Department of Health and Human Services

Office of Inspector General -- AUDIT

"Review of Hospital Observation Beds," (A-07-01-02631)

May 24, 2002

Complete Text of Report is available in PDF format (495 KB). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


The objective of this audit was to determine whether outpatient observation services billed by St. Johnís Regional Health Center (Hospital) met Medicare reimbursement requirements.  Based on the results of our sample, we questioned $197,773 of billed Hospital observation bed services that did not meet Medicare reimbursement criteria.  In our opinion, the majority of questioned charges, except for miscoded charges, developed from misinterpretations of the Medicare reimbursement requirements.  We recommended that the Hospital: (1) reimburse Medicare the overpayment amount for inappropriate observation billings of $197,773 for Fiscal Year1999;  (2) develop a corrective action plan (CAP) to correct the problems; and (3) review further observation claims to determine the effectiveness of the CAP.