The American Hospital Association (AHA) has renewed its complaints about OIG “hospital compliance reviews.”  Last Thursday AHA Executive Vice President Rick Pollack sent a letter to Health & Human Services Secretary Burwell reminding her that in June he had written then Secretary Sebelius on the same subject, pointing out the unfairness, errors and even illegality involved in these OIG audits and asking that they be stopped.  The new letter notes that despite these protests, the OIG has continued with the audits, using the same defective approaches identified in the earlier letter.

What are the defects in the audits?  The first letter pointed out four in particular.  First, the audits are redundant, duplicating the hated Recovery Audit Contractor (RAC) audits.  (The Government Accountability Office said the same thing in a recent report.)

Second, the OIG uses an “extrapolation” method that has the effect of greatly multiplying audit errors.  So the audit comes up with an alleged overpayment that reflects not just the erroneous amount, but that amount multiplied many times over.

Third, when the audit finds an overpayment of a Part A (inpatient) amount, it doesn’t credit the hospital for the Part B (outpatient) amount that the hospital should be entitled to if the patient is outpatient rather than inpatient.  And, of course, the resulting error is multiplied through the extrapolation method employed by the OIG.

Fourth, when the Medicare Administrative Contractors (MACs) then try to collect the alleged overpayments, they violate the statutory limits on their use of extrapolation, imposing a “Kafkaesque burden” on the audited hospital.

The recent letter adds a fifth error:  A new OIG audit of a period before October 1, 2013, rejected inpatient claims because they lacked a physician’s admission order.  But before that date Medicare never required a physician order for a short-term, acute care inpatient admission.  So the hospital is being punished for failing a requirement that didn’t even exist at the time.