OIG Issues FY 2008 Work Plan

26 October 2007 Publication
Authors: Heidi A. Sorensen Lawrence W. Vernaglia Judith A. Waltz

Legal News: Health Care

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Action: On October 1, 2007, the Department of Health and Human Services, Office of Inspector General (OIG) issued its Work Plan for fiscal year 2008 (FY 2008), revealing areas targeted for audit, evaluation, and inspection in the upcoming fiscal year.

Impact: The FY 2008 Work Plan identifies areas of concern that the OIG perceives as critical to its mission to improve the Department of Health and Human Services’ programs and operations by protecting against fraud, waste, and abuse. Medicare providers and suppliers are encouraged to scrutinize the Work Plan to confirm their own compliance in the targeted areas.

Effective Date: Immediately.

The Work Plan for FY 2008 issued by the OIG on October 1, 2007, details areas targeted primarily by its Office of Audit Services and Office of Evaluations and Inspections. To a lesser extent, the Work Plan also details priorities of the OIG’s Office of Investigations and Office of Counsel.

In the preamble to the Work Plan, the OIG acknowledged the dynamic nature of its work plan process, and that Congress’ changing priorities, events such as Hurricane Katrina, and issues emerging in the health care industry have affected its process. In doing so, the OIG admits that some of the work it has planned for this upcoming year will be set aside while it addresses new priorities. Notwithstanding this disclaimer, the Work Plan remains a document that details many specific projects. Some of the priorities as reflected in the Work Plan include reviews of physicians’ relationships, oversight of the Medicare Part D program, appropriateness of Medicaid payments and state Medicaid administration issues, the durable medical equipment industry, and quality of care issues, particularly in long-term care settings.

As was the case with previous work plans, the 2008 Work Plan is organized by HHS program (Medicare, Medicaid, other Centers for Medicare and Medicaid Services (CMS) issues, Public Health Programs, Human Service Programs, and overarching department-wide issues), and by the type of provider within each category (for example, Medicare Hospitals, Medicare Part D Administration, Medicaid Long-Term and Community Care, and the National Institutes of Health). This newsletter summarizes some of the areas of the 2008 Work Plan that are likely to have a significant impact on the health care community. Providers and suppliers participating in federally funded health care programs as well as pharmaceutical and device manufacturers, are encouraged to carefully review the Work Plan to identify key areas of relevant to their activities.

Hospitals (Medicare)
As in past years, the Work Plan for 2008 covers a number of areas related to Medicare Hospitals. Some of the new areas include:

Long-Term Care Hospitals. The OIG continues its interest in long-term care hospitals (LTCHs) and the new issues include:

  • Long-Term Care Hospital Payments for Interrupted Stays. The OIG will review the special LTCH payment provisions that apply to interrupted stays at LTCHs. An interrupted stay occurs when a beneficiary is discharged from an LTCH to other facilities and then returns to the same LTCH within specified periods of time.
  • Long-Term Care Hospital Short-Stay Outliers. The OIG will review payments for LTCH discharges with lengths of stay well-below the average for the diagnosis related groups (DRGs), which are referred to as short-stay outliers (SSO). The Work Plan notes a significant increase in Medicare payments to LTCHs and larger base payments to LTCHs (as compared to acute care hospitals) under PPS. The OIG’s review will focus on the distribution of payment amounts for SSO cases and cases that only marginally exceed the SSO threshold.
  • Special Payment Provisions for Patients Who Are Transferred to Onsite Providers and Readmitted to Long-Term Care Hospitals. The OIG will review the application of special payment provisions for patients who were transferred to onsite providers and readmitted to LTCHs. Under 42 C.F.R. § 412.532, if an LTCH discharges patients to specified co-located providers and directly readmits more than five percent of the total number of its Medicare inpatients discharged from that setting, special payment provisions apply. The OIG will determine whether the special payment provisions were appropriately applied.
  • Special Payment Provisions for Long-Term Care Hospitals Discharging Beneficiaries to Co-Located or Satellite Providers. The OIG will review the application of special payment provisions for LTCHs discharging beneficiaries to co-located hospitals or satellite hospitals. Under 42 C.F.R. § 412.534, special payment provisions apply if an LTCH’s or LTCH satellite facility’s discharged Medicare inpatients that were admitted to the LTCH or satellite facility from the co-located hospital exceeds the applicable threshold specified in the regulations. In these situations, payments to an LTCH may be reduced. The OIG will determine whether the special payment provisions were appropriately applied.

