Department of Health and Human Services 
OFFICE OF 
 
INSPECTOR GENERAL 
 
 
 
 
 
  M
EDICARE AND 
 
B  C
ENEFICIARIES  OULD 
 
R  S
EALIZE  UBSTANTIAL 
 
S I DRG 
  AVINGS  F THE   
W W E  
INDOW  ERE  XPANDED 
 
Daniel R. Levinson   
Inspector General  
 
February 2014 
OEI-05-12-00480   
   
EXECUTIVE SUMMARY:  MEDICARE AND BENEFICIARIES COULD REALIZE 
SUBSTANTIAL SAVINGS IF THE DRG WINDOW WERE EXPANDED 
OEI-05-12-00480 
 
WHY WE DID THIS STUDY 
 
The DRG window policy defines when outpatient services related to inpatient admissions are not 
paid for separately, but rather are considered to be included in the inpatient lump-sum payment.  
(This payment is known as the Medicare Severity Diagnosis Related Group (DRG) payment, hence 
the term DRG window.)  Under the current DRG window, Medicare and beneficiaries do not pay 
separately for related outpatient services delivered within 3 days of an inpatient admission in a 
setting owned by the admitting hospital.  Services that are provided by hospitals that share a 
common owner (i.e., multiple hospitals owned by the same corporation, hereinafter called affiliated 
hospitals) are not subject to the DRG window. 
 
HOW WE DID THIS STUDY  
 
We used 2010 and 2011 claims to identify the number of related outpatient services delivered both 
on the days prior to the DRG window at settings owned by admitting hospitals and on the days prior 
to the inpatient admission at affiliated hospital groups.  We also used 2010 and 2011 claims to 
calculate the amounts Medicare and beneficiaries paid for these services.   
 
WHAT WE FOUND 
 
Medicare and beneficiaries could realize substantial savings if the DRG window were expanded.  In 
2011, Medicare and beneficiaries paid an estimated $263 million for 4.3 million related outpatient 
services provided at settings owned by admitting hospitals in the 11 days prior to the DRG window.  
Medicare and beneficiaries could also realize savings if the DRG window were applied to other 
hospital ownership structures.  In 2011, Medicare and beneficiaries paid an estimated $45 million  
for 777,000 related outpatient services provided at hospitals affiliated with, but not owned by, 
admitting hospitals during the 3 days prior to inpatient admissions.  Finally, Medicare and 
beneficiaries could realize additional savings if an expanded DRG window were applied to other 
hospital ownership structures.  In 2011, Medicare and beneficiaries paid an estimated $10 million  
for 157,000 related outpatient services provided at affiliated hospitals during the 11 days prior to the 
start of the DRG window. 
 
WHAT WE RECOMMEND  
 
DRG payments include many related outpatient services, but millions of related outpatient services 
are being paid for as separate services, even when they are provided in settings owned by admitting 
hospitals or at affiliated hospitals.  To better ensure that more related outpatient services are covered 
by the DRG window, we recommend that CMS seek legislative authority to (1) expand the DRG 
window to include additional days prior to the inpatient admission and (2) expand the DRG window 
to include other hospital ownership arrangements,  such as affiliated hospital groups.  CMS did not 
concur with either recommendation. 
   
   
TABLE OF CONTENTS 
 
Objectives ....................................................................................................1 

Background..................................................................................................1 

Methodology................................................................................................5 

Findings......................................................................................................12 

Medicare and beneficiaries could realize substantial savings if the 

DRG window were expanded ........................................................12 

Medicare and beneficiaries could realize savings if the DRG 

window were applied to other hospital ownership structures ........15 

Conclusion and Recommendations ............................................................18 

Agency Comments and Office of Inspector General Response .....20 

Appendixes ................................................................................................21 

A: Types of Inpatient and Outpatient Diagnosis Code Matches ...21 

B: Related Outpatient Services Provided at Settings Owned by 

Admitting Hospitals  .......................................................................22 

