Key Reviews from 2014 OIG Work Plan

Vol. 10 No. 8

AuthorOn January 31, 2014, the Office of the Inspector General (“OIG”) of the Department of Health and Human Services (“HHS”) released its annual Work Plan.1  The Work Plan describes ongoing and new projects that the OIG intends to conduct during the coming year. 

Typically, the OIG issues its annual Work Plan in October of the preceding year, but this year delayed its release.  While some anticipated that the delay would result in more ambitious new initiatives, overall the Work Plan does not contain a significant number of new projects.  However, there are certain key initiatives that bear special attention.  These projects cover a wide range of issues from reviews of new rules impacting the Medicare and Medicaid programs to reviews of contractors hired by the Centers for Medicare & Medicaid Services (“CMS”).

The OIG identifies the following factors as helping it sets its project goals: (i) mandatory reviews set by statute, regulation or other directive, (ii) requests made by HHS, Congress or other government agencies, (iii) top challenges facing HHS, (iv) work to be performed in collaboration with other organizations, (v) actions taken to implement previous OIG recommendations, and (vi) timeliness.2  However, the Work Plan is also a living document and the initiatives identified by the OIG will change over the course of a year as new issues arise or new fraud or abuse risks are identified.  Regardless, each Work Plan provides a good starting point in determining the OIG’s priorities and setting areas of focus for compliance plans.

This article will highlight select new reviews that the OIG plans to initiate in 2014.  The reviews highlighted seem to track activities previously identified by the OIG as concerning or consist of reviews of new policies.  Indicators of the OIG’s priorities can come from legislative pressure, trends in healthcare activities, follow up on previous reviews and other sources.  A point to keep in mind is that each year’s new reviews can shed some light into both current thinking and future enforcement actions, since the reviews can be used to gather information on potential fraud, waste and abuse.  Not all of the new reviews are included, nor are ongoing reviews discussed in this article.

Medicare Part A and Part B – Hospitals

  • New Inpatient Admission Criteria3 – Changing criteria for hospitals to bill for inpatient services (i.e. the 2 midnight rule) creates the opportunity for overpayments and inconsistent billing practices.  Under the 2 midnight rule, an inpatient admission is presumed to be reasonable and necessary if the individual stays in the hospital for at least 2 midnights.4  The OIG will assess the impact of new inpatient admission criteria on hospital billing and Medicare payments and consider how resulting billing varies from hospital to hospital.  In particular, the OIG will assess the impact of the 2 midnight rule on inpatient admissions.  Since publication of the Work Plan, delays have been announced for the 2 midnight rule that further push off its full effectiveness.5  Additionally, a bill has been introduced in Congress to alter and refine the application of the 2 midnight rule.6  Despite these developments, hospitals should still continue developing compliance plans for the rule and bring their operations into line.

  • Analysis of Salaries Included in Hospital Cost Reports7 – The OIG will examine the extent to which employee compensation is included in operating costs reported to and reimbursed by Medicare.  An assessment will then be made as to the potential impact to the Medicare Trust Fund of limiting the amount of employee compensation that could be reported.  Currently, such costs can only be included to the extent that the costs represent reasonable remuneration for managerial, administrative, professional, and other services related to facility operation and furnished in connection with patient care.8

  • Comparison of Provider-Based and Free-Standing Clinics9 – Provider-based clinics and free-standing clinics are reimbursed at different rates, which may result in entities seeking to bill under the higher rate.  Provider-based clinics receive higher reimbursement for certain services.  Hospitals may sometimes try to classify a free-standing clinic as a provider-based one to receive higher reimbursement.  The OIG will review such billings to assess whether an appropriate setting was selected.  The OIG would be concerned if a hospital attempted to obtain higher reimbursement than to which it is entitled.  Determination of setting can be expected to become increasingly important and contentious given the fast pace of consolidation and acquisition that has occurred since passage of the Patient Protection and Affordable Care Act in 2010 (“PPACA”).10 

  • Outpatient Evaluation and Management Services Billed at the New-Patient Rate11 – The OIG will review hospital billing of outpatient evaluation and management services for new patients to assess whether such claims were submitted for patients that were actually new.  If the service is billed incorrectly, then the hospital would receive an overpayment.  This is an area of concern because preliminary reviews have shown that hospitals were billing established patients as new patients.12  Medicare regulations define who qualifies as a new patient, which should guide hospital billing.13

Medicare Part A and Part B – Other Providers and Suppliers

  • Ambulance Services – Portfolio Report on Medicare Part B Payments14  – The OIG will perform a comprehensive review of guidance and practices related to ground ambulance transport services.  The purpose of the review is to identify vulnerabilities, inefficiencies and fraud trends in order to develop recommendations for improvements.  Previous reviews uncovered issues relating to overutilization and billing for medically unnecessary services.15   The review in the ambulance field should not be surprising in light of recent moratoria on new provider enrollments in certain areas of the country, which clearly shows that the OIG views these services as a field ripe for and subject to extensive fraud.16

