t~.~-. .4$tRvic~"."-"'A..,  .  DEPARTMENT OF HEALTH A..l\lD HUl'vlAN SERVICES 
DEPARTMENT OF HEALTH AND HUl'vlAN SERVICES
OOFFFFICICEE OOFFI INNSSPPEECCTOTORR GGEENNEERRAALL 
"""aa(:  WWAASHSHININGGTTOONN, ,D DCC: 2022002101 
NOV  2 3  2012 
NOV 23 2012
TO:  Marilyn Tavenner 
TO: Marilyn Tavenner
Acting Administrator 
Acting Administrator
CCenentetresrsf oforrM Medediciacraere& &M MedediciaciadidS Seervrviciecses 
.;  /~ 
FFRROOMM: :  SStutuaratrtW Wrirgighhtt 
Deputy Inspector General  ~.:::-~-----
Deputy Inspector General
for Evaluation and Inspections 
for Evaluation and Inspections
SUBJECT:  Memorandum Report:  Assessment ofH  ospital Reporting ofP  resent on Admission 
SUBJECT: Memorandum Report: Assessment of Hospital Reporting of Present on Admission
Indicators on Medicare Claims, OEI-06-09-0031 0 
Indicators on Medicare Claims, OEI-06-09-00310
TThhisism mememoroarnadnudmumr erpeporotrtp prorovvidiedsesi ninfoformrmataiotinonr ereqquuesetsetdedb byyo offfifciicailaslso offth theeC Ceenntetresrsf oforrM Meeddicicaarere& & 
Medicaid Services (CMS) about hospital reporting of Present on Admission (POA) indicators.  The 
Medicaid Services (CMS) about hospital reporting of Present onAdmission (POA) indicators. The
Office of Inspector General (OIG) analyzed the POA indicators for Medicare Inpatient Prospective 
Office of Inspector General (OIG) analyzed the POA indicators for Medicare Inpatient Prospective
System (IPPS) claims collected as part of a national, random sample of patients discharged in 
System (IPPS) claims collected as part of anational, random sample of patients discharged in
October 2008.  The indicators were collected in the course of developing OIG's November 2010 
October 2008. The indicators were collected inthe course of developing ~IG's November 2010
report, Adverse Events in Hospitals: National Incidence among Medicare Beneficiaries, 
report, Adverse Events in Hospitals: National Incidence among Medicare Beneficiaries,
OEI-06-09-00090.  Little is known about the accuracy ofPOA indicators, which will 
OEI-06-09-00090. Little isknown about the accuracy of POAindicators, which will
be important for Medicare's efforts to align payment incentives with patient outcomes. 
be important for Medicare's efforts to align payment incentives with patient outcomes.
SUMMARY 
SUMMARY
OIG's November 2010 report found that an estimated 13.5 percent of Medicare beneficiaries 
OIG's November 2010 report found that an estimated 13.5percent of Medicare beneficiaries
hospitalized in October 2008 experienced adverse events, defined as serious harm from medical care 
hospitalized in October 2008 experienced adverse events, defined as serious harm frommedical care
resulting in prolonged hospitalization, permanent disability, life-sustaining intervention, or death. An 
resulting inprolonged hospitalization, permanent disability, life-sustaining intervention, ordeath. An
additional 13.5 percent of hospitalized beneficiaries experienced temporary harm events, defined as 
additional 13.5percent of hospitalized beneficiaries experienced temporary harm events, defined as
requiring intervention but not resulting in lasting harm. To determine these rates, we examined 
requiring intervention but not resulting in lasting harm. Todetermine these rates, we examined
medical records for a national, random sample of 780 hospitalized Medicare beneficiaries discharged 
medical records for a national, random sample of 780 hospitalized Medicare beneficiaries discharged
in October 2008.  This memorandum supplements our prior work by providing national estimates of 
in October 2008. This memorandum supplements our prior work byproviding national estimates of
the extent to which hospital coding staff misreported POA indicators on IPPS claims. 
the extent to which hospital coding staff misreported POA indicators on IPPS claims.
We reviewed 5,491 POA indicators from 698 sample claims.  Hospital coders incorrectly reported 
Wereviewed 5,491 POA indicators from 698 sample claims. Hospital coders incorrectly reported
3 percent of the 5,491 POA indicators reviewed, resulting in at least one incorrect indicator on each 
3percent of the 5,491 POA indicators reviewed, resulting inat least one incorrect indicator oneach
of 129 claims (18 percent).  By dividing the POA indicator errors into three groups based on noted 
of 129claims (18 percent). By dividing the POAindicator errors into three groups based onnoted
similarities, we determined that 21 percent related to the assessment of developing or chronic 
similarities, we determined that 21 percent related to the assessment of developing orchronic
conditions, 32 percent involved errors in assigning POA indicators to exempted conditions, and 
conditions, 32percent involved errors in assigning POA indicators to exempted conditions, and
4 7 percent involved other reporting errors not associated with developing or chronic conditions or 
47 percent involved other reporting errors not associated with developing or chronic conditions or Page 2  Marilyn Tavenner  
with exemptions.  The 3-percent national POA indicator error rate is relatively low, particularly 
given that our review assessed claims submitted early in the implementation of the POA reporting 
requirement.  However, POA indicators provide an opportunity for monitoring hospital quality of 
care and are critical to CMSs efforts to link payment to quality; they must be accurate to serve 
these purposes.  Encouraging hospitals to assess POA reporting practices related to developing 
conditions and exemption codes, and to retrain staff as needed, could help to ensure accuracy.   
 
