Report (2020-11-30)

Full text

Department of Health and Human Services
OFFICE OF
INSPECTOR GENERAL

MEDICARE GENERALLY PAID
ACUTE-CARE HOSPITALS FOR
INPATIENT STAYS FOR
MEDICARE ENROLLEES DIAGNOSED
WITH COVID-19 IN ACCORDANCE
WITH FEDERAL REQUIREMENTS

Amy J. Frontz
Deputy Inspector General
for Audit Services

December 2023
A-09-21-03009
Inquiries about this report may be addressed to the Office of Public Affairs at
Public.Affairs@oig.hhs.gov.

Office of Inspector General
https://oig.hhs.gov

The mission of the Office of Inspector General (OIG) is to provide objective oversight to promote the
economy, efficiency, effectiveness, and integrity of the Department of Health and Human Services (HHS)
programs, as well as the health and welfare of the people they serve.  Established by Public Law
No. 95-452, as amended, OIG carries out its mission through audits, investigations, and evaluations
conducted by the following operating components:
Office of Audit Services.  OAS provides auditing services for HHS, either by conducting audits
with its own audit resources or by overseeing audit work done by others.  The audits examine the
performance of HHS programs, funding recipients, and contractors in carrying out their respective
responsibilities and provide independent assessments of HHS programs and operations to reduce waste,
abuse, and mismanagement.
Office of Evaluation and Inspections.  OEI’s national evaluations provide HHS, Congress,
and the public with timely, useful, and reliable information on significant issues.  To promote impact,
OEI reports also provide practical recommendations for improving program operations.
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misconduct related to HHS programs and operations often lead to criminal convictions, administrative
sanctions, and civil monetary penalties.  OI’s nationwide network of investigators collaborates with the
Department of Justice and other Federal, State, and local law enforcement authorities.  OI works with
public health entities to minimize adverse patient impacts following enforcement operations.  OI also
provides security and protection for the Secretary and other senior HHS officials.
Office of Counsel to the Inspector General.  OCIG provides legal advice to OIG on HHS
programs and OIG’s internal operations.  The law office also imposes exclusions and civil monetary
penalties, monitors Corporate Integrity Agreements, and represents HHS’s interests in False Claims Act
cases.  In addition, OCIG publishes advisory opinions, compliance program guidance documents, fraud
alerts, and other resources regarding compliance considerations, the anti-kickback statute, and other
OIG enforcement authorities.

Notices

THIS REPORT IS AVAILABLE TO THE PUBLIC
at https://oig.hhs.gov

Section 8M of the Inspector General Act, 5 U.S.C. App., requires
that OIG post its publicly available reports on the OIG website.

OFFICE OF AUDIT SERVICES FINDINGS AND OPINIONS

The designation of financial or management practices as
questionable, a recommendation for the disallowance of costs
incurred or claimed, and any other conclusions and
recommendations in this report represent the findings and
opinions of OAS.  Authorized officials of the HHS operating
divisions will make final determination on these matters.

Report in Brief
Date: December 2023
Report No. A-09-21-03009
Why OIG Did This Audit
The Coronavirus Aid, Relief, and
Economic Security Act increased the
payment amount that acute-care
hospitals received for Medicare
enrollees who were diagnosed with
COVID-19 and discharged during the
COVID-19 public health emergency
(PHE).  OIG’s previous work related to
pneumonia and other diagnosis
codes on claims documented
aberrant billing by some hospitals.  In
addition, acute-care hospitals may
have had a financial incentive to
include a COVID-19 diagnosis on
claims to receive additional
payments.  For these reasons, we
conducted this audit of Medicare
payments to acute-care hospitals for
inpatient stays with admission dates
from September 1 through
November 30, 2020, for enrollees
diagnosed with COVID-19.

Our objective was to determine
whether Medicare paid acute-care
hospitals for inpatient stays for
enrollees diagnosed with COVID-19 in
accordance with Federal
requirements.

