Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

C M
ONSECUTIVE  EDICARE 

I S
NPATIENT  TAYS

 Inspector General 
June 2005 
OEI-03-01-00430  Office of Inspector General 

http://oig.hhs.gov 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, 
as amended, is to protect the integrity of the Department of Health and Human Services 
(HHS) programs, as well as the health and welfare of beneficiaries served by those 
programs. This statutory mission is carried out through a nationwide network of audits, 
investigations, and inspections conducted by the following operating components: 
Office of Audit Services 
The OIG's Office of Audit Services (OAS) provides all auditing services for HHS, either by 
conducting audits with its own audit resources or by overseeing audit work done by others. 
Audits examine the performance of HHS programs and/or its grantees and contractors 
in carrying out their respective responsibilities and are intended to provide independent 
assessments of HHS programs and operations in order to reduce waste, abuse, and 
mismanagement and to promote economy and efficiency throughout the department. 
Office of Evaluation and Inspections 
The OIG's Office of Evaluation and Inspections (OEI) conducts short-term management 
and program evaluations (called inspections) that focus on issues of concern to the 
department, the Congress, and the public. The findings and recommendations contained 
in the inspections reports generate rapid, accurate, and up-to-date information on the 
efficiency, vulnerability, and effectiveness of departmental programs. The OEI also 
oversees state Medicaid fraud control units, which investigate and prosecute fraud and 
patient abuse in the Medicaid program. 
Office of Investigations
The OIG's Office of Investigations (OI) conducts criminal, civil, and administrative 
investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries 
and of unjust enrichment by providers. The investigative efforts of OI lead to criminal 
convictions, administrative sanctions, or civil monetary penalties. 
Office of Counsel to the Inspector General 
The Office of Counsel to the Inspector General (OCIG) provides general legal services to 
OIG, rendering advice and opinions on HHS programs and operations and providing all 
legal support in OIG's internal operations. The OCIG imposes program exclusions and 
civil monetary penalties on health care providers and litigates those actions within the 
department. The OCIG also represents OIG in the global settlement of cases arising 
under the Civil False Claims Act, develops and monitors corporate integrity agreements, 
develops compliance program guidances, renders advisory opinions on OIG sanctions to 
the health care community, and issues fraud alerts and other industry guidance.    E X E C U T I V E   S U M M A R Y
OBJECTIVE 
To review services provided to beneficiaries with consecutive Medicare 
inpatient stays involving acute care hospitals, rehabilitation units, 
psychiatric units, and skilled nursing swing beds in acute care hospitals 
to determine:  (1) whether there were problems with quality of patient 
care, (2) whether services were unnecessarily fragmented across 
consecutive inpatient stays, and (3) whether care was medically 
necessary and reasonable. 
BACKGROUND 
This inspection focuses on consecutive inpatient stays in fiscal year (FY) 
2002 involving acute care hospitals and three types of inpatient 
facilities that may be found within acute care hospitals:  rehabilitation 
units, psychiatric units, and skilled nursing swing beds.  For purposes 
of this review, we define the term consecutive inpatient stays as a 
sequence of three or more individual inpatient facility stays for the 
same Medicare beneficiary, where the admission date for each 
successive stay occurs within 1 day of the discharge date for the 
preceding stay. 
There were 63,345 sequences of consecutive inpatient stays    
(210,555 individual stays) involving one or more of these four facility 
types in FY 2002.  Medicare payments for these stays totaled $1.9 
billion. These are payments from the Medicare Hospital Insurance 
Trust Fund and do not include any beneficiary payment amounts (i.e., 
deductibles and coinsurance). 
Medicare fiscal intermediaries are responsible for ensuring that 
inpatient rehabilitation, inpatient psychiatric, and skilled nursing 
swing bed services are medically necessary and billed and paid 
appropriately.  Medicare Quality Improvement Organizations (QIOs) 
are responsible for reviewing acute care hospital services for medical 
necessity and correct coding, and are required to review instances in 
which acute care hospitals may try to circumvent the prospective 
payment system through actions such as premature discharges, 
inappropriate transfers, and inappropriate or early readmissions.  The 
QIOs are also responsible for reviewing services rendered by all types of 
Medicare providers to ensure that the quality of services met 
professionally recognized standards of health care. 
  OEI-03-01-00430  CONSECUTIVE MEDICARE INPATIENT STAYS  i  E X E C U T I V E   S U M M A R Y  
Fiscal intermediaries ceased performing routine medical reviews of 
inpatient hospital services in 1982, when the Peer Review 
Organizations (now known as QIOs) were created.  However, QIOs do 
not currently conduct routine case reviews of inpatient hospital services 
for the express purpose of identifying potential quality of care concerns 
or identifying activities that may suggest potential circumvention of the 
prospective payment system. 
We reviewed FY 2002 Medicare inpatient facility services and identified 
sequences of consecutive inpatient stays that contained one or more of 
the four types of facilities included in our review.  We selected a 
stratified-cluster sample of sequences of consecutive inpatient stays and 
collected beneficiaries medical records for these stays from inpatient 
facilities. We forwarded the medical records for 120 sample sequences 
(407 individual stays) to an independent medical review contractor.  
Three physicians of internal medicine reviewed these medical records 
and answered questions about each individual stay.  Then, to analyze 
the consecutive nature of these stays, physicians assessed each 
sequence of stays in its entirety as a single episode of care. 
FINDINGS 
Twenty percent of consecutive inpatient stay sequences were 
associated with poor-quality care and/or unnecessary fragmentation 
of care.  The majority of sequences of consecutive inpatient stays 
reviewed were medically necessary and appropriate.  However, 
20 percent of sequences were associated with (1) quality of care 
problems that significantly contributed to the need for multiple 
inpatient stays, and/or (2) unnecessary fragmentation of health care 
services across multiple inpatient stays in a sequence. Medicare paid 
an estimated $267 million for these sequences of stays in FY 2002. 
Examples of quality of care problems included failure to treat patients 
in a timely manner, inadequate monitoring and treatment of patients, 
and inadequate care planning.  Unnecessary fragmentation of services 
involved cases in which care provided across sequences of multiple 
inpatient stays may have been necessary and appropriate but should 
have been consolidated into fewer stays.  In sequences containing swing 
bed stays, most instances of unnecessary fragmentation of care resulted 
from unwarranted transfers between acute care and swing bed stays. 
  OEI-03-01-00430  CONSECUTIVE MEDICARE INPATIENT STAYS  ii  EEEEE XXXXX EEEEE CCCCC UUUUU TTTTT IIIII VVVVV EEEEE       SSSSS UUUUU MMMMM MMMMM AAAAA RRRRR YYYYY
Poor-quality care was also a problem within individual stays. As 
stated in the first finding, reviewers found quality of care problems 
associated with sequences of consecutive inpatient stays. Reviewers 
also found quality of care issues in their stay-specific reviews of the 407 
individual inpatient stays within sample sequences. We estimate that 
10 percent of individual inpatient stays in consecutive inpatient stay 
sequences involved problems with the quality of patient care. Medicare 
paid an estimated $171 million in FY 2002 for these stays. 
An additional 3 percent of individual stays were not associated with 
poor-quality care, but did involve medically unnecessary admission and 
treatment, medically inappropriate care setting, treatment that was not 
appropriate to the type of unit or hospital where it occurred, and/or 
premature discharge. 
RECOMMENDATIONS 
To address the Medicare program vulnerabilities discussed in this 
report, we recommend that CMS: 
(1) Direct QIOs to monitor the quality of inpatient services provided 
within sequences of consecutive Medicare inpatient stays involving 
acute care hospitals, skilled nursing swing beds, rehabilitation units, 
and psychiatric units; and (2) encourage QIOs and fiscal 
intermediaries, as appropriate, to monitor the medical necessity and 
appropriateness of inpatient services provided within these 
sequences of consecutive Medicare inpatient stays. 
This monitoring should consist of periodic reviews of a sample of inpatient 
services that were part of sequences of consecutive inpatient stays to 
target the types of problems found during this inspection, including poor 
quality of care and unnecessary fragmentation of care. 
(3) Reinforce efforts to educate providers about the appropriate uses 
of skilled nursing swing beds. 
CMS and its contractors should ensure that physicians and other acute 
care hospital staff understand and comply with Medicare rules regarding 
the appropriate uses of skilled nursing swing beds in acute care hospitals. 
In addition to these recommendations, we will forward information on 
cases that reflected poor quality of patient care, unnecessary 
fragmentation of services, medically unnecessary admission and 
treatment, and inappropriate treatment and setting of care to CMS for 
review and appropriate action. 
OEI-03-01-00430  CONSECUTIVE MEDICARE INPATIENT STAYS  iii  EE XX EE CC UU TT II VV EE    SS UU MM MM AA RR YY

