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Update #4
Department of Justice/Office of Inspector General
DRG Three-Day "Window" Project


Allied Association Executives, Legal Counsel and Financial Specialists


John E. Steiner, Jr.


American Hospital Association


Office of General Counsel




July 16, 1996

This is a status report on the initiative against approximately 4,600 hospitals by the Department of Justice (DoJ) and the Office of the Inspector General (OIG) of the Department of Health and Human Services. The issue is alleged improper claims for certain outpatient services. The following information is aimed at clarifying enforcement and compliance issues. It is based on discussions between the AHA's Office of General Counsel and the U.S. Attorney's office for the Middle District of Pennsylvania.

Next States

The U.S. Attorney's office for the Middle District of Pennsylvania recently informed us that it will send demand letters and model settlement agreements to the following states next: California (we expect Northern California to be handled by the Assistant U.S. Attorney in that region, and Southern California by the U.S. Attorney's office for the Middle District of Pennsylvania); Georgia; New Jersey; North Carolina; South Carolina; and Texas. The DoJ said it can't predict the mailing dates for demand letters, because each Assistant U.S. Attorney typically decides independently whether to exercise jurisdiction over this project in their state. In addition, the U.S. Attorney's office for the Middle District of Pennsylvania informed us that some Assistant U.S. Attorneys may start this project on their own in their states and, therefore, act independently of the U.S. Attorney's office for the Middle District of Pennsylvania.

Project Clarifications

The AHA's Office of General Counsel recently clarified the following project points with the DoJ for the Middle District of Pennsylvania:

1. Post-1992 Claims

Providers may delete any claims from 1992 and thereafter if those claims do not include any diagnostic services code. (For applicable diagnostic services codes see: HIM Section 3610.3 subsection B). On the other hand, if any diagnostic services appear on the bill, even if unrelated to the principal diagnosis for the admission, then the OIG will not delete those claims.

2. "Three-Day Window" Project - Not the "72-Hour Window" Project

Technically, this national project should not be referred to as the 72-hour window project, but as the three-day window project. That is because the rule covers any claim for applicable services provided three days before the patient's admission, regardless of what time during the day the patient was admitted. For example, the rule applies to patients admitted any time on January 4, if they also received applicable pre-admission services on January 1-3.

3. Calculating Current, Pre-Settlement Agreement Claims Exposure

In the model settlement agreement, the DoJ calculated for each hospital the average duplicate paid claims data -- in aggregate -- for calendar years 1992, 1993 and 1994. Then, it projected each hospital-specific average up to the most current quarter of the calendar year. Each hospital can decide whether to use the number calculated by the DoJ or conduct its own review of claims data. If a hospital conducts a separate review, the DoJ will require it to report the higher number of duplicate paid claims. Also, for duplicate paid claims after calendar year 1991, the DoJ is only seeking repayment of duplicate paid claims with simple interest at 7% -- no penalties are being assessed on this universe of claims. The calculations of duplicate paid claims and interest for each hospital are reflected in Paragraph 7(b) at page 3 of the settlement agreement.

4. Psychiatric Units

The DoJ has clarified that PPS-exempt psychiatric units are not part of this project for purposes of calculating duplicate paid claims after calendar year 1991. Therefore, providers should check to see whether this type of claim is reflected on the data included with the DoJ's demand letter and settlement agreement. However, the DoJ and OIG did include PPS-exempt units up through the 1991 audit review period for purposes of calculating hospital placement within one of the three tiers used to assess penalties.

Clarification of DoJ Enforcement Intentions and Compliance Requirements

We've attached two DoJ letters, and urge you to keep them in your files.

No Criminal Prosecutions Contemplated

The first letter, dated June 6, 1995, states the DoJ's position on possible criminal prosecutions for claims arising under this recovery project. The DoJ letter states that there are no pending or contemplated criminal investigations or prosecutions arising out of the claims as defined in paragraph 2 of the settlement agreement.

Clarification of "Claim" Definition

The second letter, dated July 11, 1996, reflects several months of negotiations between the AHA and DoJ regarding the scope of this recovery project and related compliance requirements imposed on any hospital signing a settlement agreement. The letter clarifies the definition of a "claim" for purposes of the settlement agreement, and it makes clear that the compliance provisions do not require hospitals to implement either pre or post claims submission testing processes to identify all instances of potential duplicate payments that might result from violations of the DRG 3 day window rule. For example, the July 11, 1996 letter, in the third paragraph on page one, states that certain claims for services provided by two hospitals that may be "wholly owned or operated by a parent corporation common to both hospitals, are not claims that are subject to this project or the Settlement Agreement."

In summary, the universe of potential Medicare claims covered by the DRG 3 day window rule is much larger than the universe of "claims" that are defined in Paragraph 2 of the settlement agreement and are the subject of this project. This important clarification from the DoJ should make it easier and less expensive for hospitals to demonstrate good faith efforts to implement billing compliance provisions for claims that are defined in Paragraph 2 of the settlement agreement.

Working Relationship between Hospitals and Fiscal Intermediaries

The July 11, 1996 letter also states that questions about claims that do not fit within the settlement agreement definition of a claim should be handled "in accordance with a hospital's normal business dealings with its Medicare fiscal intermediary." This important point indicates that the penalties assessed by the DoJ against hospitals that sign a settlement agreement, in lieu of false claims litigation, are intended to heighten provider awareness of a specific billing problem. But neither the penalties nor the compliance provisions in the Settlement Agreement are intended to disrupt or replace the usual course of dealing between hospitals and their fiscal intermediaries to resolve questions involving the Medicare program.

We suggest you discuss these clarifications with your fiscal intermediary. Many of those we've talked to during the course of this national project seem as confused as our members about the definition of a "claim" and the compliance provisions in the settlement agreement.



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