How OIG Did This Audit
Our audit covered $2.7 billion in
Medicare payments for 166,107
claims billed by acute-care hospitals.
We selected a random sample of 150
claims and excluded 1 claim because
the acute-care hospital did not
receive the increased payment.  We
submitted the remaining 149 claims
to an independent medical review
contractor to determine whether the
claims met coverage, medical
necessity, and coding requirements.
The full report can be found at https://oig.hhs.gov/oas/reports/region9/92103009.asp.
Medicare Generally Paid Acute-Care Hospitals for
Inpatient Stays for Medicare Enrollees Diagnosed With
COVID-19 in Accordance With Federal Requirements

What OIG Found
Of the 149 sampled claims for inpatient stays for enrollees diagnosed with
COVID-19, 146 claims complied with Federal requirements; however, the
remaining 3 claims did not comply with the requirements.  As a result,
Medicare improperly paid hospitals $18,911.  These improper payments
occurred primarily because the acute-care hospitals made clerical errors when
billing claims for inpatient stays.  We provided the Centers for Medicare
& Medicaid Services (CMS) with the billing details and our findings for the three
improperly paid claims so that it can evaluate these claims and decide whether
to recover the improper payments in accordance with the agency’s policies and
procedures.

At the time of our audit, CMS stated that, with the recent end of the COVID-19
PHE on May 11, 2023, CMS was assessing which actions would be most useful
in a future PHE, such as a natural disaster or other emergencies, to: (1) ensure
a rapid response to future emergencies, both locally and nationally, or
(2) address the unique needs of communities that may experience barriers to
accessing health care.  CMS also stated that it will use lessons learned from the
COVID-19 PHE and assessments of the actions it took in response to the PHE to
inform what steps it takes in responding to future emergencies, such as
mitigating risk by having a policy in place to ensure that payments are made
only for treatments that are reasonable and medically necessary.

What OIG Recommends

This report does not have any recommendations because Medicare generally
paid acute-care hospitals for inpatient stays for enrollees diagnosed with
COVID-19 in accordance with Federal requirements, the improper payments
we identified resulted primarily from clerical errors made by the acute-care
hospitals, and Medicare no longer pays hospitals the additional amount for
billing a claim for a Medicare enrollee diagnosed with COVID-19.

Because this report contains no recommendations, CMS did not provide
written comments on our draft report but did provide technical comments,
which we addressed as appropriate.

Medicare Payments for Inpatient Stays for Enrollees Diagnosed With COVID-19 (A-09-21-03009)

TABLE OF CONTENTS

INTRODUCTION ............................................................................................................................... 1

Why We Did This Audit ....................................................................................................... 1

Objective ............................................................................................................................. 1

Background ......................................................................................................................... 2

Medicare Part A and the Hospital Inpatient Prospective Payment System ........... 2

COVID-19 Public Health Emergency ....................................................................... 2

Hospital Billing of Inpatient Claims for Enrollees Diagnosed With COVID-19 ........ 3

How We Conducted This Audit ........................................................................................... 4

FINDING........................................................................................................................................... 5

Federal Requirements and Guidance ................................................................................. 5

Medicare Generally Paid Acute-Care Hospitals for Inpatient Stays for Enrollees
   Diagnosed With COVID-19 in Accordance With Federal Requirements .......................... 6

Conclusion ........................................................................................................................... 7

APPENDICES

A: Audit Scope and Methodology ....................................................................................... 8

B: Statistical Sampling Methodology ................................................................................ 11

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1
INTRODUCTION

WHY WE DID THIS AUDIT

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) increased the payment
amount that acute-care hospitals received for Medicare enrollees who were diagnosed with
COVID-19 and discharged during the COVID-19 public health emergency (PHE).1, 2  For
admissions on or after September 1, 2020, the Centers for Medicare & Medicaid Services (CMS)
required acute-care hospitals to document a positive COVID-19 laboratory test in an enrollee’s
medical records to receive the increased payment.