C: Related Outpatient Services Provided at Affiliated Hospitals .24 

D: Agency Comments  ...................................................................26 

Acknowledgments......................................................................................28 

 
Medicare and Beneficiaries Could Save If the DRG Window Were Expanded (OEI-05-12-00480)    
   
   
OBJECTIVE 
To determine how much money Medicare and its beneficiaries paid in 
2011 for services related to inpatient admissions but not captured by the 
current DRG window policy. 
BACKGROUND 
The DRG window policy defines when outpatient services related to an 
inpatient admission are not paid for separately, but rather are considered 
part of the inpatient lump-sum payment. 1,  2    This lump-sum payment, 
known as the Medicare Severity Diagnosis Related Group (hereinafter 
referred to as the DRG) payment, represents all operating costs 
associated with the inpatient admission, including costs for routine nursing 
services, radiology services, and laboratory services.3  
DRG Window Criteria 
If a Medicare beneficiary receives an outpatient service just prior to an 
inpatient admission, Medicare considers the service to be an extension of 
the inpatient admission and does not pay for it separately.  Generally,  
Medicare does not pay separately for outpatient services so long as the 
services are (1) delivered within 3 days of an inpatient admission in an 
acute care hospital, (2) related to the upcoming inpatient admission, and 
(3) delivered in a setting wholly owned or operated by the admitting 
hospital.4  Payment for these outpatient services is included in the DRG 
payment for the inpatient admission.   
Preadmission Services Delivered More Than 3 Days Before the 
Inpatient Admission 
Although Congress determined that the DRG window should include 
services delivered within 3 days of the inpatient admission, 3 days is not a 
medical standard.  The medical community has identified benefits to 
providing certain preadmission services weeks and sometimes months 
prior to an inpatient stay, notably for surgical inpatient admissions.  For 
example, hematology experts from Stanford University encourage 
physicians to provide diagnostic services 30 days prior to a surgery.   
 
1 Ambulance services and maintenance renal  dialysis services are the only outpatient 
services excluded from this rule.  The Centers for Medicare  & Medicaid Services (CMS) 
separately pays for ambulance services and  maintenance renal services and never bundles 
these services into the DRG payment.  
2 Certain  hospitals (such as psychiatric hospitals, rehabilitation  hospitals, and childrens 
hospitals) are subject only to  a 1-day DRG window.  Social Security Act   1886(a)(4)  
and (d)(1)(B). 
3 42 CFR   412.2(c). 
4 Ibid. 
Medicare and Beneficiaries Could Save If the DRG Window Were Expanded (OEI-05-12-00480)   1 
   
   
They claim this timeframe enables physicians to better identify and 
manage blood diseases such as anemia.5  Similarly, physicians from  Yale 
University state that certain diagnostic services could be delivered 30 (and 
sometimes 90 or 180) days prior to a surgery.6    
Services Related to the Inpatient Admission 
Preadmission services can be either diagnostic or nondiagnostic.  
Diagnostic services are used to make diagnoses and include services such 
as laboratory testing and imaging services.  Nondiagnostic services are 
used to treat diseases and include services such as minor surgical 
procedures. CMS defines diagnostic services using specific revenue codes 
and Current Procedural Terminology (CPT) codes.7, 8   All services that  
CMS does not define as diagnostic are considered nondiagnostic.    
CMS uses different methods to determine whether diagnostic or 
nondiagnostic services are related to an inpatient admission.  The agency 
considers all diagnostic services performed within 3 days of an inpatient 
admission to be related to the inpatient admission.9 CMS considers all 
nondiagnostic services performed within 3 days of an inpatient admission 
to be related to the inpatient admission, unless the hospital indicates on the 
claim that the service is unrelated.10    
Settings Subject to the DRG Window  
Three types of settings are subject to the current DRG window:  settings 
that are wholly owned by admitting hospitals, settings that are wholly 
operated by admitting hospitals, and admitting hospitals themselves.  
A setting is wholly owned by the hospital if the hospital is the sole 
owner.11   An example of a setting that is wholly owned is an outpatient 
clinic that is owned by a hospital.   
A setting is wholly operated by the hospital if the hospital has exclusive 
responsibility for conducting and overseeing the settings routine 
operations, regardless of whether the hospital also has policymaking 
 
5 L.T. Goodnough, et al., Management of  preoperative anaemia in patients undergoing  
elective surgery, ISBT Science Series, Vol. 5, pp. 120124, 2010. 