Patient Care and Safety in Physician-Owned Specialty Hospitals. In 2007, the OIG conducted a review of the CMS oversight of physician-owned specialty hospitals. In 2008, the OIG will review indicators of patient care and safety in physician-owned specialty hospitals, and will also examine policies related to staffing requirements for specialty hospitals.

Areas of focus from previous years that also appear in the OIG’s 2008 Work Plan include:

Inpatient Prospective Payment System Wage Indices. The OIG will review hospital and Medicare controls over the accuracy of the hospital wage data used to calculate wage indices for the inpatient prospective payment system. Hospitals report data to CMS in order to properly calculate the wage index. The OIG has previously identified hundreds of millions of dollars in misreported wage data. In this review, the OIG will determine whether hospitals have complied with the Medicare wage data reporting requirements and determine the effect on the Medicare program of incorrect reimbursement caused by inaccurate wage data. The OIG also intends to examine the appropriateness of using hospital wage indices for other provider types, although the Work Plan does not identify those types.

Inpatient Payments for New Technologies. The OIG will review payments made to hospitals for “new” services and technologies. “New” medical services and technologies are defined by regulation, and a hospital may receive additional payment if the new service or technology is demonstrated to be otherwise inadequately paid under the DRG system. The OIG will determine whether hospitals have submitted claims in accordance with this criteria and were reimbursed appropriately for costs associated with the new devices and technologies.

Hospitals (Medicaid)
The Work Plan does not include a long list of initiatives with respect to Medicaid hospitals, but the OIG will be looking at several important areas, including Hospital Outlier Payments and Disproportionate Share Hospital Payments. Specific Medicaid DSH issues include a study of Hospital Eligibility for Disproportionate Share Hospital Payments. The OIG will also review state Medicaid programs to determine the magnitude of federal DSH funding being used to pay for services provided to individuals residing in institutions for mental diseases (States’ Use of Disproportionate Share Hospital Payments). In addition, the OIG will examine the threshold that hospitals must meet to qualify for Medicaid DSH payments and, if appropriate, recommend changes to the program (Medicaid Disproportionate Share Hospital Payment Distribution).

Home Health
The OIG is approaching homes health agencies’ (HHA) compliance not only from the perspective of traditional billing reviews, but also from the survey and certification vantage point. Perhaps reflecting the OIG’s increased interest in quality and operational issues, the agency is looking into “cyclical noncompliance” of HHAs with the conditions of participation as well as the data reflected on the CMS Home Health Compare Web site.

Now that HHAs are paid under prospective payment, a more traditional OIG study will review the accuracy of coding and claims for the Medicare Home Health Resource Groups (HHRGs) to determine if codes are supported by documentation in the medical records. The government is interested in the accuracy of HHRG assignment and any patterns of upcoding.

Skilled Nursing Facilities
There are few surprises in the OIG’s interests in Skilled Nursing Facilities (SNFs) in this year’s Work Plan. Consolidated billing and where SNFs submit claims for various other suppliers’ services rendered to the SNFs’ patients, is a continuing focus. While CMS has implemented some edits designed to identify consolidated billing errors, much is still dependent upon human interface. The study will build on prior work in this area.