AGENCY COMMENTS 
CMS concurred with the OIGs assessment of consecutive Medicare 
inpatient stays, but believes that existing mechanisms already largely 
address our recommendations. CMS stated that periodic reviews of 
sequences of consecutive inpatient stays are not warranted and contended 
that current QIO activities functionally cover the first and second of OIGs 
recommendations. CMS agreed with OIGs third recommendation and 
indicated that it will prepare a Medlearn Matters provider education 
article that will reference appropriate manual sections to remind providers 
of the appropriate uses of skilled nursing swing beds. 
OFFICE OF INSPECTOR GENERAL RESPONSE 
We continue to believe that CMS should direct QIOs to monitor the 
quality of services provided within sequences of consecutive inpatient 
stays, and should encourage QIOs and fiscal intermediaries to monitor 
the medical necessity and appropriateness of inpatient services provided 
within these sequences of stays. We recognize that QIOs and fiscal 
intermediaries may examine selected individual inpatient stays for 
medical necessity, proper coding, and, in some cases, quality of care. 
However, current efforts do not focus on sequences of consecutive 
inpatient stays and could not detect the types of problems we found in 
our review. 
CMS stated that QIOs conduct provider-wide quality improvement 
activities and review beneficiary complaints about the quality of care 
delivered in any setting. QIOs quality improvement projects, conducted 
as part of CMSs Health Care Quality Improvement Program, are 
strictly voluntary collaborations between QIOs and providers to promote 
optimal care practices. These projects do not involve any routine or 
provider-specific case reviews to evaluate quality of care. We 
acknowledge that QIOs are required to conduct specific types of case 
reviews in response to beneficiary complaints. However, these are 
reactive, case-by-case reviews that do not reflect broad monitoring for 
quality that periodic reviews of a random sample of sequences of 
consecutive Medicare inpatient stays would afford. 
CMS noted that QIOs conduct case reviews of inpatient hospital 
services as part of the Hospital Payment Monitoring Program. It is our 
understanding that the Clinical Data Abstraction Centers screen a large 
sample of individual inpatient services for medical necessity and proper 
coding of services. Sample services are not screened for potential 
OEI-03-01-00430  CONSECUTIVE MEDICARE INPATIENT STAYS  iv  E X E C U T I V E   S U M M A R Y  
quality of care concerns.  Only individual inpatient services that fail to 
pass the initial screening process undergo a QIO case review, where 
quality of care concerns may be detected.  Since individual inpatient 
stays are sampled, the Clinical Data Abstraction Centers screening 
process could not detect problems within sequences of consecutive 
inpatient stays. 
Additionally, CMS stated that fiscal intermediaries will continue to 
actively pursue data analysis efforts regarding consecutive inpatient 
stays and perform medical review if aberrant billing patterns are 
defined.  We are not aware that fiscal intermediaries have ever 
conducted or are currently conducting data analysis and/or medical 
review activities regarding the sequences of consecutive inpatient stays 
we included in our inspection.  According to Chapter 1 of the Medicare 
Program Integrity Manual, fiscal intermediaries alone could not 
conduct such reviews, as QIOs are the sole entities responsible for 
oversight of inpatient acute care hospital services. 
We support CMSs planned effort to prepare and distribute a Medlearn 
Matters provider education article to remind providers of the 
appropriate uses of skilled nursing swing beds. 
  OEI-03-01-00430  CONSECUTIVE MEDICARE INPATIENT STAYS  v  
 T A  B L E   O F   C O N T E N T S  
EXECUTIVE SUMMARY ......................................... i 

