The state Department of Health’s lack of guidance for hospitals has resulted in improper billing and Medicaid overpayments to facilities, a new report from state Comptroller Thomas DiNapoli found.
The report, released Aug. 30, found that almost half of 190 claims from six hospitals that auditors selected for judgment were improperly billed as inpatient care when they should be considered outpatient services. The judgment sample’s claims totaled more than $4 million, with $1.5 million in misclassified payments from the federal Centers for Medicare and Medicaid Services to hospitals.
The health department’s Medicaid guidance is inadequate, the report reads, and doesn’t help hospitals evaluate aspects of patient stays that could influence how they’re billed. These include how long patients stay in facilities, the presence of an admission order, medical necessity of the services, or if patients leave the hospital against medical advice.
To assess whether hospitals improperly billed CMS, the auditors evaluated claims against the agency’s “two midnight” rule for inpatient admissions for Medicare patients–that is, if a physician orders an inpatient admission because they expect the patient will require at least two midnights of hospital care.
This rule is not part of New York state Medicaid guidance. But according to CMS, it would be "rare and unusual" for a physician to order an inpatient stay without expecting the patient to be there for two nights. Therefore, the auditors used that criteria to develop a risk population, said Christopher Morris, the manager on the comptroller’s audit.
The report found that in addition to the 190 claims auditors sampled, more than 34,000 claims totaling $360 million involved Medicaid patients that left the hospital within 24 hours. In more than 3,000 claims, patients left after five hours or less.
“There is a high risk that a portion of these claims were improper if the services provided should have been billed as outpatient,” the audit reads.
Six hospitals–Albany Medical Center, Kings County Hospital Center, Montefiore Medical Center, Nassau University Medical Center, Queens Hospital and Staten Island University Hospital–were part of the 190-claim sample review. According to DiNapoli’s office, the facilities have some of the largest numbers of inpatient claims where patients were admitted and discharged within 24 hours.
Albany Medical Center saw the highest percentage of misclassified claims–18 out of the 31 that were sampled. Meanwhile, Montefiore’s 11 misclassified claims resulted in improper payments of almost $333,000, the highest amount of the six hospitals.
When a hospital is overpaid for a service, that could divert taxpayer dollars away from underserved New Yorkers getting care elsewhere in the hospital, Morris said.
After reviewing the claims, DiNapoli’s office issued recommendations for the health department to advise hospitals and cut down on overpayments. The health department should develop Medicaid inpatient and outpatient guidance for hospitals and encourage hospitals to develop verification procedures for inpatient billing before billing Medicaid, the audit found. Additionally, it recommends that hospitals review the improper claims that haven’t yet been voided and recover overpayments.
In response to these recommendations, the health department said it will review its inpatient manual which advises hospitals on how to bill and remind hospitals to submit to Medicaid based on a claim’s setting. Officials noted that inpatient claims should generally contain admissions orders.
The department is also collaborating with the state Office of the Medicaid Inspector General to analyze the claims and the comptroller’s audit methodology, and will explore ways to evaluate high-risk hospital stay claims in the future. Erin Clary, a representative from the department, added that it is working to strengthen its guidance to hospitals and that hospitals must have a Medicaid compliance program in place to reduce potential for fraud and waste, and correct errors before Medicaid is billed.
Stephanie Buhle, a representative for New York City Health + Hospitals, said the system will consider findings and recommendations from the comptroller.
Representatives from Northwell Health, which Staten Island University Hospital is part of, did not respond to requests for comment. Neither did representatives from Montefiore.
Andrea Inman, the director for the audit, said the comptroller’s office will conduct a follow-up assessment about one year from now to see whether the health department implemented recommendations. —Jacqueline Neber
This story has been updated with additional information from the health department.
September 6, 2023: A previous version of this story stated that Nassau University Medical Center is part of Northwell Health. The hospital is affiliated with Northwell, but Northwell does not provide oversight.