BACKGROUND 
 
POA Indicators 
Pursuant to Section 5001(c) of the Deficit Reduction Act of 2006 (DRA), hospitals may not receive 
increased Medicare reimbursement for certain conditions when they develop during the hospital stay 
and are not present at the time of admission (referred to as hospital-acquired conditions).  A list of 
non-reimbursable hospital-acquired conditions is updated annually and includes conditions that CMS 
determines to be reasonably preventable.1  To distinguish between conditions that are present at the 
time of admission and those that develop during hospitalization, CMS requires hospitals to report 
POA indicators for every diagnosis code (i.e., International Classification of Disease, Ninth Revision, 
Clinical Modification (ICD-9-CM)) submitted on claims reimbursed through the Medicare IPPS 
beginning in October 2007.2  Hospitals must include a POA indicator for all diagnosis codes.  Certain 
diagnoses are exempted from POA reporting:  conditions that do not represent a current disease or 
injury (such as a prior diagnosis of cancer) or are always present at the admission of a particular 
person (such as a congenital disorder).   
 
In addition to providing a necessary framework for the DRA-mandated payment policy, POA 
indicators provide information for monitoring quality of care.  A number of provisions in the 
Patient Protection and Affordable Care Act of 2010 (ACA) address quality measurement and will 
rely, in part, on accurate reporting of POA indicators.3  Further, hospitals can use information about 
the types and frequency of conditions that develop during hospital stays to monitor trends or to 
narrow case reviews to those most likely to reveal poor care.   
 
CMS requires hospital coders to assign one of five POA indicators to each patient diagnosis on 
Medicare inpatient claims (see Table 1).  Accurately determining whether conditions are present on 
admission requires a high level of precision in patient assessment and medical documentation.4  To 
correctly implement the POA policy, hospitals must train clinicians, such as nurses and physicians, 
to clearly document preexisting conditions in records and train coders to accurately assign POA 
indicators.5   
 
                                                            
1 CMS payment policy regarding hospital-acquired conditions became effective October 1, 2008.  DRA,              
P.L. 109-362,  5001(c), Social Security Act,  1886(d)(4)(D), 42 U.S.C.  1395ww(d)(4)(D); 73 Fed. Reg. 48434, 
4847148491 (Aug. 19, 2008).   
2 CMS, Present on Admission Indicator, Medicare Claims Processing, Transmittal 1240 (Change Request 5499, 
May 11, 2007).  Accessed at https://www.cms.gov/transmittals/downloads/r1240cp.pdf on January 3, 2012. 
3 ACA, P.L. 111-146,  3001 and 3008. 
4 C. Zahn, et al., Modifying DRG-PPS to Include Only Diagnoses Present on Admission:  Financial Implications 
and Challenge, Medical Care, 45 (4), 2007. 
5 L.A. Wiedemann, Preparing for POA Reporting:  How One Facility Educated Its Staff on the Importance of the 
New Requirement, Journal of American Health Information Management Association, 78 (7), 2007.  Page 3  Marilyn Tavenner  
Table 1:  POA Indicators 
Indicator  Description 
Y  Condition was present at time of inpatient admission 
N  Condition was not present at time of inpatient admission 
Documentation insufficient to determine whether condition was present at the time of 
U 
inpatient admission 
Provider unable to clinically determine whether the condition was present at the time of 
W 
inpatient admission 
1  Diagnosis is exempt from POA reporting 
Source:  CMS Fact Sheet, POA Reporting by IPPS Hospitals, October 2008. 
 