INTRODUCTION ................................................ 1 

FINDINGS ....................................................... 9 

Poor quality and unnecessary fragmentation of care in 

consecutivei npatient stay sequences. . . . . . . . . . . . . . . . . . . . . . . .  9

Poor quality of care in individual inpatient stays  . . . . . . . . . . . . .  11

RECOMMENDATIONS ......................................... 13 

APPENDIXES .................................................. 16 

Appendix A:  Estimatesa nd Confidence Intervals  . . . . . . . . . . . .  16

Appendix B:  Centers for Medicare & Medicaid Services 

  Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17

ENDNOTES ..................................................... 19

ACKNOWLEDGMENTS ......................................... 21 
 ..
INTRODUCTION
OBJECTIVE
To review servces provided to beneficiaries with consecutive Medicare
inpatient stays involving acute care hospitals, rehabilitation units,
nursing swing beds in acute care hospitals
psychiatric units, and skiled 
to determine: (1) whether there were problems with quality of  patient
care, (2) whether services were unnecessarily fragmented across
consecutive inpatient stays, and (3) whether care was medically
necessary and reasonable.
BACKGROUND
The Social Security Act of 1965 (the Act) established Medicare, which
now provides health insurance coverage to Americans over the age of
65, certain people with disabilities, and people with end .stage renal
disease. Medicare Part A provides insurance for inpatient care in acute
care and other types of hospitals and in skilled nursing facilities. It also
covers hospice care and some home health care.
Consecutive Medicare Inpatient Stays.
This inspection focuses on consecutive inpatient stays in fical year (FY)
2002 involving acute care hospitals and three types of inpatient
facilities that may be found within acute care hospitals: rehabilitation
units, psychiatric units, and skiled nursing swing beds.
For purposes of this review, we define the term "consecutive inpatient
stays" as a sequence of three or more individual inpatient facility stays
for the same Medicare beneficiary, where the admission date for each
successive sta, occurs within 1 day of the discharge date of the
preceding stay.
Medicare Payments for Consecutive Inpatient Stays.
Medicare Part A payments for all inpatient facility stays in FY 2002
totaled $101 billion. Payments to the four inpatient facility types
included in this review accounted for $84 billion of this totaL As shown
in Table 1, more than $1.9 billion ofthese Medicare payments were for
63,345 sequences of consecutive inpatient stays (210,555 individuat
the four facility types in our review. All
stays) involving one or more of 
Medicare payment amounts presented in this report reflect payments
made from the Medicare Hospital Insurance Trust Fund and do not
include any payments from beneficiaries. Medicare beneficiaries are
responsible for payment of deductibles and coinsurance. Medicaid or
private insurance policies may cover these costs.
OEI-03.01-00430 CONSECUTIVE MEDICARE INPATIENT STArS
1 I N T R O D U C T I O N

