Review of Hospital Observation Beds

EXECUTIVE SUMMARY:

The objective of this audit was to determine whether outpatient observation services billed by St. John's 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.