6 Thomas M. Halaszynski, M.D., et al., Optimizing postoperative outcomes with 

efficient preoperative assessment and management, Critical Care Medicine, Vol.  32, 
 
No. 4, 2004. 

7 Revenue codes describe hospital accommodations and services.  CPT codes are a set of 

codes, descriptions, and guidelines that  describe procedures  and services performed by 
 
physicians and other qualified health care providers. 
 
8 CMS, Medicare Claims Processing Manual,  Pub. No.  100-04, ch. 3  40.3.  

9 42 CFR   412.2(c)(5)(ii). 

10 42 CFR   412.2(c)(5)(iv).  

11 42 CFR   412.2(c)(5)(i). 

Medicare and Beneficiaries Could Save If the DRG Window Were Expanded (OEI-05-12-00480)   2 
   
   
control over the setting.12   An example of a wholly operated setting is a 
hospital-operated physician office.  See Figure 1 for an example of 
settings wholly owned or operated by a hospital.  
 
Figure 1: Example of Settings Wholly Owned or Operated by a Hospital 
 
 
 
 
 
 
 
 
 
 
 
 
 
Source:  Office of  Inspector General (OIG) interpretation of CMS definition of wholly owned or operated.  
For the remainder of this report, we will refer to all three of these settings 
(wholly owned by the admitting hospital, wholly operated by the 
admitting hospital, and the admitting hospital itself) as owned by 
admitting hospitals.  
CMS uses different methods to determine whether hospital outpatient 
settings or physicians offices are owned by admitting hospitals.  For 
hospital outpatient settings, CMS staff said they use an identification 
number unique to each hospital to identify claims where the outpatient 
setting is owned by the admitting hospital.  In July 2012, CMS began 
requiring physicians offices to indicate whether the offices are owned by 
the admitting hospital when billing for a service that is subject to the DRG 
window policy.13  Physicians offices indicate this by placing a modifier on 
the claim.  
 
12 Ibid. 

13 CMS, Medicare Claims Processing Manual, Pub. No. 100-04, ch. 12   90.7 and 
 
90.7.1.  
Medicare and Beneficiaries Could Save If the DRG Window Were Expanded (OEI-05-12-00480)  3 
   
   
Other Hospital Ow nership Structures   
The current DRG window does not apply to at least one common 
ownership structure: hospitals that are owned by the same organization 
(herei nafter called affiliated hospitals).14   
Aff iliated hospitals make up an increasing portion of the current hospital 
ma rket.  In 2011, almost half of all acute-care hospitals and critical access 
hospitals reported being part of a chain org anization.15  Further, an analysis 
of hospital acquisitions fo und that hospital consolidation had increased 
fro m 2009 to 2011.16  See Figure 2 for an example of a group of affiliated 
hospital s. 
Figure 2: Example of a Group of Affiliated Hospitals 
 
 
 
  Corporation 
 
 
Outpt 
clinic 
 
Not  wholly  owned  or  
 
operated  Outpt 
Outpt 
Owns  clinic 
clinic 
  Hospital  
Hospital   B 
  A 
Outpt 
Outpt  dept  Docs  
  Docs   dept  office 
office 
 
Wholly  owned  or  operated  Wholly  owned  or  operated 
 
 
Source:  OIG interpretation of CMS definition of wholly owned or operated and not wholly owned or operated.  
Related Reports 
OIG has a body of work related to the DRG window, spanning over 
20 years.  In this body of work, OIG has documented savings for Medicare 
if the DRG window were expanded beyond 3 days.  In 1994, OIG found 
that Medicare and its beneficiaries could save a total of $121 million on 
hospital outpatient services if Medicare expanded the DRG window to 
 
14 76 Fed. Reg. 73026, 73286  (Nov. 28, 2011). 
15 OIG analysis of fiscal year (FY) 2011 cost reports.   We considered an organization to
  
be a chain  organization if it  owned more than one hospital. 
 
