Hospitals Increasingly Billing for Inpatient Stays at Highest Severity Level

Investigators at the Office of Inspector General identified trends in hospital billing and Medicare payments for stays at the highest severity level.

Hospitals are increasingly billing for inpatients stays at the highest severity level — the most expensive one — according to recent findings.

Because of the findings, study investigators at the Office of Inspector General recommended the Centers for Medicare & Medicaid Services (CMS) conduct targeted interviews of Medicare Severity Diagnosis Related Groups (MS-DRGs) and stays that are vulnerable to upcoding, along with hospitals that frequently bill them.

The team analyzed paid Medicare Part A claims for inpatient hospital stays from fiscal year 2014 through fiscal year 2019. They identified trends in hospital billing and Medicare payments for stays at the highest severity level. Severity levels were determined by the MS-DRG.

The Office of Inspector General found hospitals billed Medicare for 8.7 million inpatient hospital stays in fiscal year 2019 and 40% of them (3.5 million stays) were billed at the highest severity level. In fiscal year 2019, Medicare spent $109.8 billion for inpatient hospital stays and nearly half of that ($54.6 billion) was for stays billed at the highest severity level. In fact, Medicare paid an average of $15,500 per stay billed at the highest severity level. The most frequently billed MS-DRG was septicemia or severe sepsis with a major complication in fiscal year 2019.

While the number of stays billed at the highest severity level has increased almost 20% from fiscal year 2014 to fiscal year 2019, the number of stays billed at each of the other severity levels decreased. Still, the average length of stays at the highest severity level decreased from 6.9 days to 6.4 days, while the average length of all stay remained fairly similar, decreasing by .1 days.

Further, the Office of Inspector General investigators found hospitals varied significantly in their billing of stays at the highest severity level, with some billing far differently than most. Despite some variation expected, the amount of variation and the differences seen in some hospitals were considered further indications that stays with certain characteristics were vulnerable to inappropriate billing practices like upcoding.

Aside from the Office of Inspector General team recommending CMS conduct targeted reviews of MS-DRGs and stays that are vulnerable to upcoding and hospitals that frequently bill them, they also think more work needs to be done by the agency. The Office of Inspector General continues to recommend CMS conduct targeted review to identify stays involving upcoding and hospitals with patterns of upcoding.