The Office of Inspector General’s (OIG’s) previous work related to pneumonia and other
diagnosis codes on claims documented aberrant billing by some hospitals.3  In addition,
acute-care hospitals may have had a financial incentive to include a COVID-19 diagnosis on
claims to receive additional payments.  During a U.S. House of Representatives hearing on
July 31, 2020, investigating the Federal Government’s response to the COVID-19 pandemic,
then-Director of the Centers for Disease Control and Prevention (CDC) Dr. Robert Redfield was
asked about the possibility of providers incorrectly coding claims for higher reimbursement.  He
stated that there was “some reality” to hospitals preferring to bill for certain diagnoses to
receive an increased payment amount, which raises the possibility that hospitals incorrectly
billed for enrollee discharges with a COVID-19 diagnosis to receive the increased payment.4  For
these reasons, we conducted this audit of Medicare’s payments to acute-care hospitals for
inpatient stays with admission dates from September 1 through November 30, 2020 (audit
period) for enrollees diagnosed with COVID-19.

OBJECTIVE

Our objective was to determine whether Medicare paid acute-care hospitals for inpatient stays
for enrollees diagnosed with COVID-19 in accordance with Federal requirements.

1 Acute-care hospitals are hospitals that provide inpatient medical care and other related services for surgery,
acute medical conditions, or injuries (usually for a short-term illness or condition).

2 CARES Act, P.L. No. 116-136, § 3710 (Mar. 27, 2020).

3 DRG 89: Simple Pneumonia and Pleurisy (OAI-12-88-01140) June 1989; Monitoring the Accuracy of Hospital
Coding (OEI-01-98-00420) Jan. 21, 1999.

4 The Urgent Need for a National Plan To Contain the Coronavirus, Hearing Before the Select Subcommittee on the
Coronavirus Crisis of the Committee on Oversight and Reform, House of Representatives (Serial No. 116-109),
July 31, 2020.  The transcript is available online at https://www.govinfo.gov/content/pkg/CHRG-116hhrg41909/
pdf/CHRG-116hhrg41909.pdf.  Accessed on Oct. 26, 2023.

Medicare Payments for Inpatient Stays for Enrollees Diagnosed With COVID-19 (A-09-21-03009)
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BACKGROUND

Medicare Part A and the Hospital Inpatient Prospective Payment System

The Medicare program provides health insurance for people aged 65 and older, people with
disabilities, and people with permanent kidney disease.  Medicare Part A provides inpatient
hospital insurance benefits and coverage of extended care services for Medicare enrollees after
they are discharged from the hospital.  CMS administers the Medicare program.  CMS uses
Medicare Administrative Contractors (MACs) to, among other things, process and pay claims
submitted by acute-care hospitals.

Medicare uses an inpatient prospective payment system (IPPS) to pay for inpatient hospital
services provided to Part A enrollees (the Social Security Act (the Act) §§ 1886(d) and (g)).  Under
the IPPS, CMS pays acute-care hospital costs at predetermined rates for patient discharges.
The rates vary according to the Medicare Severity Diagnosis-Related Group (MS-DRG) to which
an enrollee’s stay is assigned.  The MS-DRG payment is, with certain exceptions, intended to be
payment in full to an acute-care hospital for all inpatient costs associated with an enrollee’s
stay.  The MS-DRG payment for an enrollee’s stay is calculated by multiplying the weighting
factor for the MS-DRG by the hospital’s base payment rate.5

COVID-19 Public Health Emergency

COVID-19 is a disease caused by a highly contagious coronavirus, called SARS-CoV-2.
COVID-19’s symptoms include fever, fatigue, cough, and shortness of breath.  The disease is
fatal in some cases.  Older adults and people who have severe underlying medical conditions,
such as heart or lung disease or diabetes, are at higher risk for developing more serious
complications from COVID-19.

On January 31, 2020, acting within his authority under section 319 of the Public Health Service
Act, then-Secretary of Health and Human Services (HHS) Alex Azar declared a PHE for the
United States for COVID-19 retroactive to January 27, 2020, and extended the PHE at regular
intervals throughout his time in office.  HHS Secretary Xavier Becerra, after extending the PHE
on several occasions, ended the PHE on May 11, 2023.  During the PHE, CDC reported
6.1 million hospitalizations from COVID-19 in the United States.

