OIG tells HCFA to scrutinize hospital readmissions

The Department of Health and Human Services (HHS) Office of Inspector General (OIG) is targeting overpayments for hospital readmissions and urging the Health Care Financing Administration (HCFA) to use peer review organizations (PROs) as a weapon to correct the problem.

HHS Inspector General (IG) June Gibbs Brown reignited the debate over the appropriate role of PROs when she issued a report to HCFA May 5 contending that hospital readmissions under the Medicare prospective payment system (PPS) are "a serious quality of care issue" that must be closely monitored by the agency. "The results of our review," Brown added, "demonstrate that HCFA needs to utilize PROs to more actively monitor hospital readmissions to reduce the risk of inappropriate Medicare payments as well as the risk of premature discharges."

HCFA Administrator Nancy-Ann DeParle agrees, saying that under the agency’s performance-based contracting, PROs will be judged by how successful they are in reaching payment error reduction goals.

The IG’s report breathed new life into the dormant debate over the appropriate role of PROs. In May 1998, the OIG issued a directive that tasked PROs with detecting billing errors and reporting those errors to the OIG and other enforcement agencies. But in the face of heavy criticism from the American Medical Association and others, the OIG backed off.

In the report, the OIG recommended that HCFA reinstate hospital readmission reviews under the Payment Error Prevention Program (PEPP) directive and also monitor the fiscal intermediaries’ recovery of the $178,741 in improper Medicare payments made in 1996.

DeParle says the recommendation will "will fit in well" with HCFA’s current proposal for the PROs next contract. "We are developing a performance-based contract for PEPP and the PROs will be able to consider readmission reviews as part of reaching their goals," she reports.

Ivy Baer, an attorney for the American Association of Medical Colleges in Washington, DC, says, "It is a concern when you start using a PRO as a reviewer and a watchdog. I don’t think that was the original intent, and I don’t think that is the way providers generally view them."

Mary Grealy, Washington, DC-based legal counsel to the Chicago-based American Hospital Association, echoes that sentiment and criticizes the limited scope of the study. "The pattern is that these reports look at a very limited sample, then extrapolate to come up with a number about how much money has been lost," she says. "The problem is, until you really dig into these things, you don’t know all the reasons a patient may have been discharged. Let’s face it, this is not an exact science."

The OIG’s report was based on a review of a random selection of 100 hospital readmissions across 18 states. It concluded that 29 of the readmissions were "inappropriate" and said the pricetag of those overpayments was $178,741. Using that number, the IG pegged the cost of inappropriate hospital readmissions in these states at roughly $22 million in 1996 and said nearly half of the errors were the result of premature discharges.

But DeParle hedges her bet by pointing out that while "a judicious review" of discharge patterns may prompt some PROs to conduct these reviews, in other cases they may not. She says that decision must be left to the discretion of the contractor.