  • Mental Health Providers – Medicare Enrollment and Credentialing17 – Provider enrollment of all types is of particular concern to the OIG.  However, a review specifically for mental health providers is new.  The review will focus on verifying that providers satisfy applicable state and federal qualifications.  Given the new focus, it may be anticipated that the OIG is preparing to pursue suspected fraud in connection with mental health services.  The increased attention to mental health issues may also be a driving factor.18

Medicare Part A and Part B – Part A and Part B Contractors

  • ZPICs and PSCs – Identification and Collection Status of Medicare Overpayments19  – CMS relies upon a number of contractors to review and assess the validity of claims submitted by providers.  If a Zone Program Integrity Contractor (“ZPIC”)20 or Program Safeguard Contractor (“PSC”)21 identifies a payment error, specifically overpayments, the contractor is supposed to track and collect the overpayments.  The OIG determined in early reviews that the ZPICs and PSCs were not properly tracking overpayments.22   In response, CMS was supposed to improve reporting requirements. 

Medicaid Program

  • Provider Payment Suspensions During Pending Investigations of Credible Fraud Allegations23 – Fraud concerns exist in both the Medicare and Medicaid programs.  Fraud in Medicaid can present oversight challenges for the federal government because each state administers its own Medicaid program.  In an effort to control improper expenditure of federal funds, the OIG will review payments to providers subject to credible fraud allegations and whether payments to such providers have been suspended.24  Pursuant to Medicaid regulation, the federal government is not supposed to contribute financially to services or items furnished by an individual or entity who was supposed to have been suspended by a state.25   The review will assess state compliance with Medicaid requirements and could be used to recover money distributed to states.


Evaluation of compliance with regulations and billing requirements are common themes running through the various new reviews identified by the OIG.  The end goal of many new federal programs is to control healthcare spending and ensure that only necessary and appropriate services and items receive payment from the federal government.  The OIG’s new initiatives fit with the overall tenor of cutting down on fraud, waste and abuse in order to preserve money for the future of Medicare and other federal healthcare programs.



The 2014 OIG Work Plan is available at:


2014 OIG Work Plan, Introduction.


2014 OIG Work Plan, p. 2.


For an overview of the 2 midnight rule, see CMS’s Final Rule Regarding the Payment of Medicare Part B Inpatient Services and the Revised Standard for Hospital Inpatient Admissions, Andrew B. Wachler and Jesse A Markos, eSource Vol 10 No. 1, September 27, 2013.  (


See CMS Clarification, Inpatient Hospital Reviews: The legislation to "patch" the sustainable growth rate formula signed April 1, 2014 also delayed enforcement of the 2 midnight rule.


See S.2082, Two-Midnight Rule Coordination and Improvement Act of 2014,


2014 OIG Work Plan, p. 2.


See CMS Provider Reimbursement Manual, Part 1, Pub. No. 15-1, ch. 9 § 902.2.


2014 OIG Work Plan, p. 2-3.


Mergers and affiliations among various types of healthcare entities have occurred at a fast pace.  Recent articles discussing this trend include: Recent Trends in Academic Medical Center Mergers, Acquisitions and Affiliations, Jan Murray and Kathleen Burch, ABA Health Lawyer, Vol. 26, No. 3 February 2014 and Reform Update: ACA will accelerate hospital mergers, Moody’s says, Melanie Evans, Modern Healthcare, Oct. 23, 2013 (


2014 OIG Work Plan, p. 5.


See Id.


See Id.


2014 OIG Work Plan, p. 14.


See Id.


See CMS Press Release, Second Wave of CMS’ Enrollment Moratoria Extended for Home Health and Ground Ambulance Suppliers; Four New Geographic Areas Added, Jan. 30, 2014 (


2014 OIG Work Plan, p. 20-21.


See, for example, HHS announcement on increased funding for mental health services pursuant to PPACA:


2014 OIG Work Plan, p. 25-26.


The role of the ZPICs is to find suspected cases of fraud, review in a thorough and timely manner and then take immediate action to protect Medicare money.  See CMS definition:


PSCs were the precursors to ZPICs.  As such, PSCs were also designed to prevent, detect and deter fraud.  However, the PSCs are transitioning into becoming ZPICs and will be wholly replaced when the transition finishes.  Medicare Program Integrity Manual, ch. 4, § 4.1-4.2.


See 2014 OIG Work Plan, p. 25-26.


2014 OIG Work Plan, p. 45.


Section 6402(h)(2) of the Affordable Care Act granted this authority to the federal government.


42 C.F.R. § 455.23(a).


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