OIG Study of Adverse Events in Hospitals 
Beginning in 2008, OIG released a series of reports regarding adverse events in hospitals.  For 
the report Adverse Events in Hospitals:  National Incidence Among Medicare Beneficiaries, we 
conducted nurse and physician reviews of medical records for a nationally representative sample 
of 780 Medicare beneficiaries hospitalized in October 2008.  We found that an estimated  
13.5 percent of hospitalized Medicare beneficiaries experienced adverse events.  An additional 
13.5 percent experienced temporary harm events.6   
 
METHODOLOGY 
 
For this report, OIG contracted with certified coders to review the claims and associated medical 
records for the same sample of beneficiaries examined in the adverse events study.  For the 780 
beneficiaries selected for the adverse events study, OIG reviewed 698 claims submitted under the 
Medicare IPPS.7  Each claim included between 1 and 9 diagnoses for a combined total 5,491 POA 
indicators (all of which were reviewed).8  We made appropriate statistical adjustments and 
projected the error rates to the population of claims submitted to the Medicare IPPS in October 
2008.  We did not attempt to assess the effect of inaccurate POA indicators on claim costs. 
 
The coders analyzed POA indicators for all valid diagnosis codes within the sample using a 
standardized protocol to review the medical records and the associated Medicare claims.  We based 
review standards on the guidelines in place in October 2008.  The coders utilized all available 
information to determine whether conditions were present on admission, and consulted with the 
project director (a coder and medical review expert) and contracted physicians in making 
determinations.  The coders documented all miscoded POA indicators and described circumstances 
in individual cases that may have contributed to the errors.  In some cases, misreported POA 
indicators may not be a reflection that the hospital coders did not follow coding criteria, but rather 
that documentation in the medical record was not sufficient for the coders to accurately reflect the 
beneficiarys condition upon admission.  
                                                            
6 OIG, Adverse Events in Hospitals:  National Incidence Among Medicare Beneficiaries, OEI-06-09-00090, 
November 2010. 
7 We excluded from review 82 of the 780 claims.  We excluded 72 claims because they were not covered under the 
Medicare IPPS.  We also excluded 10 claims that we suspected did not accurately reflect hospital coding of POA 
indicators.  Each of these 10 claims had all POA indicators coded as exempt, but staff at the hospitals submitting 
these claims stated during telephone calls that the hospitals did not submit these claims with all POA indicators 
coded as exempt.   
8 We excluded from review 47 of 5,538 submitted indicators because the associated diagnosis codes were invalid.  Page 4  Marilyn Tavenner  
This study was conducted in accordance with the Quality Standards for Inspection and 
Evaluation approved by the Council of the Inspectors General on Integrity and Efficiency. 
 
RESULTS 
 
Hospital Coding Staff Incorrectly Reported 3 Percent of POA Indicators, With Errors 
Distributed Across 18 Percent of Sample Medicare Claims9 
Among Medicare inpatient claims for the review month, 18 percent (129 sample claims) included 
at least one inaccurate POA indicator.  Of the 5,491 POA indicators reviewed, we identified        
180 reporting errors (3 percent).  About half of the POA reporting errors had one of two distinctive 
traits:  developing or chronic conditions (21 percent) or incorrect use of exemption codes            
(32 percent).  The remaining errors (47 percent) did not appear to be associated with any particular 
codes or conditions, but demonstrate other errors in reviewing medical record documentation.  
Table 2 provides the estimated percentages and 95-percent confidence intervals for the three error 
groups. 
 
