OIG: Medicare spent $5.7B on improper payments to inpatient rehab facilities

Medicare spent nearly $7 billion on inpatient rehabilitation stays in 2013, the vast majority of which was improper, according to the HHS Office of Inspector General (OIG).

Based on a sampling of inpatient rehabilitation stays, the OIG estimated that Medicare improper payments to inpatient rehabilitation facilities totaled $5.7 billion in 2013, prompting the watchdog agency to recommend that the Centers for Medicare & Medicaid Services (CMS) re-evaluate the IRF payment system.

The audit (PDF), which sampled 220 inpatient rehab claims totaling $11.3 million, found that just 45 patient stays met coverage and documentation requirements. The remaining 175 stays included documentation that did not support IRF care.

Specifically, medical records reviewed by OIG did not support the need for complex and intensive inpatient rehab performed at acute care hospitals. Instead, those patients—who often suffered from generalized weakness or fatigue, simple fractures, or minor trauma—would have benefited from individual therapy interventions rather than physician-supervised intensive therapy.

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“In some of these stays, the therapy would be expected to consist of general exercises and regular activities, such as walking or exercises to improve tolerance for sitting,” the report stated. “In other stays, nonskilled caregivers would have been able to provide needed assistance with only intermittent skilled therapy oversight.”

The OIG also noted that CMS’ Comprehensive Error Rate Testing program showed error rates in the IRF program as high as 62% in 2016, up from 9% in 2012.

The OIG recommended that CMS consider implementing a demonstration project modeled after Medicare Advantage that requires prior authorization for IRF stays. It also called on the agency to increase oversight activities for IRFs and educate billing and coding personnel about documentation requirements.

CMS agreed with the recommendations.

It’s not the first time OIG has criticized IRFs. Last year it issued a report indicating that 30% of patients who go to a rehab hospital after surgery suffer some type of harm.