More Audits in Our Future – And Government Infighting

As we often notice when new leadership takes over at a federal agency, there is seemingly nonstop news from the Centers for Medicare & Medicaid Services (CMS) lately. Of interest to this audience are two announcements of significant changes to audits. First, CMS announced that they are pulling the short-stay inpatient audits from Livanta and giving them back to the Medicare Administrative Contractors (MACs) as of Sept. 1. CMS gave absolutely no explanation as to why they did this, so that leaves me free to speculate.

When the Two-Midnight Rule was introduced in 2013, CMS assigned the MACs to perform the audits for all hospitals in their jurisdictions, and reports were commonly heard that they did a terrible job, not understanding how to count midnights or the mere concept of medical necessity. CMS heard from many about their poor performance and decided to let the Beneficiary and Family-Centered Care Quality Improvement Organizations (BFCC-QIOs) perform them, as if handling discharge appeals and quality-of-care complaints was not enough.

And Kepro and Livanta did their best. CMS then decided to consolidate the duties to one contractor, and Livanta won that contract and has been doing a very good job.

So, what did happen? Well, in June 2024, the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) released a report claiming that there are still billions of dollars of overpayments for short inpatient admissions that CMS was not addressing. With the new administration’s proclaimed renewed efforts to fight fraud, it seems CMS feels that the MACs may be better able to handle the volume of audits that seem to be in our future.

These audits will follow the Targeted Probe-and-Educate model, with data analysis used to select hospitals and then 20 to 40 claims reviewed, followed by education and repeat audits, if indicated. The big question is: will they start referring hospitals to the Recovery Audit Contractor (RAC), as the OIG requested?

Of course, I want to be optimistic and hope this goes well, but providers all over the country have spent the last 18 months teaching Medicare Advantage (MA) plans how to count midnights – so if we need to do it again with the MACs, it won’t be pretty.

Now, in that effort to fight fraud, CMS also announced increased audits of MA plan reporting of Hierarchal Condition Category (HCC) codes: the codes that determine the payment to MA plans from the Medicare Trust Fund. From the announcement, it appears that CMS is hiring 2,000 coders in the next three months to perform these audits, as opposed to contracting out the work as they do with every other audit. Are there 2,000 experienced HCC coders sitting around looking for work? Gotta wonder.

Finally, the OIG just released a report on payment for office visits on the same day as eye injections for macular degeneration. The story here was not the audit findings, but that, as usual, the OIG made recommendations to CMS to improve compliance. One recommendation was that CMS provide more education to providers on the billing of an office visit on the same day as an injection. In response to this recommendation, CMS indicated that they have already conducted extensive national education on this since 2018. They then asked the OIG to remove the recommendation. To that, the OIG responded by doubling down and stating that their audit showed that providers don’t know how to bill it properly. You just have to smile when two government agencies bicker publicly.