Nationwide Review of Medicare Part A Emergency Department Adjustments for Inpatient Psychiatric Facilities During Calendar Years 2006 and 2007

Based on our sample results, we estimated that Medicare contractors made $1.7 million in overpayments to hospital-based inpatient psychiatric facilities (IPF) for calendar years 2006 and 2007 on behalf of beneficiaries who had been admitted to the IPFs upon discharge from the acute-care section of the same hospital. Our review found that hospital-based IPFs incorrectly coded the source of admission on 75 of 100 sampled claims. As a result, Medicare contractors made $3,000 in overpayments to the IPFs for emergency department services.

CMS makes an additional Medicare payment to an IPF for the first day of a beneficiary's stay to account for emergency department costs. However, CMS does not make this payment if the beneficiary was discharged from the acute-care section of a hospital to its hospital-based IPF. Hospitals must enter the correct code on their Medicare claim forms to ensure that the hospital-based IPF does not receive an additional payment for the costs of emergency department services that Medicare covers in its payment to the acute-care hospital.

We recommended that CMS (1) instruct its Medicare contractors to recover the $3,000 in overpayments for the sampled claims; (2) instruct its Medicare contractors to immediately reopen the nonsampled claims, review our information on these claims (which have overpayments estimated at $1.7 million), and recover any overpayments; (3) instruct its Medicare contractors to emphasize to hospital-based IPFs the importance of using the correct code to identify beneficiaries who were discharged from the acute-care section of the same hospital; (4) establish edits in the Common Working File to prevent and detect overpayments to IPFs that use incorrect source-of-admission codes on claims; and (5) consider conducting periodic postpayment reviews of claims submitted after our review to identify any claims that were billed and paid with incorrect source-of-admission codes. CMS concurred with our recommendations and described the corrective actions that it was taking or planned to take.