5 Each year, CMS assigns a weighting factor to each MS-DRG based on the average amount of resources that it
takes to care for an enrollee assigned to that MS-DRG relative to the average resources used to treat cases in all
MS-DRGs (e.g., cases assigned to MS-DRGs with a weighting factor less than 1.0 are less resource-intensive to treat
and are generally less costly to treat).  A hospital’s base payment rate is calculated based on labor and nonlabor
factors (including the costs of health care resources and labor, generally based on where the hospital is located).
The labor-related share is adjusted by the wage index applicable to the area where the hospital is located
(calculated by dividing the area’s average hourly wage by the national average hourly wage), and if the hospital is
located in Alaska or Hawaii, the nonlabor share is adjusted by a cost-of-living adjustment factor.

Medicare Payments for Inpatient Stays for Enrollees Diagnosed With COVID-19 (A-09-21-03009)
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Hospital Billing of Inpatient Claims for Enrollees Diagnosed With COVID-19

On March 27, 2020, Congress passed the CARES Act, which allotted $2.2 trillion to provide fast
and direct economic aid to those negatively impacted by the COVID-19 PHE.  Section 3710 of
the CARES Act directed the HHS Secretary to increase by 20 percent the weighting factor that
would otherwise apply to the assigned MS-DRG for an enrollee diagnosed with COVID-19
discharged during the PHE.6  This provision stated that the Secretary may implement this
provision “by program instruction or otherwise,” notwithstanding any other provision of law.

Diagnosis Codes for Enrollees Discharged With a Diagnosis of COVID-19

To implement section 3710 of the CARES Act, CMS notified MACs and acute-care hospitals that
a discharge of an enrollee diagnosed with COVID-19 would be identified by the presence of one
of two International Classification of Diseases, 10th Revision, Clinical Modification (ICD-10-CM),
diagnosis codes on a claim:7

• For discharges from January 27 through March 31, 2020, hospitals were to bill for
confirmed cases of COVID-19 using ICD-10-CM diagnosis code B97.29.

• For discharges on or after April 1, 2020, through the duration of the COVID-19 PHE,
hospitals were to bill for confirmed cases of COVID-19 using ICD-10-CM diagnosis code
U07.1.8

CMS made changes to its claims processing system in April 2020 to apply the 20-percent
increase to the MS-DRG weighting factor for IPPS claims submitted with the ICD-10-CM
diagnosis code related to COVID-19 that was appropriate for the timeframe (e.g., U07.1 on or
after April 1, 2020).9  We refer to diagnosis code U07.1 as the “COVID-19 diagnosis code”
throughout this report because our audit period started after April 1, 2020.

6 Only the relative weight that is used to calculate the MS-DRG payment was increased by 20 percent, not the
entire MS-DRG payment.

7 HHS adopted the ICD-10-CM as the official code set for coding diagnoses and inpatient hospital procedures
effective Mar. 17, 2009 (74 Fed. Reg. 3328 (Jan. 16, 2009)).  The ICD-10-CM was developed and is maintained by
CDC’s National Center for Health Statistics.

8 CMS, Change Request (CR) 11764 (Apr. 24, 2020); Medicare Learning Network (MLN) Matters Number:
MM11764; MLN Matters Number: SE20015 (Revised); CDC, ICD-10-CM Official Coding Guidelines – Supplement
Coding Encounters Related to COVID-19 Coronavirus Outbreak; CDC, New ICD-10-CM Official Code for the 2019
Novel Coronavirus (COVID-19).

9 In CR 11764, CMS instructed the MACs to identify and reprocess IPPS claims billed with ICD-10-CM diagnosis code
B97.29 with discharge dates on or after Jan. 27 through Mar. 31, 2020, and ICD-10-CM diagnosis code U07.1 with
discharge dates on or after Apr. 1, 2020, so that hospitals could receive the increased payment for such claims
processed before the change in the claims processing system.

