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Federal contractors are paying particular attention to payment for COVID care.

It’s time to revisit a prediction regarding COVID-related audits. Months ago, it was proposed that any additional funds the U.S. Department of Health and Human Services (HHS) authorized for payment related to COVID-19 care would be at high risk of audit and recoupment. At the time, audits were expected for HRSA (Health Resources and Services Administration,, telemedicine, and the 20-percent increased weight for a COVID diagnosis.

Several hospitals have now received audit notices from the HHS Office of Inspector General (OIG) for COVID-related claims. The OIG has begun auditing hospitals to “determine whether Medicare paid hospitals for these inpatient claims in accordance with federal requirements.” Make no mistake, the OIG is auditing provider billing, not payment. The OIG is not auditing Medicare Administrative Contractor (MAC) performance.

As part of this inpatient status audit, the OIG “requests” documents and completion of a questionnaire. Additionally, the OIG is auditing the qualification of individual claims for the 20-percent increase in MS-DRG weighting. In essence, this is a non-targeted audit of inpatient claims. As expected, once the records are in the hands of an auditor, the claim may be denied for any reason.

Readers will recall that after Sept. 1, 2020, any medical record with a COVID diagnosis must contain documentation of positive test results. The OIG’s letter indicated that the positive test must be the result of specified viral testing methods consistent with Centers for Disease Control and Prevention (CDC) guidelines in effect at the time the test was performed. The tests used must have had Food and Drug Administration (FDA) approval or emergency use authorization at the time of testing.

The OIG asks the hospital to confirm if it declined the payment of the 20-percent increase in weighting. If the hospital did decline the increase, the OIG requests a copy of the hospital’s communication with its MAC. The OIG also asks if the hospital subsequently rescinded its declining of the additional payment. As expected, the OIG requests written documentation of that.

It appears that the OIG is reinstituting its hospital inpatient audits. At this time, any inpatient claim bearing a COVID diagnosis is now at very high risk of audit. If you have billed a COVID diagnosis since Sept. 1, 2020, you should assume you will be audited. If you sought the 20-percent increase after that date, you should prepare to have these claims audited. Even if you declined the increase, COVID claims are still subject to audit, and you should still begin preparing.

The first step is risk assessment:

  • You should determine the volume of COVID claims submitted since Sept. 1, 2020 to assess potential impact to your hospital.
  • Next you should ensure that you can identify the specific type of test associated with each claim, and the FDA approval status of the testing methodology on the date the test was administered.
  • Next, you should assess the risk associated with other diagnoses in these claims, such as sepsis, respiratory failure, mechanical ventilation, and renal failure. Any coded diagnoses that contribute to CCs or MCCs, or otherwise modify the DRG or reimbursement, will likely be scrutinized by the OIG’s medical reviewers. If the diagnoses do not conform to recognized criteria, you should expect DRG-validation denials.
  • Finally, medical necessity should be rigorously reviewed.

The next step is risk response. With assistance and guidance from your compliance team and legal counsel, you should determine how much additional review is warranted:

  • Zero- and one-midnight stays rarely have sufficient documentation to survive audit for inpatient reimbursement.
  • Three-midnight and longer stays should survive review, unless the record indicates that the stay is for a prohibited reason.
  • Two-midnight stays are much more complex. The outcome for these claims will be determined by the auditor’s assessment of the documentation of reasonableness.

These audit results will be the basis for additional reviews. If the OIG determines that you have a well-stocked pond, it will come back to fish again.