OIG tell HCFA to audit 3 DRGs for upcoding abuse

A new federal study reveals a widespread pattern of abuse for DRGs 14, 79, and 416

A new Office of the Inspector General report chastizing the Health Care Financing Administration for its laxity in weeding out hospital upcoding has prompted HCFA to step up its practice of routinely analyzing claims for fraud and looking at specific DRGs. If your facility’s claims for these DRGs fall outside certain parameters, expect an HCFA audit. And HCFA won’t be the only one looking for patterns; the agency is putting heat on Peer Review Organizations to do the same.

The DRGs in question are DRG 79, the infamous pneumonia code that federal investigators are already scrutinizing; DRG 416, a septicemia code; and DRG 14, a code for specific cerebrovascular disorders. A study of billings for those DRGs show upcoding as high as 37%, but virtually no downcoding, according to the OIG. Federal investigators view the disparity as clear evidence that coding is being fudged. OIG is searching for more DRGs that it suspects are being upcoded (see related story, page 3).

And if the government is paying attention to these DRGs, you’d better pay attention to them as well, says Ron Gaasch, compliance officer at California-based Community Hospital of the Monterey Peninsula. His audits — monthly for internal checks and quarterly for the external audit — focus on hot buttons such as DRGs named as problems in the press and by OIG. At the least, carefully auditing your DRGs will not only save you legal hassles, but also save you money, notes Gaasch. Audits that reveal downcoding enable hospitals to get money they’re entitled to.

In this case, the potentially troublesome DRG trio were cited in a OIG memorandum to HCFA that raises a disturbing question: how can HCFA come down on hospitals for upcoding if it doesn’t even bother to check its own data to identify problem coding?

OIG singles out HCFA’s neglect of its Clinical Data Abstraction Centers, which are two specialized contractors who validate DRGs by examining an annual sample of 20,000 Medicare claims. The CDACs submit a monthly report to HCFA’s Office of Clinical Standards and Quality. "However, we found that HCFA performs no routine, ongoing analysis of CDAC data," says the OIG memo. Nor has HCFA given any instructions to Peer Review Organizations on using CDAC data for DRG oversight.

Perhaps more important, HCFA doesn’t take advantage of a wealth of "clinical, demographic, and administrative data that form the underlying basis of the over 10 million DRG-based claims each year," according to the memo. (HCFA can peruse data on diagnoses, cost reports, admissions and discharges.) HCFA hasn’t asked PROs to do so, either, even though they get complete inpatient billing data from HCFA. "In fact, HCFA staff told us that the PROs were instructed not to do coding projects’ within their current contract," says OIG. About the only time that PROs analyze DRG data is when they’re called for by an OIG investigation.

The consequences are severe, as OIG pointed out in a report last year of commercial software used to detect upcoding. While some hospitals had rates of upcoding that were more or less equal to their downcoding rates, others upcoded twice as many claims than were downcoded. In one sample, some hospitals had an 11% upcoding rate and a 5.1% downcoding rate, versus 5.2% and 3.9% for others. Those disparities "suggest intentional abuse of the DRG system by some providers," OIG believes. Even if a hospital isn’t upcoding, having DRG outliers means you can expect scrutiny and a demand for documentation to justify the anomalies.

As usual, HCFA says it agrees with OIG’s recommendation that it routinely monitor hospital billing and clinical data for upcoding. Some of the proposed remedies HCFA is working on include requiring PROs to detect payment errors, hiring a contractor to perform statistical analysis and creating a pilot program in which a fiscal intermediary will use data from PROs and CDACs to identify problems and refer them to law enforcement.

That will be a departure for PROs that are more familiar with medical review than fraud-fighting, says Andrea Goldstein, vice-president for utilization review at IPRO, the New York PRO. While PROs are supposed to report suspected fraud to regulators, Goldstein says PROs would prefer a more cooperative "quality improvement" approach, in which the reviewers would discuss coding problems with hospitals.

In the meantime, Gaasch recommends hospitals keep a close eye on their DRGs. For example, you can audit a few physicians on a rotating basis during each audit.