16  Irving Levin Associates Inc., The Health Care Acquisition Report:  18th Edition, 2012. 
 
Medicare and Beneficiaries Could Save If the DRG Window Were Expanded (OEI-05-12-00480)  4 
   
   
7 days prior to an inpatient admission.17 In 2003, OIG found that 
Medicare and Medicare beneficiaries  could save a total of $72 million on  
hospital outpatient services for 10 select DRGs if the DRG window were 
expanded to 14 days.18    
In both reports, OIG recommended that CMS consider seeking legislative 
authority to expand the DRG window.  CMS concurred with this 
recommendation in 2003.  However, CMS has not sought legislative 
authority to expand the DRG window beyond 3 days. 
METHODOLOGY 
We analyzed inpatient and outpatient claims and Medicare cost reports to 
identify how much Medicare and beneficiaries paid in 2011 for services 
related to inpatient admissions but not captured by the current DRG 
window policy. We included two types of services not captured by the 
current DRG window policy in our analysis:  (1) those provided in settings 
owned by admitting hospitals on the days preceding the start of the DRG 
window and (2) those provided by hospitals affiliated with, but not owned 
by, admitting hospitals on the days preceding the inpatient admissions. 
Scope 
For this evaluation, we analyzed related services delivered in hospital 
outpatient settings. We did not analyze related services delivered in 
physicians offices, as we were unable to confidently determine which 
physicians offices were owned by admitting hospitals in 2011. 
Sample Selection 
The population we sampled consisted of all inpatient admissions to 
acute-care hospitals in the 2011 inpatient Standard  Analytic File (SAF) 
that met the following four conditions: 
1.	   The hospitals were subject to the 3-day DRG window (i.e., we 
excluded hospitals subject only to a shorter, 1-day DRG window, 
such as psychiatric hospitals, and hospitals not subject to any DRG 
window policy, such as critical access hospitals).19, 20  
 
17 OIG,  Expansion of the Diagnosis Related Group Payment Window, A-01-92-00521, 
July 1994. 

18 OIG,  Expansion of the Diagnosis Related Group Payment Window, A-01-02-00503, 

August 2003. 

19 Hospitals that were not subject to any DRG window policy were excluded from our 
analysis only when  we identified inpatient admissions.  They were included in our 
analysis when we searched  for related outpatient services.  Hospitals that were subject to 
a shorter,  1-day DRG  window  were not included  when  we searched for either inpatient  
admissions or related outpatient services. 
20 Critical access hospitals are small rural hospitals that are paid 101 percent of their 
reasonable costs for most inpatient and outpatient services.   
Medicare and Beneficiaries Could Save If the DRG Window Were Expanded (OEI-05-12-00480)   5 
   
   
2. 	  The hospitals were located in one of the 50 U.S. States or 

Washington, D.C. 

