One-day stays loom as OIG’s next national initiative

Several government agencies are involved in the growing number of investigations

In an effort to recoup billions of dollars it claims were improperly paid for unnecessary admissions, the Health and Human Services’ Office of Inspector General (OIG) is busy reviewing and contesting prior-year claims for one-day hospital stays in various states. Health care attorney Linda Baumann of the law firm Reed Smith in Washington, DC, says these investigations are looking at claims dating back as far as 1992 and show all the trademarks of a national initiative.

While the initiative has never formally been designated as a "national project," Baumann points out that the $1 billion that Medicare reportedly spends each year on unnecessary hospitalizations far exceeds the amount spent on DRG upcoding.

Former OIG attorney Julie Kass, now with Ober Kaler in Baltimore, points out that the OIG has listed "one-day hospital stays" as a top priority in its Work Plan for the past several years. According to its most recent Work Plan, approximately 10% of all Medicare patients admitted to hospitals are released the following day.

Despite the relatively low visibility of the government’s investigations into one-day stays, Baumann says there are numerous signs the government is investigating this issue at hospitals nationwide. She says that makes it critical for hospitals to take proactive steps. 

Like most national investigations, this one appears at the outset to be centered in several states. Many New Jersey hospitals have been contacted by government agents investigating this issue, and several hospitals in that state already have settled False Claims Act cases for amounts ranging from $450,000 to more than $2 million. Numerous other hospitals currently are in negotiation with the OIG and the Department of Justice, Baumann reports.

To date, these investigations generally have proceeded at a fairly slow pace, often beginning when a midlevel manager receives a request for approximately 30 records from an OIG investigator, Baumann says. "While not denominated as such, the records are fairly readily identifiable as those involving one-day stays," she reports.

Baumann says the hospital may receive further additional correspondence from the OIG several months later, indicating the hospital’s error rate on the sample, the total number of one-day stay cases for a designated time period, and an extrapolated amount of damages for this time period based on the error rate identified.

"In some instances, the error rate cited by the OIG for these one-day stays has been as high as 80% or 90%," Baumann reports. Nevertheless, she says OIG agents typically have proceeded in a "low-key" manner, often giving hospitals several months to prepare their response and rarely mentioning potential liability under the False Claims Act initially.

Hospitals should not assume there is no risk of exposure. After the error rate is calculated, the U.S. Attorneys Office typically is brought in to start discussing False Claims Act liability. Baumann says reviews of the one-day stay issue by the intermediaries and peer review organizations (PROs) appear to be operating concurrently. However, these investigations appear to be focused more on current claims.

According to Baumann, hospitals may receive a request for records from the U.S. Attorneys Office, the PRO, or both, and will be asked to return any overpayments identified. While there may be no further action taken, she says there is always the possibility that the intermediary or PRO will contact the OIG or other enforcement agency if the number of errors or volume of damages is sufficiently large or if a suspect pattern or other questionable activity is identified.

Baumann says that, while PROs do seem more focused on current claims, if a significant error rate is identified, the potential for review of prior-year claims still exists. She adds that the PROs became particularly active in this area when their Sixth Scope of Work included one-day stays as part of the Payment Error Protection Program and indicated that the PRO’s performance was to be evaluated, in part, on the reduction of payment errors within their jurisdiction.