Skilled Nursing Facility Cost Reports. Even though SNFs are now subject to prospective payment, the Medicare program still requires SNFs to submit cost reports in order to establish industry rates on a going-forward basis. It is understandable that SNFs with limited resources would not prioritize cost reporting because there is no reimbursement impact from these filings; however, this study reminds SNFs and other providers that the government still sees utility in collecting this data.

Accuracy of Coding for Resource Utilization Group (RUG) Claims. The OIG is undertaking a national review of Medicare claims submitted by SNFs to determine the accuracy of the complex RUGs documentation system.

Quality of Care and Corporate Compliance Programs in Nursing Homes With Corporate Integrity Agreements (CIAs). The OIG is turning its magnifying glass on itself in this review of its CIAs to address SNFs’ failure of care issues. The OIG will also determine the extent to which quality improvements result from the SNFs’ engagements of external quality monitors.

Hospices
The OIG plans a single national project studying hospice services provided to SNF patients. This issue is of long-standing concern to the government, and the OIG has previously complained that hospice beneficiaries in SNFs allegedly received fewer nursing and aid services than hospice beneficiaries residing at home.

Physicians and Other Health Professionals
The OIG has noticed a raft of issues relating to physicians and other Part B billing practitioners. Moreover, a number of the OIG investigations relate to fundamental billing and payment requirements for physicians such as “incident to” and global surgery.

Place of Service Errors. The OIG will review physicians’ place of service codes for services performed in ambulatory surgical centers (ASC) and hospital outpatient departments. Physicians receive reduced reimbursement for the “site of service differential” in ASCs and hospitals due to the fact that physicians have no overhead expenses in such facilities. This study seeks to determine if physicians are miscoding claims to capture the higher level of reimbursement for services performed in these settings.

Evaluation and Management (E&M) Services During Global Surgery Periods. When physicians perform and bill for a surgery, Medicare bundles into that payment reimbursement for a variety of services rendered before and after the actual procedure. This time is called the “global surgery period.” This OIG study will track industry trends in how E&M services are provided during the global surgery period, rather than simply whether physicians are complying with the global surgery billing rules.

“Incident to” Services. An independent evaluation will be undertaken regarding whether physicians are billing for “incident to” services in compliance with the rules. In addition, it will also look into the qualifications and appropriateness of the staff who perform the services. From the brief description in the Work Plan, we believe this study may reflect a broader OIG concern into the role incident to services play more generally in clinical practice.

Business Relationships and the Use of MRI. Reflecting concerns outlined in the 2008 physician fee schedule and the new Stark Phase III regulations, the OIG is studying arrangements under which physicians, “billing providers,” and “others who work together to provide imaging services” are paid under Medicare for diagnostic services. Specifically, the OIG will “pay particular attention to financial relationships among the parties involved in providing services and identify whether such relationships are associated with high use of services.” The OIG appears to be more concerned about improper referrals than billing or coding issues for such services.

Pain Management. Seeing a rise in interventional pain management payments, the OIG is undertaking to review the appropriateness of Medicare payments for interventional pain management. The agency is also investigating physician oversight of the performance of pain management procedures.

Reassignment Rules. Mirroring concerns of the 2008 physician fee schedule, the OIG is pursuing its belief that certain contractual arrangements incorporating reassignment of benefits among physicians and other entities raise compliance issues. The OIG specifically cited investigations in South Florida that allegedly revealed “schemes in which fraudulent providers obtain identifying information about legitimate physicians and request reassignments on their behalf.”

Durable Medical Equipment and Supplies
The OIG identified at least 14 projects and investigations related to medical equipment and supplies, continuing its intense focus on this sector of the health care industry. Of particular note is the OIG’s statement that it plans to expand its project in South Florida, focusing on durable medical equipment suppliers, to additional areas around the country. Other significant focus areas include:

Home Blood Glucose Testing Supplies. This new project was announced in the Work Plan and is expected to be completed in FY 2009. The audit will focus on whether physicians’ orders for the supplies support medical necessity as required under Local Medical Review Policies. The audit will also review whether modifiers are being used appropriately when submitting claims to identify whether a beneficiary is or is not insulin-treated (a factor that affects reimbursement).