3. 	  The beneficiaries were not enrolled in a Medicare managed-care 
plan. 
4.   Medicare paid for the admission.  
The population consisted of 10.6 million inpatient admissions and 
6.6 million  Medicare beneficiaries.  From this population, we selected a 
sample of 76,742 beneficiaries associated with 122,868 inpatient 
admissions by selecting all claims  for approximately 1 percent of 
beneficiaries, using the eighth and ninth digits of the beneficiaries 
Medicare numbers to identify members of our sample.  We treated this 
sample as a simple random sample to make population estimates. 
Data Collection 
Standard Analytic File. We used the 2010 and 2011 outpatient SAF to 
identify outpatient services delivered up to 14 days prior to the inpatient 
admissions in our sample.  We also used the 2010 and 2011 outpatient 
SAF to describe the types of related outpatient services provided outside 
the DRG window.  
Medicare cost reports. We used FY 2011 cost-report data to identify 
groups of affiliated hospitals.21    
Data Analysis  
Identifying related outpatient services provided at settings owned by 
admitting hospitals outside the DRG window.  We used the following steps 
to identify related outpatient services provided at settings owned by 
admitting hospitals outside the DRG window: 
1. 	  We identified all 2011 acute care inpatient admissions subject to 
the DRG window.   
2. 	  Using these inpatient admissions, we identified any outpatient 
services delivered between 4 and 14 days prior to an inpatient 
admission to the same beneficiary.  We selected this timeframe 
because OIG had previously recommended expanding the DRG 
window to 14 days prior to the inpatient admission.  We performed 
this analysis using the Medicare number, date of admission for the 
 
21 Hospitals submit cost reports based  on their fiscal years rather than calendar years.  
Because the start of fiscal years varies across hospitals, cost reports are submitted at 
different times. 
Medicare and Beneficiaries Could Save If the DRG Window Were Expanded (OEI-05-12-00480)   6 
   
   
inpatient claim, and the date of service for the corresponding line 
item on the outpatient claim.22    
3. 	  Next, for these outpatient services, we determined whether they 
were provided at settings owned by admitting hospitals.  We did 
this by using an exact match of the hospital identification number 
on the outpatient and inpatient claims.  According to CMS staff, 
the agency uses the hospital identification number in its claims  
processing systems to determine whether claims submitted during 
the DRG window were performed at outpatient settings owned by 
admitting hospitals.  
4.	   Using the same outpatient services identified previously, we 
determined whether these services were related to the upcoming 
inpatient admission.  We made this determination on the basis of a 
match of the first three digits of the admitting, primary, or 
secondary diagnosis codes for hospital inpatient and outpatient 
claims.23  We did not match all five digits of the diagnosis codes 
for two reasons. First, the World Health Organization (the body 
that develops diagnosis codes) states that the first three digits of a 
diagnosis code appropriately describe the major disease category, 
while the fourth and fifth digits provide additional detail and  
specificity.24  Second, CMS believes that the five-digit match 
would impermissibly limit the number of outpatient services 
related to an inpatient admission.25  Approximately 50 percent of 
related outpatient services were identified because the primary 
diagnosis code on the outpatient claim matched the primary 
diagnosis code on the inpatient claim. See Appendix A for the 
number and percentage of each combination of inpatient and 
outpatient diagnosis code matches included in this dataset. 
We relied on these four steps, rather than other data in the claims or 
current CMS policies, to determine whether diagnostic and nondiagnostic 
services were related to inpatient admissions beyond the DRG window.  In 
the DRG window, CMS considers all diagnostic services to be related to 
 
22 Multiple line items can be billed on a claim.  Each line item represents a unique  
service. 
23 A match between the first three digits of the admitting,  primary, or first-listed  
secondary diagnosis codes on  the inpatient claim and the first three digits of the primary 
or first-listed secondary diagnosis codes on the outpatient claim were classified as related 
for this analysis. 
24 World Health Organization,  International Statistical  Classification of Diseases and  
Related Health Problems 10th Revision Volume 2 Instruction Manual, ch. 6.8. 
 
25 Prior to June  2010, CMS used a five-digit match to determine whether nondiagnostic 

services were  related to an inpatient admission.  76  Fed. Reg. 51476, 51707 

(August 18, 2011).  