Medicare Payments for Inpatient Stays for Enrollees Diagnosed With COVID-19 (A-09-21-03009)
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Documentation Requirements for Receiving an Increased Payment for Inpatient Claims
Submitted With the COVID-19 Diagnosis Code

To address potential Medicare program integrity risks, effective with admissions on or after
September 1, 2020, claims eligible for the 20-percent increase in the MS-DRG weighting factor
were required to have a positive COVID-19 laboratory test documented in the enrollee’s
medical records.  Positive tests had to be demonstrated using only the results of viral testing
(i.e., antigen or molecular), consistent with CDC guidelines.10  The viral test had to be
performed either during or before an enrollee’s admission to the hospital.  For this purpose, a
viral test performed within 14 days before the hospital admission, including a test performed by
an entity other than the hospital, could be manually entered into the enrollee’s medical record
to satisfy this documentation requirement.11

HOW WE CONDUCTED THIS AUDIT

Our audit covered $2.7 billion in Medicare payments for 166,107 claims with a payment
amount greater than $1,000 for inpatient stays billed by acute-care hospitals and paid under
the IPPS with admission dates during our audit period with the COVID-19 diagnosis code (i.e.,
U07.1) in any of the claims’ fields for diagnosis codes.

We selected for review a stratified random sample of 150 claims, with payments totaling
$3.4 million.  We did not review one sampled claim because the hospital billed the claim with
the COVID-19 diagnosis code in the field for the admitting diagnosis code but not in the fields
for either the principal diagnosis code or other diagnosis codes, resulting in the hospital not
receiving the increased payment.12  We submitted the remaining 149 claims to an independent
medical review contractor to determine whether the claims met coverage, medical necessity,
and coding requirements.

10 An antigen test identifies the presence of a particular kind of protein that is found on the exterior of the
COVID-19 coronavirus and is performed on a sample taken by swabbing an enrollee’s nose or the upper part of the
throat behind the nose.  A molecular test identifies COVID-19’s genetic material of and is performed on a sample
taken by: (1) swabbing an enrollee’s nose, the upper part of the throat behind the nose, or the middle part of the
throat just behind the oral cavity or (2) collecting an enrollee’s saliva.

11 MLN Matters Number: SE20015 (Revised).

12 The claim’s field for the admitting diagnosis code is used to indicate the condition that a physician identified at
the time of the patient’s admission requiring hospitalization.  For a hospital to receive the increased payment, it
must include the COVID-19 diagnosis code in either the field for the principal diagnosis code (i.e., the condition
established after study to be chiefly responsible for the enrollee’s admission) or the fields for secondary diagnosis
codes (i.e., other conditions that coexist or develop subsequently during the enrollee’s treatment).  Of the 166,107
claims, 598 had the COVID-19 diagnosis code in the field for the admitting diagnosis code but not in either the field
for the principal diagnosis code or the fields for secondary diagnosis codes.  We provided CMS with the billing
details for the 598 claims so that it is aware of which acute-care hospitals did not receive the increased payment.

Medicare Payments for Inpatient Stays for Enrollees Diagnosed With COVID-19 (A-09-21-03009)
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We conducted this performance audit in accordance with generally accepted government
auditing standards.  Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions
based on our audit objectives.  We believe that the evidence obtained provides a reasonable
basis for our findings and conclusions based on our audit objectives.

Appendix A contains the details of our audit scope and methodology, and Appendix B describes
our statistical sampling methodology.

FINDING

Medicare generally paid acute-care hospitals for inpatient stays for enrollees diagnosed with
COVID-19 in accordance with Federal requirements.  Of the 149 sampled claims, 146 complied
with Federal requirements; however, the remaining 3 claims did not comply with the
requirements.  As a result, Medicare improperly paid hospitals $18,911.  These improper
payments occurred primarily because the acute-care hospitals made clerical errors when billing
claims for inpatient stays.

FEDERAL REQUIREMENTS AND GUIDANCE

Medicare payments may not be made for items or services that “are not reasonable and
necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a
malformed body member” (the Act § 1862(a)(1)(A)).  In addition, the Act precludes payment to
any provider without information necessary to determine the amount due the provider (the Act
§ 1815(a)).  Federal regulations state that an acute-care hospital must furnish to the MAC
sufficient information to determine whether payment is due and the amount of the payment
(42 CFR § 424.5(a)(6)).  MS-DRGs are assigned to specific hospital discharges based on claim
data submitted by hospitals, including the principal diagnosis and secondary diagnoses (42 CFR
§ 412.60(c)); therefore, claim data must be accurate.  The Medicare Claims Processing Manual
states that “in order to be processed correctly and promptly, a bill must be completed
accurately” (chapter 1, § 80.3.2.2).