Part B Services in Nursing Homes. The OIG has ongoing projects reviewing Part B payments for items or supplies provided to beneficiaries in SNFs whose stays are not paid for under the Part A SNF benefit. Specific focal points include durable medical equipment and enteral nutrition therapy.

End Stage Renal Disease (ESRD)
Epogen Payments to Dialysis Facilities. This continuing review will include scrutiny of medical records against the documentation requirements set forth in the ESRD Conditions for Coverage to determine whether Epogen claims were supported and billed in accordance with Medicare requirements. The OIG also intends to assess CMS’ and the fiscal intermediaries’ oversight functions with respect to Epogen administration.     

Separately Billable ESRD Laboratory Services. Most ESRD services, including many laboratory tests, are included in a bundled payment called the “composite rate.” By statute the Secretary of HHS is required to develop a report on a potentially more-inclusive bundled prospective payment system for ESRD services (ESRD-PPS), which could include laboratory tests that are not currently included in the composite rate, and that currently may be billed separately. The OIG will review compliance with the current rules for billing automated multichannel chemistry (AMCC) tests as well as identify laboratory tests that are regularly provided to ESRD patients but not currently included in the composite rate for possible inclusion in the ESRD-PPS.     

Ambulance Services for ESRD Beneficiaries. Noting that $262 million was paid by Medicare in calendar year 2005 for such services, the OIG will consider industry-wide factors as part of its review for the statutorily required report on a more inclusive ESRD-PPS.

Medicare Advantage (MA)
Medicare Encounter Data. Part A encounter data must be submitted by all MA plans to CMS for its use in developing a portion of the MA organizations’ monthly capitation rate. The OIG will review the accuracy of the data that has been submitted, noting the requirement that medical records are necessary to substantiate all diagnostic information provided in the encounter data.

Special Needs Plans. The OIG will evaluate how these plans operate differently than traditional MA plans, including how the benefit packages differ, coordination of care, and the adequacy of provider networks.

Drug Reimbursement (Medicare Part B)
In contrast to Part D, coverage for drugs is extremely limited under Part B. Covered Part B drugs generally fall into three categories: drugs furnished incident to a physician’s service; drugs used with durable medical equipment (DME); and certain statutorily covered drugs. The OIG will continue several studies that are already underway, and commence some new ones, including:

Drug Pricing. Computation of Average Sales Price (ASP) and related issues. ASP, as defined by statute, is reported quarterly by manufacturers and reflects unit sales to all U.S. purchasers divided by the total number of units sold (other factors also impact the calculation). Part B reimbursement for drugs is now based on 106 percent of the ASP. The OIG will continue to review how manufacturers calculate ASP. In addition, the OIG will review fluctuations in ASP from quarter to quarter, and identify those drugs with the greatest quarterly variations. As mandated by statute, the OIG will also be comparing ASP to widely available market prices (WAMP) and average manufacturer price (AMP). The OIG must notify the Secretary of HHS if the ASP for a drug exceeds either the WAMP or the AMP by a threshold of five percent. The OIG will also continue to study whether the shift to 106 percent of ASP reimbursement for Part B drugs has resulted in a shift from generic to brand name inhalation drugs for Medicare beneficiaries. The OIG is studying related issues pertaining to Medicaid drug pricing.

Excessive Dosages of Drugs. The OIG will review Part B drug claims to examine provider prescribing patterns and amounts billed for comparison against generally accepted dosages.

Medicare Part D Administration
In 2008, the OIG will continue to review the Medicare prescription drug program, known as Part D. The Part D program will begin its third year in January 2008 and the OIG’s review continues to expand and evolve as the program matures. Review of Part D issues now encompasses a large part of the OIG’s Work Plan. Some of the key Part D areas to be reviewed by the OIG in 2008 include:

Medicare Part D Duplicate Claims. The OIG will review CMS’ controls to prevent duplicate Part D claims for the same beneficiary, particularly when a beneficiary changes plans, tries to enroll in more than one plan, or tries to enroll in a plan and a retiree-subsidy covered plan.