Table 1: Medicare Payments for Inpatient Stays, FY 2002 
All Inpatient Stays  Consecutive Inpatient Stays 
Type of 
Number of  Medicare  Number of  Medicare 
Inpatient 
Stays  Payments  Stays  Payments 
Stay 
Acute Care  10,815,587  $79,312,786,735  140,713  $1,394,870,199 
Hospital 
Rehabilitation  271,517  $2,838,128,268  38,719  $372,537,620 
Unit 
Psychiatric  331,098  $2,123,306,086  18,830  $110,004,471 
Unit 
Skilled  76,617  $160,927,083  12,293  $27,669,595 
Nursing Swing 
Beds 
  Totals  11,494,819  $84,435,148,172  210,555  $1,905,081,885 
Source:  Centers for Medicare & Medicaid Services, Medicare Provider Analysis and Review file, FY 2002 
Medicare Payment Systems. 
Acute care hospitals  Section 1886(d) of the Act established the 
prospective payment system for Medicare acute care hospital services 
effective October 1, 1983.  Under this system, the Centers for Medicare 
& Medicaid Services (CMS) pay a hospital a fixed, predetermined 
amount for each acute care stay, depending on the diagnosis related 
group code assigned to the stay.1 
Inpatient units in acute care hospitals  CMS also uses prospective payment 
systems to reimburse for care in inpatient rehabilitation units 
(beginning January 1, 2002) and skilled nursing swing beds (beginning 
July 1, 2002).  Swing beds are located in hospitals that have special 
approval to use these beds, as needed, to provide either acute care or 
skilled nursing care.   
In November 2003, CMS issued a proposed rule to implement a 
prospective payment system for inpatient psychiatric hospitals and 
units that would have become effective in April 2004.  However, CMS 
has delayed issuing the final rule to implement the prospective payment 
system for inpatient psychiatric care due to the late publication of the 
proposed rule.  At present, Medicare continues to pay for inpatient 
psychiatric care using a cost-based reimbursement system. 
Oversight of Inpatient Hospital Care. 
Fiscal intermediaries Pursuant to section 1816(a) of the Act and    
42 CFR  421.100, CMS contracts with fiscal intermediaries to pay 
claims for health care services provided to beneficiaries by hospitals and 
other inpatient facilities, and to ensure that the services rendered by 
these facilities are covered by the program.  Fiscal intermediaries are 
  OEI-03-01-00430  CONSECUTIVE MEDICARE INPATIENT STAYS  2  I N T R O D U C T I O N  
also responsible for ensuring that inpatient rehabilitation, inpatient 
psychiatric, and skilled nursing swing bed services are medically 
necessary and reasonable and are billed and paid appropriately, as 
required by 42 CFR  421.100 and Chapter 1 of the Medicare Program 
Integrity Manual.  Fiscal intermediaries ceased routine medical review 
of inpatient hospital services with the advent of CMSs peer review 
program. 
Quality Improvement Organizations  Under the authority of the Peer 
Review Improvement Act of 1982, CMS contracted with groups of 
licensed physicians in each State to ensure the quality, effectiveness, 
efficiency, and economy of hospital care provided to Medicare 
beneficiaries. Section 1154(a) of the Act stipulates that Peer Review 
Organizations, now called Quality Improvement Organizations (QIOs), 
must review health care services rendered by all types of Medicare 
providers to ensure that the quality of services meets professionally 
recognized standards of health care.  As part of the Hospital Payment 
Monitoring Program, the QIOs are also responsible for ensuring that 
acute care hospital services provided to Medicare beneficiaries are 
medically necessary and reasonable and are billed correctly. 
Section 1886(f)(2) of the Act provides specific actions that the Secretary 
may take when QIOs determine that a Medicare provider took an action 
with the intent of circumventing the prospective payment system.  The 
Act prohibits hospitals from admitting patients unnecessarily, 
admitting them unnecessarily multiple times, or engaging in other 
inappropriate practices designed to circumvent the prospective payment 
system. Section 4255(C) of the Quality Improvement Organization 
Manual specifies prohibited actions that are considered circumventions 
of the prospective payment system including premature discharges, 
inappropriate transfers, and inappropriate or early readmissions. If a 
QIO establishes that an acute care hospital has been taking actions 
with the intent of circumventing the prospective payment system, the 
QIO may deny admissions, initiate a sanction report and 
recommendation, or refer the cases to the Office of Inspector General 
(OIG) for potential termination of its Medicare provider agreement. 
Originally, QIOs depended heavily upon medical case reviews of random 
samples of individual inpatient stays to determine medical necessity 
and quality of care.  However, during the mid-1990s, individual case 
review activities were replaced with quality improvement projects 
conducted as part of CMSs Health Care Quality Improvement Program. 
  OEI-03-01-00430  CONSECUTIVE MEDICARE INPATIENT STAYS  3  I N T R O D U C T I O N  
Unlike case reviews, the quality improvement projects depend upon 
voluntary collaborations between QIOs, hospitals, and physicians to 
improve adherence to optimal care practices. 
Currently, QIOs do not conduct routine case reviews of inpatient 
hospital services for the express purpose of identifying potential quality 
of care concerns or potential circumventions of the prospective payment 
system. However, QIOs are required to conduct specific types of case 
reviews to fulfill mandatory requirements including beneficiary 
complaints, alleged anti-dumping violations, gross and flagrant 
violations,2 and Hospital Payment Monitoring Program cases.  QIOs can 
refer cases to OIG for sanction as a result of case reviews.  However, the 
numbers of monetary penalties and exclusions resulting from QIO 
referrals have declined significantly since the early 1990s. 
Related Office of Inspector General Work. 
Since the implementation of the prospective payment system for acute 
care hospitals, OIG has conducted a number of audits to determine 
whether acute care hospitals are engaged in activities to maximize 
Medicare reimbursements by circumventing prospective payment 
system rules.  These audits have focused on the implementation of 
Medicares postacute care transfer policy and readmissions to the same 
acute care hospital on the same day.  In a report issued in August 2002, 
Review of Medicare Same-Day, Same-Provider Acute Care 
Readmissions in Pennsylvania During Calendar Year 1998   
(A-03-01-00011), OIG examined a sample of medical records and found 
that 63 of 98 readmissions were billed incorrectly because beneficiaries 
were, in fact, admitted to a nonacute care unit within the hospital, or 
were never actually discharged from the initial admission. 
In addition to identifying providers with high incidences of same-day 
readmissions, a February 2000 OIG report, Analysis of Readmissions 
Under the Medicare Prospective Payment System for Calendar Years 
1996 and 1997 (A-14-99-00401), also identified cases in which 
beneficiaries had three or more multiple, continuous readmissions to 
the same hospital. OIG made several recommendations, including a 
recommendation that CMS review the claims for these multiple, 
continuous readmissions. The report also pointed out that QIOs 
discontinued case review for random samples of acute care hospital 
readmission claims in 1993. 
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METHODOLOGY 
The methodology for this inspection was composed of two parts: (1) an 
analysis of Medicare claims for all FY 2002 inpatient facility services, 
and (2) a medical record review of a sample of inpatient facility services. 
Analysis of Medicare Claims. 
We accessed CMSs Medicare Provider Analysis and Review (MedPAR) 
file to analyze and manipulate data for all Medicare inpatient stays in 
FY 2002.3 We used SAS programming to identify sequences of three or 
more consecutive inpatient stays, and then to identify those sequences 
that contained one or more of four facility types included in our review: 
acute care hospitals, inpatient rehabilitation units, inpatient psychiatric 
units, and skilled nursing swing beds in acute care hospitals. We chose 
to focus this inspection on consecutive inpatient stays involving these 
four types of facilities because rehabilitation units, psychiatric units, 
and skilled nursing swing beds are generally located within acute care 
hospitals. We excluded from review all other types of inpatient facilities 
that were involved in consecutive inpatient stays in FY 2002. For 
sequences involving the four facility types included in our review, we 
examined the data to determine the frequency of consecutive inpatient 
stay sequences and to assess the characteristics of these sequences. 
Sample Design for Medical Review. 
The sample for this inspection consisted of sequences of three or more 
consecutive inpatient stays for the same beneficiary involving one or 
more of four inpatient facility types included in our review. 
Analysis of FY 2002 MedPAR data indicated that Medicare payments 
for individual sequences of consecutive inpatient stays ranged from a 
low of $150 to a high of $1.3 million. Therefore, we stratified the 
population of consecutive stay sequences by Medicare payment amount. 
We designed three strata representing low, middle, and high Medicare 
payment amounts per sequence. For sampling purposes, each sequence 
was considered a cluster, or grouping, of individual inpatient stays. We 
selected a stratified-cluster sample of sequences of consecutive stays 
from the population of 63,345 sequences. 
We intentionally oversampled due to concerns that open OIG 
investigations may have prevented us from contacting some inpatient 
facilities. As shown in Table 2 on the following page, the final sample 
for this inspection included 120 sequences (407 individual inpatient 
stays) for medical review. 
OEI-03-01-00430  CONSECUTIVE MEDICARE INPATIENT STAYS  5  I N T R O D U C T I O N