Effective with enrollee admissions on or after September 1, 2020, claims eligible for the
20-percent increase in the MS-DRG weighting factor were required to have documentation of a
positive COVID-19 laboratory test.  Positive tests had to be demonstrated using only the results
of viral testing (i.e., molecular or antigen), consistent with CDC’s guidelines.  The viral test had
to be performed either during or before an enrollee’s admission to the hospital.  For this
purpose, a viral test performed within 14 days before the hospital admission, including a test
performed by an entity other than the hospital, could be manually entered into the enrollee’s
medical record to satisfy this documentation requirement.  For admissions through

Medicare Payments for Inpatient Stays for Enrollees Diagnosed With COVID-19 (A-09-21-03009)
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May 11, 2023 (the end of the PHE), claims billed with the COVID-19 diagnosis code were eligible
for a 20-percent increase in the MS-DRG weighting factor.13

MEDICARE GENERALLY PAID ACUTE-CARE HOSPITALS FOR INPATIENT STAYS FOR ENROLLEES
DIAGNOSED WITH COVID-19 IN ACCORDANCE WITH FEDERAL REQUIREMENTS

Of the 149 sampled claims, 146 complied with Medicare billing requirements.  However, three
claims did not comply with the requirements.  Specifically:

• For two claims, acute-care hospitals incorrectly billed the COVID-19 diagnosis code for
an inpatient stay in which: (1) an enrollee received a positive COVID-19 test more than
14 days before their hospital admission date and (2) a hospital did not include the
documentation of a positive laboratory test in an enrollee’s medical records.  This
incorrect billing resulted in the hospitals receiving the 20-percent increase in the
MS-DRG weighting factor and Medicare improperly paying the hospitals for these
claims.

• For one claim, an acute-care hospital correctly billed the COVID-19 diagnosis code for an
inpatient stay but incorrectly billed diagnosis code J69.0 (pneumonitis due to inhalation
of food and vomit14) as the principal diagnosis instead of diagnosis code J96.01 (acute
respiratory failure with hypoxia15), which was incorrectly billed as a secondary diagnosis
code.  This incorrect billing resulted in the incorrect MS-DRG being assigned to this
specific hospital discharge and Medicare improperly paying the acute-care hospital for
this claim.

The improper payments for these three claims totaled $18,911.

These improper payments occurred primarily because the acute-care hospitals made clerical
errors when billing claims for inpatient stays.  For example, according to one of the acute-care
hospitals that incorrectly billed the COVID-19 diagnosis code for an inpatient stay, it
erroneously deleted on its claim the “No Pos Test” remark code (this code indicates “no
positive COVID-19 test”).  This remark code is used to notify a MAC that a hospital diagnosed an
enrollee with COVID-19 consistent with the ICD-10-CM Official Coding and Reporting Guidelines
but does not have evidence of a positive test result.  Based on Medicare requirements, adding
this remark code would have prevented the hospital from receiving the additional payment

13 Section 3710 of the CARES Act; CR 11764; MLN Matters Number: MM11764; MLN Matters Number: SE20015
(Revised).

14 Pneumonitis is inflammation of lung tissue.

15 Acute respiratory failure occurs when the lungs cannot release enough oxygen into the blood, preventing the
organs from properly functioning.  Hypoxia is low levels of oxygen in body tissues, which can cause symptoms like
confusion, restlessness, difficulty breathing, rapid heart rate, and bluish skin.

Medicare Payments for Inpatient Stays for Enrollees Diagnosed With COVID-19 (A-09-21-03009)
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associated with the 20-percent increase in the MS-DRG weighting factor for billing the claim
with the COVID-19 diagnosis code (MLN Matters Number: SE20015 (Revised)).

