Medical Billing Mistakes for Malnutrition Led to $1B in Overpayments

July 28, 2020 - CMS should recoup the portion of nearly $1 billion that was incorrectly paid to hospitals because of medical billing and coding errors involving severe malnutrition diagnosis codes, HHS’ Office of the Inspector General (OIG) recently recommended in a report.

The report released earlier this month uncovered persistent errors with the medical billing and coding of severe malnutrition diagnosis codes on inpatient hospital claims.

A recent audit of a random sample of 200 claims from fiscal years (FY) 2016 and 2017 uncovered similar medical billing mistakes.

Hospitals only correctly billed Medicare for severe malnutrition diagnosis codes in 27 of the claims, the latest audit of the diagnosis codes revealed.

Hospitals did not correctly bill Medicare for the remaining 173 claims, with the majority of these claims (164) using severe malnutrition diagnosis codes when they should have used codes for other forms of malnutrition or no malnutrition diagnosis code at all, OIG reported.

The other nine claims had medical record documentation that supported secondary diagnosis codes other than a severe malnutrition diagnosis code. However, the error did not change Medicare payment or diagnosis-related group (DRG).

The medical billing mistakes led to net overpayments of $914,128, which OIG said indicated total overpayments of about $1 billion for FYs 2016 and 2017.

OIG advised CMS to recoup the portion of the $914,128 attributed to incorrectly billed hospital claims that are within the reopening period.

Hospitals can code for severe malnutrition using the ICD-10-CM codes E41 (Nutritional marasmus) and E43 (unspecified severe protein-calorie malnutrition), OIG explained. The codes are each classified as a type of major complication or comorbidity (MCC), which when added Medicare claim, increase in higher reimbursement.

In FYs 2016 and 2017, hospitals submitted 224,175 inpatient claims to Medicare that contained one of the severe malnutrition diagnosis codes for which removing the codes changed the DRG. The claims totaled $3.4 billion in Medicare payments to hospitals, OIG reported.

The HHS watchdog recommended that, in addition to recouping overpayments to hospitals, CMS should review the 224,175 inpatient claims made during the period that were not part of OIG’s sample but are still within the reopening period.

CMS should also review how hospitals use diagnosis code E41 and E43 to ensure inpatient providers correctly code claims and bill Medicare, OIG advised.

In a letter to OIG, CMS Administrator Seema Verma concurred with OIG recommendations and said it will “instruct its contractors to recover the overpayments consistent with relevant law and CMS’s policies and procedures, notify appropriate providers of this audit and the potential overpayment, and track any returned overpayments made in accordance with the 60-day rule.”

The agency stated that its contractors have already been performing reviews of codes E41 and E43. It also said that it has implemented several Fraud Prevention System models that may help to identify potential DRG upcoding, like the upcoding uncovered by OIG’s audit of several malnutrition coding.

“Of the claims that we reviewed, 82 percent were not correctly billed, which we maintain is significant and needs to be addressed,” OIG concluded. “We continue to recommend that CMS review all claims in our sampling frame that were not part of our sample but were within the reopening period and work with the hospitals to ensure they correctly bill Medicare when using severe malnutrition diagnosis codes.”

Previous OIG audits of severe malnutrition have also found that hospitals incorrectly billed Medicare by using severe malnutrition diagnosis codes when they should have used codes for other forms of malnutrition or no malnutrition diagnosis code at all.