OIG sets secret threshold for fraud investigations

Investigators remain wary of providers who seek to game the system’ with false claims

Whether your facility gets scooped up in a government fraud probe largely depends on a set of secret minimum thresholds the Office of the Inspector General says a provider must exceed before it will pursue a case against a hospital.

The catch is that OIG won't disclose where those thresholds are set. That's in keeping with OIG's traditional tight-lipped policy and its oft-repeated fear that disclosing investigative parameters will enable providers to game the system. That's a legitimate concern, admits Ivy Baer, an attorney for the American Association of Medical Colleges in Washington, DC. But at the same time, it would be "useful information" for providers to have, she adds.

OIG originally made the decision to set a monetary threshold or percentage error rate to determine which providers to go after back in June — around the same time the Department of Justice issued its False Claims Act guidance. (See "OIG, DOJ back down on use of False Claims Act," Compliance Hotline, June 15, 1998, p. 1.) The threshold decision was part of OIG's own "best practice" guidelines, which responded to criticism by some members of Congress about how national investigations were being handled.

In a briefing paper on OIG/DOJ national investigations, the agency took pains to reassure the hospital industry that only a small percentage of hospitals will be penalized. It also was careful to show that it's complying with its "best practices" pledge, which paralleled DOJ's promise to go easier on investigations.

But a compliance officer at a Midwestern non-profit health system isn't buying it. She says that while DOJ and OIG have done preliminary inquiries on lab unbundling in her area, she has not received a demand letter asking for payment. Neither, however, has she been told the investigation has been dropped, says the compliance officer, who asked for anonymity. "We've been waiting in limbo," she complains. "They could at least give us some closure."

Some hospitals under investigation for unbundling lab claims won't be getting closure, either. OIG notes that U.S. Attorneys were investigating hospitals before the new best practice guidelines were devised. The agency is attempting to standardize the language of the compliance provisions in settlement agreements.

Still, some providers are reaping the benefits of OIG's new guidelines. For example, OIG says that creating thresholds for its prospective payment system (PPS) transfer-discharge probe "resulted in a significant narrowing of our investigative focus. We have identified for investigation a small percentage of the 5,487 hospitals that between 1992 and 1997 had been identified as receiving potential overpayments."

The transfer-discharge hunt, which is just getting under way, focuses on hospitals that allegedly billed for patients as discharges even when they were transferred to another hospital. Hospitals that transfer patients get a smaller per diem rate for a patient's stay rather than the full DRG rate. OIG estimates there have been $185 million in potential overpayments between January 1992 and September 1997.

The OIG report, presented at a recent American Hospital Association conference, also presents tantalizing if cryptic hints about where OIG is headed. For example, while the agency is mum on the parameters for its investigation of pneumonia upcoding, it does say that they are based on the rate and volume of various billing codes used by hospitals. "It is significant to note that the establishment of parameters will result in this project focusing on those facilities that appear to have the most widespread coding problems," OIG notes.

Translation: Only those hospitals that are egregious outliers will be chatting with the local U.S. Attorney. However, a hospital that escapes a national investigation won't escape scot-free. OIG still will refer the institution to its local fiscal intermediary for collection of any overpayments.