Table 2: Sample for Medical Review 
Sample  Stays in 
Sequence  Total Medicare  Sampling  Sequences  Sample 
Stratum  Description  Payments  Frame  for Review  Sequences 
Medicare  $631,573,087  38,007  40  125 
payment per 
1 
sequence < 
$27,000 
Medicare  $702,820,090  19,000  40  135 
payment per 
2  sequence > 
$27,000 and < 
$54,000 
Medicare  $570,688,708  6,338  40  147 
payment per 
3 
sequence > 
$54,000 
  Totals  $1,905,081,885  63,345  120  407 
Source:  FY 2002 MedPAR file and OIG data analyses 
Data Collection for Medical Review. 
Between October 2003 and March 2004, we collected medical records 
from inpatient facilities and an independent contractor performed 
medical reviews of these records. 
Medical records We identified the names and addresses of the inpatient 
facilities that billed Medicare for all stays in each sample sequence.  We 
prepared letters requesting copies of electronic and paper-based medical 
records in support of each stay in sample sequences, and mailed medical 
record requests to inpatient facilities.   
Medical review  We forwarded beneficiaries medical records for   
120 sample sequences (407 individual stays) to an independent medical 
review contractor.  This contractor employed three physicians of 
internal medicine to review the medical records for sample sequences. 
The physicians used a medical review instrument jointly developed by 
OIG and the contractor.  The physicians answered specific questions 
pertaining to each individual stay in sample sequences. Then, to 
analyze the consecutive nature of these stays, the three physicians 
answered questions about each sequence of stays in its entirety as a 
single episode of care. The medical review instrument provided space 
for the physicians to explain their responses in narrative form. 
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Issues for medical review For each stay within a sequence, the physicians 
determined: 
 	 The health care setting for the stay and the reason for 
admission, 
 	 Whether the care setting was medically appropriate,4 
 	 Whether the admission and treatment were reasonable and 
medically necessary, 
 	 Whether the treatment provided during the stay was 
appropriate to the type of unit or hospital where it occurred,5 
 	 Whether there were problems with the quality of patient care 
during the stay, 
 	 Whether the patient was discharged prematurely, and 
 	 Whether problems with the quality of patient care during the 
stay necessitated a subsequent stay in the sequence. 
For each sequence of stays, the physicians determined: 
 	 Whether services were unnecessarily fragmented across multiple 
inpatient stays in the sequence,6 
 	 Whether problems with quality of care significantly contributed 
to the need for multiple inpatient stays in the sequence, 
 	 Whether premature discharge significantly contributed to the 
need for multiple inpatient stays in the sequence, and 
 	 Whether it appeared that factors other than clinical 
considerations influenced the course of patient care in the 
sequence. 
Data Analysis. 
Medical review data We aggregated the medical review results to identify 
the proportion of consecutive inpatient stays that physicians cited for 
poor quality of patient care, medically inappropriate care setting, 
medically unnecessary admission, premature discharge, medically 
unnecessary or unreasonable treatment, and treatment that was not 
appropriate to the type of unit or hospital where it occurred. We 
analyzed the proportion of stays cited for a particular problem by 
facility type. In addition, we identified the proportion of sequences that 
physician reviewers cited for unnecessary fragmentation of services 
across multiple stays, quality of care problems that significantly 
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contributed to the need for multiple stays, premature discharge(s) that 
contributed to the need for multiple stays, and nonclinical 
considerations that influenced the course of patient care. We estimated 
total Medicare payments associated with these stays and sequences. 
We used SUDAAN software to produce weighted estimates of 
proportions and total payments. These estimates reflect the stratified-
cluster sample design. Point estimates and confidence intervals for all 
statistics presented in the findings of this report are provided in 
Appendix A. We used qualitative data analysis software to aid in our 
analyses of narrative explanations that physicians recorded on the 
medical review instruments. 
This study was conducted in accordance with the Quality Standards for 
Inspections issued by the Presidents Council on Integrity and 
Efficiency and the Executive Council on Integrity and Efficiency. 
OEI-03-01-00430  CONSECUTIVE MEDICARE INPATIENT STAYS  8    F I N D I N G S
The majority of sequences of 
Twenty percent of consecutive inpatient stay 
consecutive inpatient stays 
sequences were associated with poor-quality 
reviewed were medically 
care and/or unnecessary fragmentation of care 
necessary and appropriate.  
However, reviewers determined that 20 percent of consecutive inpatient 
stay sequences were associated with (1) quality of care problems that 
significantly contributed to the need for multiple inpatient stays, and/or 
(2) unnecessary fragmentation of health care services across multiple 
inpatient stays in a sequence.  Quality of care problems were defined as 
medical errors, accidents, or patient care that did not meet 
professionally recognized standards.  Unnecessary fragmentation of 
services involved cases where care provided across sequences of 
multiple inpatient stays may have been necessary and appropriate, but 
should have been consolidated to fewer stays.    
Medicare paid an estimated $267 million in FY 2002 for sequences of 
consecutive stays associated with poor-quality care and/or unnecessary 
fragmentation of care. This figure represents 14 percent of total 
Medicare payments in FY 2002 for consecutive inpatient stays involving 
one or more of the four facility types included in our review ($1.9 
billion). 
Four of the sequences reviewed that were associated with poor-quality 
care and/or unnecessary fragmentation of care also involved one or more 
premature discharges that contributed to the need for multiple 
inpatient stays. For these sequences, reviewers noted that patients 
required additional evaluation or treatment that they did not receive 
prior to discharge.  In one sequence, there may not have been a need for 
one or more of the subsequent stays had the patient received additional 
evaluation or treatment. 
In another three sequences associated with poor-quality care and/or 
unnecessary fragmentation of care, reviewers were unable to identify 
clinical factors to justify the patients course of care.  Although there 
were multiple inpatient stays in these sequences, reviewers could not 
identify discernible breaks in the patients treatment across stays or 
could not clearly determine the need for multiple inpatient admissions 
in two of these sequences. 
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 SSS  
Most quality of care problems and unnecessary fragmentation of care in 
these sequences of consecutive inpatient stays resulted from poor 
management of patient care. 
Reviewers described instances of poor management of patient care in 
