Review of Medicare Claims Submitted by Inpatient Psychiatric Facilities During the Transition to the Prospective Payment System in 2005

Executive Summary

Inpatient psychiatric facilities (IPF) that split-billed transition stays did not always cancel the split bills and rebill the Centers for Medicare & Medicaid Services (CMS) using prospective payment system rates and rules as required. Based on our sample results, we estimated that incorrectly billed transition stays for which IPFs had not canceled split bills and resubmitted correct bills resulted in about $9 million in overpayments in 2005. CMS instructions state that if a beneficiary's stay begins before and ends on or after the date on which the IPF becomes subject to the prospective payment system (a "transition stay"), the fiscal intermediary must base its payments to the facility on prospective payment rates and rules. The instructions also state that IPFs that split the stay and submit two separate claims must cancel the split bills and then rebill the fiscal intermediary after the cancellation has been accepted.

We recommended that CMS instruct the fiscal intermediaries to adjust claims for the sampled stays that resulted in overpayments of $408,000; review our information on the stays not included in our sample, which had potential overpayments estimated at $8.6 million ($9 million less $408,000), and work with the IPFs to recover any overpayments; and analyze postpayment data for claims submitted after our review to ensure that IPFs billed the claims properly and fiscal intermediaries paid them correctly. CMS agreed with our recommendations.