Duplicate Medicare Part A and Part B Claims Included With Part D Claims. The OIG will determine whether claims submitted under Part D were also submitted under Part A as part of the inpatient hospital prospective payment system or under Part B coverage for drugs such as injectable drugs administered by a physician, or drugs used in conjunction with durable medical equipment.

Medical Therapy Management Program (MTMP). The OIG will review whether Part D plans enrolled qualified beneficiaries into an MTMP and submitted administrative costs that were supported, reasonable, and allowable.

Aberrant Part D Claims. The OIG will review Part D claims to identify aberrant claims (those that deviate from the usual patterns of claims) and determine how these claims relate to pharmacies, physicians, and/or beneficiaries. For example, the OIG will review whether prescription drug plans (PDPs) appropriately process Part D claims for Schedule II (street-value) drugs.

Part D Negotiated Drug Prices and Price Concessions. The OIG will review Part D sponsors’ implementation of and compliance with provisions regarding passing on negotiated drug prices to Medicare and/or its beneficiaries. The OIG will also review CMS’ oversight of sponsors’ disclosure and passthrough of negotiated price concessions. This review stems from the statutory requirement that a Part D sponsor must provide its enrollees with access to negotiated prices for Part D drugs included in its formulary, and to disclose to CMS data on aggregate negotiated price concessions.

Implementation of Medicare Part D in Nursing Facilities. This review will examine the implementation of Part D for dual-eligible residents in a sample of SNFs. The review will assess whether dual-eligible residents are receiving medically necessary drugs. The OIG will also identify concerns of SNFs and long-term care pharmacy staff regarding the implementation of Part D in SNFs.

Prescription Drug Plan Marketing Materials. The OIG will review CMS’ oversight of marketing materials for Part D PDPs. Previous OIG reviews have highlighted shortcomings with marketing materials for MA SNFs plans and temporary Medicare drug discount cards. In this review, the OIG will evaluate the extent to which PDP marketing materials comply with CMS regulations and CMS’ Medicare Marketing Guidelines.

Comparing Drug Prices. The OIG will conduct several reviews comparing Part D drug prices. These include a comparison of:

  • Medicare Part D to Medicaid. The OIG will review Part D drug prices and compare them with amounts reimbursed by Medicaid. The review will compare the prices for a sample of drugs paid under Part D to amounts reimbursed by Medicaid.
  • Medicare Part D to Medicare Part B ASPs. The OIG will review Part D drug prices and compare them to Part B prices paid under the ASP methodology for drugs covered under both programs. Some drugs may be covered under Part D for some uses and under Part B for others. The OIG will compare the ASPs for a sample of drugs paid under Part B to the prices paid by Part D.

Prescription Drug Plan Sponsors’ Detection and Reporting of Fraud and Abuse. The OIG will review the extent to which PDP sponsors detect and report Part D fraud and abuse to CMS. A previous OIG report found that some PDP sponsors’ compliance plans did not address all the elements required regarding fraud, waste, and abuse for Part D plans.

Medicaid Prescription Drugs
Average Manufacturer Price. The AMP and best price reporting affect the amounts that pharmaceutical manufacturers report (and pay) under the Medicaid drug rebate program and affect the Federal Upper Limit for drug reimbursement under Medicaid. The OIG will review selected manufacturers to evaluate their methodology for computing AMP to determine consistency with applicable requirements. In a separate review, the OIG will report on if, and how the states are using AMP to establish Medicaid pharmacy reimbursement. The OIG will also review how pharmacy acquisition costs compare to the AMP.