almost all sequences that were cited for quality of care problems and 
unnecessary fragmentation of services. 
For sequences associated with quality of care problems, we classified the 
following types of events as poor management of patient care: failure to 
treat patients in a timely manner, inadequate monitoring and 
treatment of patients, and inadequate care planning. 
In one sequence, a patient was transferred from an acute care stay to a 
skilled nursing swing bed stay and then back to an acute care stay. 
During this sequence, the patient gained 20 pounds of fluid due to 
overhydration. Initially, this patient required intravenous fluid to treat 
dehydration. However, the patient had a history of heart failure. The 
reviewer noted that medical records did not indicate that an appropriate 
amount of monitoring took place for a patient with a history of 
congestive heart failure. Had medical staff monitored the patient better 
during the first acute care stay, congestive heart failure would have 
been detected and treated earlier, and these actions would have 
prevented the third stay in this sequence. 
For sequences in which health care services were unnecessarily 
fragmented across stays, reviewers indicated that better management of 
patient care could have led to fewer inpatient stays. We classified the 
following types of events as poor management of patient care that 
resulted in unnecessary fragmentation of services across stays: 
unnecessary or inappropriate transfers and readmissions, inadequate 
assessment of patients, and inadequate care planning. 
Most instances of unnecessary fragmentation of care in sequences 
including skilled nursing swing bed stays resulted from unwarranted 
transfers. 
Unnecessary fragmentation in sequences including swing bed stays 
occurred because there was no clinical need for a transfer to the swing 
bed. From the medical records, reviewers could not identify a change in 
the types of acute care services provided or a break in the continuity of 
patient care that would have justified new admissions to the skilled 
nursing swing bed stays. In one case, the reviewer wrote: The record 
as sent to me was organized as one stay (e.g., all progress notes 
together, all labs together, etc.), and that indeed was what it was. I 
OEI-03-01-00430  CONSECUTIVE MEDICARE INPATIENT STAYS  10  F I N D I N G S  
separated the pages by dates and could find no clinical reason for 
dividing this patients course into four stays.  Reviewers noted that the 
change in patients status did not appear to be justified and thus 
resulted in additional inpatient admissions that were not needed. 
As stated in the first finding,
Poor-quality care was also a common problem 
reviewers found quality of care 
within individual stays 
problems associated with 
sequences of consecutive inpatient stays.  Reviewers also found quality 
of care issues in their stay-specific reviews of the 407 individual 
inpatient stays within these sequences.  Reviewers found that     
10 percent of individual inpatient stays were associated with poor 
quality of patient care. An additional 3 percent of inpatient stays 
reflected other problems including medically unnecessary admission 
and treatment, inappropriate treatment and setting of care, and 
premature discharge. 
Ten percent of individual stays in consecutive inpatient stay sequences 
involved poor quality of patient care. 
Physicians were asked to determine whether the medical records for 
each individual stay in the sequences under review indicated problems 
with the quality of patient care in the stay.  Quality of care problems 
were defined as medical errors, accidents, or patient care that did not 
meet professionally recognized standards.  Based on our analysis of 
medical review data, we estimate that 10 percent of individual inpatient 
stays involved problems with the quality of patient care.  Medicare paid 
an estimated $171 million in FY 2002 for these stays, or 9 percent of 
total Medicare payments in that year for consecutive inpatient stays 
involving one or more of the four facility types included in our review 
($1.9 billion). 
Reviewers determined that poor quality of patient care was the only 
problem associated with 8 percent of individual inpatient stays 
reviewed.  Two percent of stays were associated with poor quality of 
patient care as well as other problems, including medically unnecessary 
admission, medically inappropriate care setting, treatment that was not 
appropriate to the unit or hospital where it occurred, and premature 
discharge. 
Most quality of care problems in these individual stays resulted from poor 
management of patient care and medical errors. 
Most of the quality of care problems that reviewers identified among 
individual inpatient stays were categorized as poor management of 
  OEI-03-01-00430  CONSECUTIVE MEDICARE INPATIENT STAYS  11  FFFFFF IIIIII NNNNNN DDDDDD IIIIII NNNNNN GGGGGG SSSSSS  
patient care and medical errors. Similar to our findings regarding 
sequences associated with quality of care problems, poor management of 
patient care in these individual stays involved medical staff failing to 
treat patients in a timely manner; exhibiting poor clinical knowledge; 
performing inadequate planning; and failing to properly evaluate, 
diagnose, and treat their patients. 
Reviewers also described specific medical errors that resulted in poor 
quality of patient care. Examples of these medical errors included drug 
overdoses, inadequate prevention of blood clots, misplaced pacemaker 
wires, improper administration of intravenous fluids, and 
administration of inappropriate or ineffective drugs. The quality of care 
problems that reviewers found in the individual inpatient stays often 
contributed to the need for multiple inpatient stays in related 
sequences. 
An additional 3 percent of individual stays in consecutive inpatient stay 
sequences were not associated with poor-quality care, but involved 
medically unnecessary admission and treatment, inappropriate treatment 
and setting of care, and premature discharge. 
Poor quality of care was the most common problem associated with the 
individual inpatient stays reviewed; however, reviewers found other 
problems with individual inpatient stays. An additional 3 percent of 
stays reflected problems such as medically unnecessary admission, 
medically inappropriate care setting, treatment that was not 
appropriate to the type of unit or hospital where it occurred, medically 
unnecessary treatment, and premature discharge. 
OEI-03-01-00430  CONSECUTIVE MEDICARE INPATIENT STAYS  12  ..
R E COM MEN D A T I 0 "N 5
Medical review of sequences of consecutive Medicare inpatient stays
revealed instances of poor quality of patient care and unnecessary
fragmentation of health care servces across multiple stays. Physician
reviewers' examination of medical records for sequences of consecutive
inpatient stays provided context that would not have been available
individual inpatient stays. This approach
using a random sample of 
enabled reviewers to analyze the consecutive nature of these stays and
identify the broader impacts of poor-quality care and unnecessary
fragmentation of care beyond the level of an individual inpatient stay.
QIOs are responsible for ensuring that the quality of health care