Table 2:  POA Indicator Reporting Errors (n=180) 
95-Percent Confidence Interval 
Error Group   Percentage 
Lower  Upper 
Developing or Chronic Condition  21.1%  14.8%  28.6% 
Exemption Code  31.7%  23.0%  40.3% 
Other Coding Errors  47.2%  39.3%  55.1% 
Source:  OIG analysis of 5,491 POA indicators. 
 
Twenty-One Percent of POA Reporting Errors Involved Patients Developing or Chronic 
Conditions 
Thirty-eight of 180 inaccurate POA indicators in our sample may have resulted from uncertainty 
regarding how to assign POA indicators for health conditions that were developing at the time of 
admission and for certain cases of chronic health conditions.  Thirty-two cases involved conditions 
that were developing at the time of admission, when hospital coders used differing criteria for 
assigning POA indicators, such as which symptoms patients exhibited at admission, when 
diagnostic tests were performed, and when physicians documented the diagnosis.  The diagnoses 
associated with these misreported POA indicators included systemic inflammatory response 
syndrome, septic shock, blood infections, urinary tract infections, pneumonia, pressure ulcers, 
constipation, and malnutritionall conditions that may develop over a period of time.  For the 
remaining six cases in this group, hospital coders made POA errors for patients receiving an initial 
diagnosis of a chronic illness, such as diabetes, and for patients experiencing an exacerbation of a 
chronic condition, such as congestive heart failure.   
 
Thirty-Two Percent of the POA Indicator Errors Involved Exemption Codes 
Fifty-seven of the 180 inaccurate POA indicators in our sample resulted from misapplication of the 
CMS exemption provision.  In 49 of these cases, the hospital coder assigned a POA indicator code 
(Y, N, U, or W), when he or she should have identified the diagnosis as exempt (1).  
                                                            
9 The 95-percent confidence interval is 2.863.94 percent for miscoded POA indicators.  For claims with at least one 
POA coding error, the 95-percent confidence interval is 15.7821.73 percent.  Page 5  Marilyn Tavenner  
Exempt diagnoses are not easily categorized by POA indicators, as they typically provide 
contextual information, such as how an injury occurred, or relate to a past diagnosis, such as a 
history of cancer.  Exempt diagnoses should be assigned a 1 POA indicator; yet, in several of 
these cases, the hospital coder listed a POA indicator of U (documentation insufficient).  For the 
remaining eight miscoding errors involving exemption codes, the hospital coders coded the 
diagnoses as exempt when they were not on the published list of exemptions and should have been 
assigned POA indicators.   
 
Forty-Seven Percent of Inaccurately Reported POA Indicators Were Not Associated With 
Specific Codes or Conditions and Demonstrated Other Errors Associated With Medical 
Record Documentation 
For 85 of the 180 misreported POA indicators in our sample, the OIG coders found documentation 
in the medical record that contradicted the POA designation.  The medical records for 50 of these 
cases clearly indicated the presence or absence of the diagnosis at the time of admission.  This 
suggests that hospital coders may have failed to notice or disregarded information necessary to 
make an accurate POA assessment.  For another 22 of the errors in this group, the OIG coders 
found the relevant information in laboratory results or other time-specific information that marked 
the presence or absence of the condition at the time of admission.  However, the physicians who 
diagnosed the patients did not indicate clearly when the conditions developed, and per the coding 
standards, the hospital coders may have been unable to determine the correct POA indicator 
independently.  The remaining 13 miscoded POA indicators included a range of other issues, such 
as a diagnosis that changed during the hospital stay.   
 
CONCLUSION 
 
We found that hospital coders inaccurately reported 3 percent of the POA indicators reviewed, 
resulting in the presence of at least one inaccurate indicator on 18 percent of claims.  The 
3-percent error rate is relatively low, particularly given that our review assessed POA indicators 
early in implementation of the POA reporting requirement.  POA indicators provide an 
opportunity for monitoring hospital quality of care and are critical to CMSs efforts to link 
payment to quality, but they must be accurate to serve these purposes.  Encouraging hospitals to 
assess POA reporting practices related to developing conditions and exemption codes, and to 
retrain staff as needed, could help to ensure accuracy.   
 
This report is being issued directly in final form because it contains no recommendations.  If you 
have comments or questions about this report, please provide them within 60 days.  Please refer 
to report number OEI-06-09-00310 in all correspondence.