Becker's Hospital Review

10 CFO / FINANCE Hospitals overbilled Medicare $1B by upcoding claims, inspector general finds By Ayla Ellison H ospitals overbilled Medicare $1 billion by incorrectly assigning severe malnutri- tion diagnosis codes to inpatient hospi- tal claims, according to a July report from HHS' Office of Inspector General. e inspector general did the review aer previous claims audits found that hospitals had incorrectly billed Medicare by using several malnutrition di- agnosis codes when they should have used codes for other forms of malnutrition or not used a mal- nutrition code at all. Severe malnutrition diagno- sis codes are classified as a type of major complica- tion or comorbidity, which have higher Medicare payment rates. e audit covered $3.4 billion in Medicare pay- ments for more than 224,000 claims with a dis- charge date in fiscal year 2016 or 2017. It reviewed a random sample of 200 claims that contained a severe malnutrition diagnosis code and for which removing the code changed the diagnosis-related group. e audit revealed that hospitals incorrectly billed Medicare for 173 of the 200 claims reviewed. For 164 of those claims, hospitals used severe mal- nutrition diagnosis codes when they should have used codes for other forms of malnutrition or no malnutrition code. e upcoding resulted in hos- pitals receiving $914,128 in overpayments. Based on its sample results, the inspector general esti- mated hospitals received overpayments of more than $1 billion in fiscal 2016 and 2017. e inspector general made several recommen- dations, including that CMS collect the portion of the $914,128 for the incorrectly billed claims that are within the reopening period and notify pro- viders that submitted the claims so they can iden- tify and return any overpayments. "We continue to recommend that CMS review all claims in our sampling frame that were not part of our sample but were within the reopening period and work with the hospitals to ensure they cor- rectly bill Medicare when using severe malnutri- tion diagnosis codes," the office said. n Hospital margins could sink to -7% this year: 5 things to know By Ayla Ellison T he COVID-19 pandemic has created financial challenges for hos- pitals and health systems, and without additional federal aid, half of U.S. hospitals could be operating in the red in the second half of this year, according to an analysis released by the American Hospital Association on July 21. Five takeaways from the analysis: 1. Before the COVID-19 pandemic, the median hospital margin was 3.5 percent. The pandemic is expected to drive the median hospital margin from positive to negative. 2. Without funding from the Coronavirus Aid, Relief and Economic Secu- rity Act, hospital margins would have been a negative 15 percent in the second quarter of 2020. Margins are still expected to drop to a negative 3 percent in the second quarter. 3. Without additional aid from the federal government, hospital margins could sink to a negative 7 percent in the second half of this year. 4. In the second quarter of this year, nearly half of U.S. hospitals had negative margins. Those hospitals will remain with negative margins without further financial support. 5. "Heading into the COVID-19 crisis, the financial health of many hos- pitals and health systems were challenged, with many operating in the red," said hospital association President and CEO Rick Pollack in a news release. "As today's analysis shows, this pandemic is the greatest financial threat in history for hospitals and health systems and is a serious obstacle to keeping the doors open for many." n HealthPartners to lay off 200, close clinics By Ayla Ellison B loomington, Minn.-based HealthPartners said July 2 it is eliminating 200 jobs at two of the seven clinics it plans to close, according to the Star Tribune. The health system shut down the seven clinics due to the COVID-19 pan- demic and will not reopen the sites. HealthPartners cited financial pres- sures and the shift toward more telemedicine services as reasons for the closures, according to the report. "Like all health systems, we've seen increasing financial pressures — the COVID-19 pandemic certainly exacerbated that," HealthPartners said, ac- cording to the Star Tribune. "That's why we are working even harder to make care more affordable. This plan to consolidate clinical space and reduce our brick-and-mortar footprint is part of that." HealthPartners is laying off more than 130 employees at its clinic in Sartell, Minn., and laying off about 70 workers at Riverside Clinic in Minneapolis. In the first quarter of 2020, HealthPartners reported an operating loss of $40.7 million on revenue of $1.6 billion, according to the report. n

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