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Medicare Overpaid Inpatient Rehabilitation Facilities Millions of Dollars for Claims With Late Patient Assessment Instruments for Calendar Years 2009 and 2010

Under the prospective payment system for inpatient rehabilitation facilities (IRF), the Centers for Medicare & Medicaid Services (CMS) establishes a prospective payment rate for each of 92 distinct case-mix groups. IRFs must electronically transmit a patient assessment instrument (PAI) for each IRF stay to the National Assessment Collection Database (the Database). If an IRF transmits the PAI more than 27 calendar days from (and including) the beneficiary's discharge date, the IRF's payment rate for the applicable case-mix group incurs a 25-percent late-assessment penalty.

Based on our sample results, we estimated that Medicare Administrative Contractors (MAC) made a total of $8.4 million in overpayments to IRFs because IRFs often did not receive reduced case-mix-group payments for claims with PAIs that were transmitted to the Database after the 27-day deadline. Of the 108 claims that we sampled, which had dates of service in calendar years 2009 and 2010, 20 were either canceled or paid correctly. For the remaining 88 claims, IRFs did not receive reduced case-mix-group payments for PAIs that were transmitted to the Database after the 27-day deadline. The overpayments occurred because IRF and Medicare payment controls were inadequate.

We recommended that CMS (1) adjust the 88 sampled claims for overpayments of $696,000 to the extent allowed under the law; (2) work with the Office of Inspector General to resolve the remaining 2,306 nonsampled claims with potential overpayments estimated at $7.7 million and recover overpayments to the extent allowed under the law; (3) continue to provide specific education to IRFs on the importance of reporting the correct PAI transmission dates on their claims; (4) complete the process that would allow the Fiscal Intermediary Shared System to interface with the Database to identify, on a prepayment basis, IRF claims with incorrect PAI transmission dates; and (5) support the MACs' and Recovery Audit Contractors' efforts to conduct periodic postpayment reviews of IRF claims. CMS concurred with our findings and recommendations and outlined steps for implementing our recommendations.