servces provided to Medicare beneficiaries meets appropriate
standards. Both QIOs and fiscal intermediaries share responsibilties
for ensuring that servces provided in the four types of inpatient
facilities included in our review are medically reasonable and necessary
and are biled correctly. Therefore, to address the Medicare program
in this report, we recommend that CMS:
vulnerabilties discussed 
(1) Direct QIOs to monitor the quality of inpatient services provided within
sequences of consecutive Medicare inpatient stays involving acute care
hospitals, skiled nursing swing beds, rehabiltation units, and psychiatric
units; and (2) encourage QIOs and fiscal intermediaries, as appropriate, to
monitor the medical necessity and appropriateness of inpatient services
provided within these sequences of consecutive Medicare inpatient stays.
This monitorig should be conducted through periodic reviews of a
sample of inpatient servces that were part of sequences of consecutive
inpatient stays to target the types of problems found during this
inspection, including poor quality of care and unnecessary
fragmentation of care.
(3) Reinforce efforts to educate providers about the appropriate uses of
skiled nursing swing beds.
CMS and its contractors should ensure that physicians and other acute
care hospital staff understand and comply with Medicare rules regarding
the appropriate uses of skiled nursing swing beds in acute care hospitals.
In addition to these recommendations, we will forward information on
cases that reflected poor quality of patient care, unnecessary
fragmentation of servces, medically unnecessary admission and
treatment, and inappropriate treatment and setting of care to CMS for
review and appropriate action.
OEI.03.01.00430
CONSECUTIVE MEDICARE INPATIENT STAYS
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AGENCY COMMENTS 
CMS concurred with OIGs assessment of consecutive Medicare inpatient 
stays, but believes that existing mechanisms already largely address our 
recommendations. CMS stated that periodic reviews of sequences of 
consecutive inpatient stays are not warranted and contended that current 
QIO activities functionally cover the first and second of OIGs 
recommendations. CMS agreed with OIGs third recommendation and 
indicated that it will prepare a Medlearn Matters provider education 
article that will reference appropriate manual sections to remind providers 
of the appropriate uses of skilled nursing swing beds. 
OFFICE OF INSPECTOR GENERAL RESPONSE 
We continue to believe that CMS should direct QIOs to monitor the 
quality of services provided within sequences of consecutive inpatient 
stays, and should encourage QIOs and fiscal intermediaries to monitor 
the medical necessity and appropriateness of inpatient services provided 
within these sequences of stays. We recognize that QIOs and fiscal 
intermediaries may examine selected individual inpatient stays for 
medical necessity, proper coding, and, in some cases, quality of care. 
However, current efforts do not focus on sequences of consecutive 
inpatient stays and could not detect the types of problems we found in 
our review. 
CMS stated that QIOs conduct provider-wide quality improvement 
activities and review beneficiary complaints about the quality of care 
delivered in any setting. QIOs quality improvement projects, conducted 
as part of CMSs Health Care Quality Improvement Program, are 
strictly voluntary collaborations between QIOs and providers to promote 
optimal care practices. These projects do not involve any routine or 
provider-specific case reviews to evaluate quality of care. We 
acknowledge that QIOs are required to conduct specific types of case 
reviews in response to beneficiary complaints. However, these are 
reactive, case-by-case reviews that do not reflect broad monitoring for 
quality that periodic reviews of a random sample of sequences of 
consecutive Medicare inpatient stays would afford. 
CMS noted that QIOs conduct case reviews of inpatient hospital 
services as part of the Hospital Payment Monitoring Program. It is our 
understanding that the Clinical Data Abstraction Centers screen a large 
sample of individual inpatient services for medical necessity and proper 
OEI-03-01-00430  CONSECUTIVE MEDICARE INPATIENT STAYS  14  R E C O M M E N D A T I O N S  
coding of services.  Sample services are not screened for potential 
quality of care concerns.  Only individual inpatient services that fail to 
pass the initial screening process undergo a QIO case review, where 
quality of care concerns may be detected.  Since individual inpatient 
stays are sampled, the Clinical Data Abstraction Centers screening 
process could not detect problems within sequences of consecutive 
inpatient stays. 
Additionally, CMS stated that fiscal intermediaries will continue to 
actively pursue data analysis efforts regarding consecutive inpatient stays 
and perform medical review if aberrant billing patterns are defined.  We 
are not aware that fiscal intermediaries have ever conducted or are 
currently conducting data analysis and/or medical review activities 
regarding the sequences of consecutive inpatient stays we included in our 
inspection. According to Chapter 1 of the Medicare Program Integrity 
Manual, fiscal intermediaries alone could not conduct such reviews, as 
QIOs are the sole entities responsible for oversight of inpatient acute care 
hospital services. 
We support CMSs planned effort to prepare and distribute a Medlearn 
Matters provider education article to remind providers of the appropriate 
uses of skilled nursing swing beds. 
OEI-03-01-00430  CONSECUTIVE MEDICARE INPATIENT STAYS  15    A P P E N D I X   ~   A
 Estimates and Confidence Intervals 
Table 1: Sequence Counts, Point Estimates, and Confidence Intervals (n=120 Sequences) 
Sequence 
Count  Point Estimate  95% Confidence Interval 
Sequences Associated With Poor Quality of Care and 
18  20.14%  11.30% - 28.98% 
Unnecessary Fragmentation of Health Care Services 
Estimated Medicare Payments for Sequences of 
Consecutive Inpatient Stays Associated With Poor 
$266,711,464  $154,692,649 - $378,730,279 
Quality of Care and Unnecessary Fragmentation of 
Health Care Services 
Source: Independent medical review contractor, OIG analysis of medical review results 
Table 2: Stay Counts, Point Estimates, and Confidence Intervals (n=407 Inpatient Stays) 
Stay Count  Point Estimate  95% Confidence Interval 
Inpatient Stays Associated With Poor Quality of Care  33  9.51%  5.45% - 13.57% 
Inpatient Stays Associated With Poor Quality of Care Only  29  7.91%  4.68% - 11.14% 
Inpatient Stays Associated With Poor Quality of Care in 
4  1.60%  0.03% - 3.17% 
Addition to Other Problems 
Inpatient Stays Associated With Medically Unnecessary 
Admissions, Medically Unnecessary Treatment, 
9  3.21%  0.84% - 5.58% 
Inappropriate Setting, Premature Discharge, and Treatment 
That Was Not Appropriate to the Facility Where It Occurred 
Estimated Medicare Payments for Consecutive Inpatient 
$171,457,370  $96,778,160 - $246,136,580 
Stays Associated With Poor Quality of Care 
Source: Independent medical review contractor, OIG analysis of medical review results 
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Centers for Medicare & Medicaid Services Comments 
OEI-03-01-00430  CONSECUTIVE MEDICARE INPATIENT STAYS  17  A P P E N D I X ~ B  

