Trend Toward More Expensive Inpatient Hospital Stays in Medicare Emerged Before COVID-19 and Warrants Further Scrutiny

WHY WE DID THIS STUDY

Hospitals have long been essential providers in our healthcare system. Medicare payments reflect their importance: nearly one-fifth of all Medicare payments are for inpatient hospitalizations. In fiscal year (FY) 2019-prior to the COVID-19 pandemic-Medicare spent $109.8 billion for 8.7 million inpatient hospital stays. Trends in inpatient hospitalizations from FY 2014 through FY 2019 provide important lessons for improving the accuracy of inpatient hospital billing. From this information, stakeholders can gain a better understanding of how hospitals bill Medicare and of vulnerabilities that Medicare should address. The pandemic has placed unprecedented stress on the country's health care system, making it more important than ever to ensure that Medicare dollars are spent appropriately.

HOW WE DID THIS STUDY

We analyzed paid Medicare Part A claims for inpatient hospital stays from FY 2014 through FY 2019. We identified trends in hospital billing and Medicare payments for stays at the highest severity level. Severity levels are determined by the Medicare Severity Diagnosis Related Group (MS-DRG).

WHAT WE FOUND

Hospitals are increasingly billing for inpatient stays at the highest severity level, which is the most expensive one. The number of stays at the highest severity level increased almost 20 percent from FY 2014 through FY 2019, ultimately accounting for nearly half of all Medicare spending on inpatient hospital stays. The number of stays billed at each of the other severity levels decreased. At the same time, the average length of stay decreased for stays at the highest severity level, while the average length of all stays remained largely the same.

Stays at the highest severity level are vulnerable to inappropriate billing practices, such as upcoding-the practice of billing at a level that is higher than warranted. Specifically, nearly a third of these stays lasted a particularly short amount of time and over half of the stays billed at the highest severity level had only one diagnosis qualifying them for payment at that level. Further, hospitals varied significantly in their billing of these stays, with some billing much differently than most.

WHAT WE RECOMMEND

Oversight is essential to ensuring that Medicare dollars are spent appropriately. Inpatient hospital billing in the years leading up to the pandemic indicates that some stays at the highest severity level could be susceptible to inappropriate billing. Accordingly, we recommend that CMS conduct targeted reviews of MS-DRGs and stays that are vulnerable to upcoding, as well as the hospitals that frequently bill them. CMS did not concur but acknowledged that there is more work to be done to determine conclusively which changes in billing are attributable to upcoding. We also think more work needs to be done; therefore, we continue to recommend that CMS conduct targeted reviews to identify stays involving upcoding and hospitals with patterns of upcoding.