospitals are required to register in order to attend one of the scheduled IPRO training in payment error root cause analysis.
For non-outlier hospitals, review attached hospital-specific report to identify patterns of payment errors. Perform root cause analyses to identify (and implement) opportunities for improvements (you may wish to register for the IPRO training in payment error root cause analysis)
Identify opportunities for improvement in medical record submission process to eliminate future technical denials.
Submit cases identified as technical denials in your hospital-specific report. A copy of IPRO?s case-specific technical denial notice should be affixed as a cover letter to the medical record submitted. (Note: When the case-specific technical denial notice cannot be located, use the cover letter provided as Attachment III and affix a copy to each medical record provided.) If you have already submitted a medical record to reopen the Technical Denial, DO NOT RESUBMIT.

Should you have any questions, feel free to contact Dr. Kathy Terry at 516-326-7767, extension 364.

¹Under the Hospital Payment Monitoring Program (HPMP) a small, statewide pure random sample of medical records is requested for review each month. These medical records represent acute inpatient discharges that have been billed in that current month. The CMS through the Clinical Data Abstraction Centers (CDACs) and IPRO, request these records for medical necessity and coding review to estimate a payment error rate for New York State (NYS). Records that are not submitted within 30 days are issued technical denials and all monies are recouped through the Fiscal Intermediary. Reviewed records that do not have sufficient documentation to support an inpatient stay are denied. Medical records that do not have sufficient information to support the billed DRG are recoded to reflect the appropriate DRG, which is supported by the medical record.

The CMS HPMP sample for NYS from fiscal year (FY) 2000 to date has included the review of 3,627 cases. There have been 349 errors identified resulting in a 9.6% (cases) error rate. These errors include cases denied in the 6th Scope of Work (SOW) under the Payment Error Prevention Program (PEPP) and in the current 7th SOW Hospital Payment Monitoring Program (HPMP). There is an associated fiscal recoupment of 1.8 million dollars in payment errors. The majority of this recoupment was due to DRG/coding errors ($999,632) with admission denials following at $720,767. Technical denials totaled $106,631 and billing errors comprised $10,710.