Medicaid Drug Rebate Program. Following up on prior reviews of 49 states and the District of Columbia that found that most states had weaknesses in their Medicaid drug rebate programs, the OIG will assess whether the states have subsequently established adequate accountability and internal controls. Separately, the OIG will review the CMS dispute resolution process, which allows manufacturers to dispute the amount of the Medicaid rebate that has been determined to be due. A new OIG review for this fiscal year will examine how drug manufacturers classify their drugs, thus impacting the formula used to calculate the rebate due. The OIG will also examine the states’ collection of rebates from the manufacturers for physician-administered drugs.

Clinical Trials
Oversight of Research Misconduct and Financial Disclosure Requirements for Clinical Investigators. The OIG has two studies planned to look at U.S. Food and Drug Administration (FDA) clinical investigators. One study will focus on the FDA’s oversight and discipline systems for clinical investigators found to have engaged in research misconduct. The second study will review disclosure to the FDA of financial interests of clinical investigators associated with drug, device, and biologic applications. A similar study of National Institutes of Health (NIH) oversight of financial conflicts of interest at extramural grantee institutions is also planned.

FDA
Oversight of Off-Label Drug Promotion. The OIG expects to issue a report this year assessing the FDA’s oversight and enforcement related to off label drug issues.

Adverse Event Reporting for Medical Devices. Building upon an issue that has received repeated media attention, the OIG intends to review the FDA’s adverse event reporting systems for medical devices. The OIG will also evaluate compliance with the reporting requirements and efficacy of the systems in spurring corrective actions.

Other Issues
“Never Events.” As dictated by the Deficit Reduction Act of 2005, the OIG is conducting three studies of serious medical errors — so-called “never events.” The studies will focus on the incidence of never events, CMS’ administrative systems for detecting never events, and the extent to which Medicare and beneficiaries paid for services furnished in connection with never events.

Payment Methodology for ASCs and Pricing for Laboratory Services. In two new separate reviews, the OIG will scrutinize the changes to the ASC payment system and rate setting methodology, and compare Medicare fee schedule payments for laboratories against the payments of other large public and private payers.

Therapy Services Provided by Comprehensive Outpatient Rehabilitation Facilities (CORFs). Citing earlier OIG reviews that indicated that Medicare paid for unallowable or highly questionable therapy services provided in certain types of facilities, the OIG intends to determine whether Medicare payments for therapy services provided by CORFs were made in accordance with applicable Medicare requirements.

Potential Duplication of Payments for Laboratory Services Rendered During Hospital Stays and Therapy Payments for Home Health Beneficiaries. Both of these reviews will examine whether payments for services were made under Part B that should have been covered by payments already made under Part A.

Part B Services Provided in Nursing Homes. Noting a prior OIG study of outpatient mental health services, the OIG intends to review psychotherapy services provided to SNF residents during noncovered Part A stays for medical necessity, appropriateness of coding, and SNF documentation.

Targeted Case Management. The OIG expects to complete two reviews of Medicaid payments for targeted case management services in the upcoming fiscal year. The reviews will focus on whether Medicaid payments claimed by states for these services were made in accordance with federal requirements.

Medicaid Adult Day Health Service Payments for Ineligible and Absent Beneficiaries. The OIG will be examining these services to determine whether payments have been made for ineligible individuals or persons not in attendance. The OIG had previously found problems with Medicaid claims for deceased patients, patients who did not require services, and patients who were not in attendance.

Medicare/Medicaid Credit Balances. The OIG is initiating an audit of providers, specifically targeting independent laboratories and hospitals, to determine whether there are credit balances in patient accounts. The OIG is also interested in determining provider compliance with requirements to identify and return credit balances.

Medicaid and SCHIP Program Payment Error Rate Measurement. The OIG will review CMS’ ability to produce valid and reliable error rate estimates for Medicaid and the State Children’s Health Insurance Program.

Conclusion
Health care providers, suppliers, pharmaceutical and device manufacturers should review the OIG FY 2008 Work Plan to determine their own compliance with the targeted areas.

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