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the inpatient admission.  Additionally, in the DRG window, CMS 
considers nondiagnostic services to be related to an inpatient admission 
unless hospitals indicate that a service is unrelated using a specific code on 
the claim.  Hospitals do not use this code outside the DRG window. 
We ultimately identified 50,475 related outpatient services provided at 
settings owned by admitting hospitals and matched them to 5,662 inpatient 
admissions.  These inpatient admissions represent 5 percent of all 
admissions in our sample. 
Identifying related outpatient services provided at affiliated hospitals. We  
used the steps previously described to identify related outpatient services  
provided at affiliated hospitals outside the DRG window, with the 
following exceptions: 
1. 	  We used chain ownership information provided in each hospitals 
FY 2011 cost report to identify groups of affiliated hospitals.  We  
considered hospitals to be affiliated with one another if they  
provided the name and address of the same chain owner.     
2. 	  In step 2, we did not limit our matches to services delivered 4 or 
more days prior to the admissions.  Rather, we included services 
provided on the date of admission and on the 14 days prior to 
admission (or, all services delivered within the timeframe of the 
DRG window, as well as during the 11  days prior to the start of the 
DRG window). 
3. 	  In step 3, we matched hospital identification numbers that were in 
the same group of affiliated hospitals, instead of using exact 
matches of the hospital identification numbers to find settings  
owned by admitting hospitals.  We excluded exact matches so that 
settings owned by admitting hospitals were not included in this 
analysis. 
FY 2011 cost reports were not available for 249  of the 4,029 hospitals in 
our sample.  We considered each of these hospitals as not belonging to an  
affiliated group.  Of the remaining 3,780 hospitals in our sample, 
2,135 reported being owned by 1 of 326 separate chain owners. 
We ultimately identified 10,929 related outpatient services provided at 
affiliated hospitals and matched them to 790 inpatient admissions.  These 
inpatient admissions represent 0.6 percent  of all admissions in our sample.   
Approximately 54 percent of related outpatient services were identified 
because the primary diagnosis code on the outpatient claim matched the 
primary diagnosis code on the inpatient claim.  See Appendix A for the 
number and percentage of each combination of inpatient and outpatient 
diagnosis code matches included in this dataset.   
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Number of related outpatient services provided outside the DRG window 
at settings owned by admitting hospitals and at affiliated hospitals. Using 
the matched dataset described above, we counted the number of related 
outpatient services to calculate the number of services provided at settings  
owned by admitting hospitals on the 11 days preceding the DRG window 
and at affiliated hospitals on the 14 days preceding the inpatient 
admission.  We calculated point estimates and 95-percent confidence 
intervals to make population estimates from the sample counts for: 
1. 	  the total number of related services provided at settings owned 
by admitting hospitals during the 11 days preceding the DRG 
window; 
2. 	  the total number of related services provided at settings owned 
by admitting hospitals on each of the 11 days preceding the 
DRG window; 
3. 	  the total number of related services provided at affiliated 
hospitals during the time period of the DRG window (the day 
of the inpatient admissions and the 3 days prior); 
4. 	  the total number of related services provided at affiliated 
hospitals on each day covered by the DRG window, including  
the day of the inpatient admissions and the day immediately 
preceding the inpatient admissions, and on the 2nd and 3rd days 
preceding the inpatient admissions; 
5. 	  the total number of related services provided at affiliated 
hospitals during the 11 days preceding the DRG window; and  
6. 	  the total number of related services provided at affiliated 
hospitals during both the timeframe of the DRG window and 
during the 11 days preceding the DRG window. 
We present point estimates and confidence intervals for multiple days to 
increase the precision of these estimates, as the sample sizes for some  
individual days were too small to calculate reliable estimates. 
Amounts that Medicare and beneficiaries paid for related outpatient 
services provided at settings owned by admitting hospitals and at affiliated 
hospitals. Using the matched dataset described above, we summed 
Medicare payments to providers to calculate the amount Medicare paid for 
related outpatient services.  These related outpatient services were 
provided at settings owned by admitting hospitals on the 11 days 
preceding the DRG window or at affiliated hospitals on the days included 
in the DRG window and the 11 days preceding the DRG window.   
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Similarly, we summed beneficiary deductible and coinsurance payments to 
providers to calculate the amount beneficiaries paid for related outpatient 
services provided at settings owned by admitting hospitals on the 11 days 
preceding the DRG window or at affiliated hospitals on the days included 
in the current DRG window and the 11 days preceding the DRG window.  
We calculated 95-percent confidence intervals for figures in the six 
scenarios described previously. 
Types of related outpatient services provided at settings owned by 
admitting hospitals and at affiliated hospitals. We used the matched 
dataset described above and a list of diagnostic services from CMS to 
classify services as diagnostic or nondiagnostic.  Then, we counted the 
number of each type of service provided at settings owned by admitting 
hospitals during the 11 days preceding the DRG window and at affiliated 
hospitals during the timeframe of the current DRG window, as well as 
during the 11 days preceding the DRG window.  Finally, we calculated 
95-percent confidence intervals for figures in the six scenarios described 
previously. 
Additionally, we grouped the Healthcare Common Procedures Coding 
System (HCPCS) codes into Berenson-Eggers Type of Service (BETOS) 
categories. 26   We then summed the number of services in each BETOS 
category to identify the most common types of diagnostic and 
nondiagnostic services provided at settings owned by admitting hospitals 
on the 11 days preceding the DRG window and at affiliated hospitals on 
the days included in the current DRG window, as well as on the 11 days 
preceding the DRG window.  
Limitations 
We likely underestimated the number of services provided outside the 
DRG window. This happened for three reasons.  First, as previously 
stated, we excluded physicians offices owned by admitting hospitals from  
our analysis. Second, we were likely unable to identify all settings owned 
by admitting hospitals.  CMS staff have acknowledged that there may be 
instances when a hospital outpatient setting is owned by the admitting 
hospital but bills using a separate identification number.  Third, we may 
not have identified all related outpatient services by matching diagnosis 
codes on the inpatient and outpatient claims.  We did not perform a 
medical record review on the claims in our sample to ensure that we had 
identified all related outpatient  services provided outside the DRG 
window. 
 
