Compliance, CDI, and the False Claims Act: Connecting the Dots

EDITOR’S NOTE: Senior healthcare consultant Cheryl Ericson reported this story live today during Monitor Mondays. Ericson is the director of clinical documentation integrity (CDI) and utilization management (UM) for the Brundage Group

Let’s start with the False Claims Act, which allows the U.S. government to recover money when an individual or entity knowingly submits or causes to be submitted false or fraudulent claims for payment by the government. Why a CDI professional may be impacted by this Act is that the standard of “knowingly” includes a person who “acts in reckless disregard of the truth or falsity of the information . . . no proof of specific intent to defraud is required.” If you go to the Medicare Fee-for-Service (FFS) Compliance Program page on the CMS.gov website, it lists several Centers for Medicare & Medicaid Services (CMS) Compliance programs to educate and support Medicare providers in “understanding and applying” Medicare FFS policies. If the hospital compliance department is not monitoring these resources, it would be prudent for CDI leadership to do so.

The General Compliance Program Guide published by the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) states that “healthcare providers and other industry stakeholders should take proactive measures to ensure compliance with program rules, including regular reviews to keep billing and coding practices up-to date, as well as regular internal billing and coding audits. Even if an entity makes an innocent billing mistake, that entity still has an obligation to repay the money to the government.” The Guide further states that when a billing mistake or other non-compliance with Medicare rules leads to overpayment, it must be repaid to avoid False Claims Act liability.

Several years ago, I attended a conference where one of the keynote speakers was an assistant U.S. Attorney who said that technically, hospitals that fail to audit DRGs that were identified as outliers on their Program for Evaluating Payment Patterns Electronic Report (PEPPER) could be subject to the False Claims Act. If you happen to be in hospital leadership and have not reviewed your hospital’s PEPPER data, you can breathe a sigh of relief, because PEPPER was paused through the fall of 2024; however, I could not find evidence that it is being distributed again. The speaker’s point was that hospitals should be auditing claims that could be considered at high risk for fraud, as identified through CMS compliance efforts. Failure to do so could be considered willful ignorance if a hospital is later found by a CMS contractor to have a pattern of submitting claims that result in overpayment.

According to the OIG, a compliant program includes the following seven elements:

• Written policies and procedures;
• Compliance leadership and oversight;
• Training and education;
• Effective lines of communication with the compliance officer and disclosure program;
• Enforcing standards: consequences and incentives;
• Risk assessment, auditing, and monitoring; and
• Responding to detected offenses and developing corrective action initiatives.   

Among the common compliance risk areas that need to be addressed are billing, coding, and quality of care. CDI departments do not need to have each of these elements if they are present elsewhere within the hospital, but they should have policies, procedures, training, education, auditing, monitoring, and a corrective action plan, at a minimum. Unfortunately, I’ve worked with many hospitals that do not have these safeguards in place for CDI.

Hospitals are also advised to have monitoring techniques that identify variations from established baselines. However, it is often difficult to identify those baselines. This is where PEPPER data, once it is distributed again, can assist in some areas. Hospitals that have high Medicare FFS denial rates or unusual billing practices, as identified by the Medicare Administrative Contractor (MAC) through data analysis, may become part of the Targeted Probe-and-Educate (TPE) program. Through this program, the MAC reviews a sample of 20-40 claims to assess if Medicare rules and requirements are being met. The results of the audit are shared with the hospital, along with the offer of additional education to address any errors that were found, as well as ways to prevent future errors.

More often than not, hospitals will not have access to comparative data to know how they are performing compared to their peers, so it is also important to keep abreast of general guidance from the OIG, MACs, and other CMS resources. A 2021 OIG report titled “Trend Toward More Expensive Inpatient Hospital Stays in Medicare Emerged Before COVID-19 and Warrants Further Scrutiny” suggested CMS conducted targeted reviews of MS-DRGs and hospital stays that are vulnerable to upcoding, defined as claims billed at the highest severity level with short stays or only one major complication/comorbidity (MCC). Specifically, the data revealed that stays at the highest severity level (e.g., MS-DRGs that are impacted by the presence of a MCC) increased prior to COVID, while the average length of stay decreased. In other words, there were more patients in the highest severity categories, but they had shorter hospital stays. It is unknown if the recent activities of the current administration will halt some of the current OIG Work Plan items that include an audit of claims with severe malnutrition.

Another source hospitals can use to identify potential claims that could be at risk of overpayment is the Comprehensive Error Rate Testing (CERT) findings. The CERT program reviews a statistically valid stratified random sample of Medicare FFS claims each year to determine if they were properly paid under Medicare coverage, coding, and payment rules. The 2024 findings were released last November. Hospitals should monitor the DRGs associated with improper payment and audit a sample of their claims to validate the accuracy of their documentation to support compliant coding practices. Compliance can be an intimidating topic, but there are simple steps that CDI leadership can take to validate that CDI practices are supporting compliant billing efforts. Leverage resources available from CMS to minimize the risk of willful ignorance, and proactively identify possible overpayments.