OIG cites overpayments after consolidation

According to a report issued by the Health and Human Services’ Office of Inspector General (OIG) Aug. 6, 15 hospitals that technically ceased to exist after consolidation with another hospital were paid for 1,118 discharges that should not have been billed to Medicare.

Katie McDermott, of the law firm Blank Rome in Philadelphia, says the OIG is highlighting a risk issue that was not immediately foreseen in the merger context. "It is a compliance issue, but it is not inherently a fraud and abuse issue," McDermott says. "Hospitals should be alert to making sure that once they have integrated merged entities, they are addressing any reimbursement issues that can arise."

Under Medicare rules, a consolidation of hospitals is considered a change of ownership. After a consolidation, only the surviving hospital is entitled to Medicare payments because it was the legal owner on the date patients were discharged.

The OIG identified overpayments of more than $4.5 million for six of the 15 hospitals and says it will make referrals to fiscal intermediaries for recovery. Intermediaries also have recovered nearly $300,000 related to two consolidations and have initiated recovery actions related to two additional consolidations. In addition, the Department of Justice has reached settlements totaling nearly $3.2 million related to five consolidations.

The Centers for Medicare & Medicaid Services (CMS) concurred with the OIG’s recommendation to review current claim, cost report, audit, and change of ownership instructions to determine whether revisions or additions are necessary to clearly address proper claim filing and cost treatment when a change of ownership or consolidation occurs.