OEI-03-01-00430  CONSECUTIVE MEDICARE INPATIENT STAYS  18  
 E N D N O T E S   
1	 For purposes of payment, an acute care hospital stay is assigned to 
one of approximately 500 categories called diagnosis related groups 
(DRG) based on the patients diagnoses, demographic information, 
and medical procedures performed during the stay. As some patients 
require more intensive services and procedures than others, Medicare 
reimbursement amounts vary depending on the DRG assigned to a 
stay. CMS pays for hospital inpatient care at a predetermined rate 
per discharge, not based on length of stay.  For particular cases that 
are unusually costly, known as outlier cases, the payment is 
increased.  This additional payment is designed to protect the 
hospital from large financial losses due to unusually expensive cases. 
2	 As specified in 42 CFR  1004.1, 
gross and flagrant violation means a violation of an obligation has 
occurred in one or more instances which presents an imminent 
danger to the health, safety, or well-being of a program patient or 
places the program patient unnecessarily in high-risk situations. 
Health care provider obligations under the Social Security Act (the 
Act) are specified at section 1156(a): 
It shall be the obligation of any health care practitioner and any 
other person (including a hospital or other health care facility, 
organization, or agency) who provides health care services for 
which payment may be made (in whole or in part) under this Act, to 
assure, to the extent of his authority that services or items ordered 
or provided by such practitioner or person to beneficiaries and 
recipients under this Act  (1) will be provided economically and 
only when, and to the extent, medically necessary; (2) will be of a 
quality which meets professionally recognized standards of health 
care; and (3) will be supported by evidence of medical necessity and 
quality in such form and fashion and at such time as may 
reasonably be required by a reviewing peer review organization in 
the exercise of its duties and responsibilities. 
3	 The MedPAR file is made up of final action records for all Medicare 
beneficiaries using inpatient facility services.  Each record 
summarizes all services provided to a beneficiary during an inpatient 
facility stay from the time of admission to the time of discharge.  The 
file is created quarterly from CMSs National Claims History      
100 Percent Nearline File. 
OEI-03-01-00430  CONSECUTIVE MEDICARE INPATIENT STAYS  19  E N D N O T E S  
4  Physician reviewers were asked, In your professional opinion, was 
the setting a medically appropriate care setting for this stay?  To 
answer this question, reviewers considered the overall condition and 
treatment needs of the patient upon admission to the care setting. 
5  Physician reviewers were asked, In your professional opinion, does it 
appear that the treatment provided during this stay was appropriate 
to the type of unit or hospital where it occurred?  To answer this 
question, reviewers considered the specific treatments rendered to 
the patient during the stay to determine whether these treatments 
were appropriately provided in the unit/hospital where they occurred. 
6  Physician reviewers were asked, Does it appear that services were 
unnecessarily fragmented across the multiple inpatient stays in this 
sequence?  We provided reviewers with the following examples to 
define the concept of unnecessary fragmentation.  Example A: A 
patient is discharged to a rehabilitation unit after hip replacement.  
After several days in the rehabilitation unit, the patient is 
transferred to a swing bed, where the same course of rehabilitation 
and general care continues.  Example B:  A patient is admitted to 
acute care with pneumonia.  Initial laboratory findings include a 
glucose level of 350 milligrams per deciliter, although the patient has 
not been previously diagnosed with diabetes.  Treatment during the 
initial acute stay focuses solely on the pneumonia.  The patient is 
discharged to a swing bed, where a urinalysis is positive for sugar.  
On day 5 of the swing bed stay, blood tests again show abnormal 
glucose levels and the patient is readmitted to acute care for 
uncontrolled diabetes.  Example C:  A patient is admitted to acute 
care with symptoms of psychosis.  Laboratory studies rule out any 
organic cause and a diagnosis of schizophrenia is made.  Treatment 
with medication is initiated, and on day 3 the patient is admitted to 
the psychiatric unit.  Medical treatment continues in the psychiatric 
unit until day 14, when the patient is transferred back to acute care 
without explanation.  On day 20, the patient is released on oral 
antipsychotics. 
OEI-03-01-00430  CONSECUTIVE MEDICARE INPATIENT STAYS  20  
 AA PC PK EN NO DW ILXE  D~ G  AM  E N T S
This report was prepared under the direction of Robert A. Vito, Regional 
Inspector General for Evaluation and Inspections in the Philadelphia 
regional office, and Linda M. Ragone, Deputy Regional Inspector 
General. Other principal Office of Evaluation and Inspections staff who 
contributed include: 
Amy Sernyak, Project Leader 
Edward Burley, Program Analyst 
Bambi Straw, Program Specialist 
Doris Jackson, Program Specialist 
Barbara Tedesco, Mathematical Statistician 
Robert Gibbons, Program Analyst
OEI-03-01-00430  CONSECUTIVE MEDICARE INPATIENT STAYS  21