CONCLUSION

Medicare properly paid acute-care hospitals for most of our sampled claims for inpatient stays
for enrollees diagnosed with COVID-19.  We provided CMS with the billing details and our
findings for the three improperly paid claims so that it can evaluate these claims and decide
whether to recover the improper payments in accordance with the agency’s policies and
procedures.  This report does not have any recommendations because Medicare generally paid
acute-care hospitals for inpatient stays for enrollees diagnosed with COVID-19 in accordance
with Federal requirements, the improper payments we identified resulted primarily from
clerical errors made by the acute-care hospitals when billing the claims, and Medicare no longer
pays hospitals the additional amount associated with the 20-percent increase in the MS-DRG
weighting factor for billing a claim with the COVID-19 diagnosis code.

At the time of our audit, CMS stated that, with the recent end of the COVID-19 PHE on
May 11, 2023, CMS was assessing which actions would be most useful in a future PHE, such as a
natural disaster or other emergencies, to: (1) ensure a rapid response to future emergencies,
both locally and nationally, or (2) address the unique needs of communities that may
experience barriers to accessing health care.  CMS also stated that it will use lessons learned
from the COVID-19 PHE and assessments of the actions it took in response to the PHE to inform
what steps it takes in responding to future emergencies, such as mitigating risk by having a
policy in place to ensure that payments are made only for treatments that are reasonable and
medically necessary.

Because this report contains no recommendations, CMS did not provide written comments on
our draft report but did provide technical comments, which we addressed as appropriate.

Medicare Payments for Inpatient Stays for Enrollees Diagnosed With COVID-19 (A-09-21-03009)
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APPENDIX A: AUDIT SCOPE AND METHODOLOGY
SCOPE

Our audit covered $2,664,514,986 in Medicare payments for 166,107 claims with a payment
amount greater than $1,000 for inpatient stays billed by acute-care hospitals paid under the
IPPS with admission dates from September 1 through November 30, 2020, with the COVID-19
diagnosis code in any of the claims’ fields for diagnosis codes.

We selected for review a stratified random sample of 150 claims, with payments totaling
$3,447,932.  We did not review one sampled claim because the hospital billed the claim with
the COVID-19 diagnosis code in the field for the admitting diagnosis code but not in the fields
for either the principal diagnosis code or other diagnosis codes, resulting in the hospital not
receiving the increased payment.16  We submitted the remaining 149 claims to an independent
medical review contractor to determine whether the claims met coverage, medical necessity,
and coding requirements.

We did not perform an overall assessment of the internal control structures of CMS.  Rather,
we limited our review to those controls that were significant to our objective.  Specifically, we
assessed provider education and CMS’s procedures to identify and monitor acute-care hospitals
that were potentially at risk of incorrectly receiving the increased MS-DRG payment by billing
for the COVID-19 diagnosis code (e.g., acute-care hospitals with a high percentage of short-stay
claims).17

Our audit enabled us to establish reasonable assurance of the authenticity and accuracy of the
data obtained from CMS’s National Claims History (NCH) file, but we did not assess the
completeness of the file.  We assessed the reliability of the claims data from OIG’s copy of
CMS’s NCH file by: (1) considering prior data reliability assessments from OIG’s copy of this file
and (2) performing electronic testing on the data, such as testing for missing data.  We
determined that the data were sufficiently reliable for the purposes of this audit.

We conducted our audit from August 2020 to November 2023, which included contacting CMS
in Baltimore, Maryland, and the acute-care hospitals that received payments for the
150 sampled claims.

16 The claim’s field for the admitting diagnosis code is used to indicate the condition that a physician identified at
the time of the patient’s admission requiring hospitalization.  For a hospital to receive the increased payment, it
must include the COVID-19 diagnosis code in either the field for the principal diagnosis code (i.e., the condition
established after study to be chiefly responsible for the enrollee’s admission) or the fields for secondary diagnosis
codes (i.e., other conditions that coexist or develop subsequently during the enrollee’s treatment).  Of the 166,107
claims, 598 had the COVID-19 diagnosis code in the field for the admitting diagnosis code but not in either the field
for the principal diagnosis code or the fields for other diagnosis codes.  We provided CMS with the billing details
for the 598 claims so that it is aware of which acute-care hospitals did not receive the increased payment.

17 A short-stay claim is a claim in which a hospital billed for an enrollee’s stay as inpatient and the stay did not
exceed 2 days.

