Medicare estimated to have paid $94M in improper EHR incentives

Jessica Kim Cohen  December 17, 2019

The CMS may have doled out $93.6 million in erroneous Medicare incentive payments to acute-care hospitals using electronic health record systems, according to new estimates from HHS' Office of Inspector General.

The CMS plans to attempt to recover some, but not all, of the possible erroneous payments, according to the OIG's report.

The estimated $93.6 million represents less than 1% of the total $10.8 billion Medicare EHR incentive payments the CMS paid to acute-care hospitals during a nearly five-year audit period, from January 2013 to September 2017. Payments dispensed as part of the incentive program, which was renamed the Medicare Promoting Interoperability Program last year, are meant to encourage hospitals to use EHRs.

"CMS appreciates OIG's estimate that over 99 percent of the $10.8 billion in total incentive payments in this legacy program were correct," CMS Administrator Seema Verma wrote in an October letter to acting Inspector General Joanne Chiedi.

The CMS did not respond to a request for comment on the OIG's findings at deadline.

For its audit, the OIG reviewed 99 of the 8,297 payments. The 99 payments, 53 of which were final and 46 of which were not final, totaled $152.2 million.

Fifty of the 99 payments included in the audit were made erroneously and not in accordance with federal requirements, the OIG found. They totaled $1.3 million, less than 1% of the $152.2 million figure. Of those 50, more than half—63%—were from final payments.

"On the basis of our sample results, we estimated that CMS made incorrect net incentive payments of $93.6 million," the OIG wrote.

The OIG attributed the errors to Medicare administrative contractors not properly reviewing information from hospitals' cost reports, which are used to calculate incentive payments. Some cost reports included errors like hospitals using data for more than 12 months and incorporating services other than acute-care services.

The CMS also neglected to include some required services in its incentive payment calculations, such as labor and delivery services, as well as some services related to intensive-care units.

To attempt to recover the estimated $93.6 million, the OIG recommended the CMS instruct Medicare administrative contractors to review all hospitals' supporting documentation to identify the above errors. The OIG also recommended the CMS attempt to recover the 50 erroneous payments already identified in the office's audit. The CMS said it would review the list and work to recoup incorrect final payments and ask Medicare administrative contractors to make corrections on the cost reports of non-final payments.

But for the remaining erroneous payments from the period not identified in the audit, the CMS said it would only implement the OIG's recommendations to "the extent that it applies to non-final payments."

The OIG seemed to question that approach. "Limiting (Medicare administrative contractor) reviews of supporting documentation to only non-final payments and revising the incentive payment calculations to include labor and delivery days only for non-final payments could result in a large portion of overpayments not being recouped," the OIG wrote.

It could put a strain on health systems to have incentive payments they were expecting—or have already received—changed, said Michael Abrams, managing partner of Numerof & Associates.

"But I'm not sure that the fact it might be a hardship would be a reason for anyone to say I should get to keep it," he said.

Health systems "often run on pretty thin margins, and manage cash flow in a pretty proactive and thoughtful way," said Rick Kes, healthcare senior analyst at audit and consulting firm RSM. Those thin margins make health systems particularly sensitive to unexpected changes in their cash flow, and a reduction might cut into funds available for more long-term projects like innovation and expansion efforts.

The impact would also depend on the magnitude of the incorrect payment. If just a portion of a health system's incentive payment over the five-year period is revoked, "maybe it won't be a super significant issue for them to overcome," Kes added.

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