Client Alert

Hospitals Beware: CMS Scrutiny on Medicare Outlier Payments

December 01, 2002

Kenneth J. Yood, James F. Owens and Tae G. Lee

Hot on the heels of the government’s investigation of Tenet Healthcare Corporation and its alleged abusive pricing strategies that inflated Medicare outlier payments, the Centers for Medicare & Medicaid Services has recently issued a Program Memorandum to its fiscal intermediaries. According to the PM, FIs are instructed to identify all hospitals that may be “gaming” the system and inappropriately maximizing Medicare outlier reimbursement. FIs were to complete their analyses and report the identity of suspect hospitals to CMS by December 10, 2002. By December 15, 2002, CMS was scheduled to provide further instructions to FIs regarding taking appropriate investigation and compliance actions against targeted hospitals, which will include possible referrals to the CMS Program Integrity Unit and, if warranted, the Office of Inspector General for investigations of fraud.