Medicare Payments for Inpatient Stays for Enrollees Diagnosed With COVID-19 (A-09-21-03009)
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METHODOLOGY

To accomplish our objective, we:

• reviewed applicable Federal laws, regulations, and guidance;

• interviewed staff at CMS regarding the types of procedures, system edits, and provider
education materials specific to acute-care hospitals billing for COVID-19 inpatient stays;

• used CMS’s NCH file to identify Medicare Part A claims billed with the COVID-19
diagnosis code with admission dates from September 1 through November 30, 2020;

• created a sampling frame of 166,107 Medicare Part A paid claims, totaling
$2,664,514,986, consisting of claims with a payment amount greater than $1,000 for
stays billed by acute-care hospitals paid under the IPPS with admission dates during our
audit period with the COVID-19 diagnosis code in any of the claims’ fields for diagnosis
codes;

• selected for review a stratified random sample of 150 claims, totaling $3,447,932
(Appendix B), and:

o reviewed available data from CMS’s Common Working File for the sampled
claims to determine whether the claims had been canceled or adjusted,

o obtained from acute-care hospitals supporting documentation for each sampled
claim,

o used an independent medical review contractor to determine whether each
sample claim complied with selected billing requirements, and

o for each sampled claim that was incorrectly billed, obtained the calculated
improper payment amount from the MAC that processed and paid the claim;
and

• discussed the results of our audit with CMS officials.

On November 28, 2023, we provided CMS with our draft audit report.  CMS had no written
comments but did provide technical comments.

We conducted this performance audit in accordance with generally accepted government
auditing standards.  Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions

Medicare Payments for Inpatient Stays for Enrollees Diagnosed With COVID-19 (A-09-21-03009)
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based on our audit objectives.  We believe that the evidence obtained provides a reasonable
basis for our findings and conclusions based on our audit objectives.

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APPENDIX B: STATISTICAL SAMPLING METHODOLOGY

SAMPLING FRAME

Our sampling frame contained 166,107 Medicare Part A paid claims, totaling $2,664,514,986.
The frame consisted of claims with a payment amount greater than $1,000 for stays billed by
acute-care hospitals paid under the IPPS with admission dates during our audit period with the
COVID-19 diagnosis code in any of the claims’ fields for diagnosis codes.

SAMPLE UNIT

The sample unit was a Medicare Part A paid claim.

SAMPLE DESIGN AND SAMPLE SIZE

We used a stratified random sample.  We selected 150 sampled claims for review.  See the
table for the details of each stratum.

Table: Claims by Stratum

Stratum
Claim Type
Frame
Size
(Claims) Value of Frame
Sample
Size
1
Claims for which the COVID-19 diagnosis
code did not indicate that COVID-19 was
present on admission (POA)*
3,648
$83,324,744
30
2
Short-stay claims not included in stratum 1
27,675
315,291,402
30
3
All remaining claims not included in strata 1
or 2 with payment amounts less than or
equal to $20,000
112,120
1,359,030,080
45
4
All remaining claims not included in strata 1
or 2 with payment amounts greater than
$20,000
22,664
906,868,760
45

Total
166,107 $2,664,514,986
150
*CMS requires the principal and all other diagnosis codes reported on claims involving inpatient admissions to
acute-care hospitals to include a POA indicator so that the diagnoses can be grouped into the proper MS-DRG.  We
included claims in stratum 1 if the hospitals did not indicate that COVID-19 was present at the time of inpatient
admission (i.e., the COVID-19 diagnosis code did not include POA indicator “Y,” which indicates that the diagnosis
was present at the time of inpatient admission).

SOURCE OF RANDOM NUMBERS

We generated the random numbers with the OIG, Office of Audit Services, statistical software.

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METHOD OF SELECTING SAMPLE ITEMS

We sorted the items in each stratum in the sampling frame by a unique identifier assigned to
each claim in OIG’s copy of CMS’s NCH file.  Then, we consecutively numbered the items in each
stratum in the sampling frame.  After generating the random numbers for our sample according
to our sample design, we selected the corresponding claims in each stratum for review.

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