26 HCPCS codes are used to describe outpatient services on claims.  BETOS categories 
are used to  group similar types of  HCPCS codes into broad classes of services. 
Medicare and Beneficiaries Could Save If the DRG Window Were Expanded (OEI-05-12-00480)   10 
   
   
We may also have included some services in our analysis that were not 
related to the inpatient admission.  We believe that our diagnosis code 
matching criteria resulted primarily in the identification of services that 
were related to the inpatient admission.  However, as mentioned 
previously, we did not perform a medical record review on the services 
included in this analysis to confirm that the matching successfully 
identified related services in all cases.  The number of services that we 
excluded from our analysis likely outweighs the number of nonrelated 
services that we may have included.   
Finally, we likely underestimated the number of services that were 
provided at affiliated hospitals.  FY  2011 cost reports were not available 
for 249  of the 4,029 hospitals in our sample.  We were unable to determine 
whether these hospitals were affiliated with any other hospitals.  
Standards 
This study was conducted in accordance with the Quality Standards for 
Inspection and Evaluation issued by the Council of the Inspectors General 
on Integrity and Efficiency. 
   
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FINDINGS 
Medicare and beneficiaries could realize substantial 
savings if the DRG window were expanded 
If the DRG window were expanded to include more days preceding the 
inpatient admission, Medicare and beneficiaries could realize substantial 
saving by no longer paying for some  outpatient services related to 
inpatient admissions.  During the 11  days prior to the DRG window in 
2011, Medicare and beneficiaries paid an estimated $263 million for an 
estimated 4.3 million services provided at outpatient settings owned by 
admitting hospitals.  See Figure 3 for per-day estimates of related services  
provided at settings owned by admitting hospitals.  Additionally, see 
Appendix B for estimates of the number of services provided, the number 
of diagnostic and nondiagnostic services provided, and the amounts paid 
by Medicare and beneficiaries for related outpatient services provided at 
settings owned by admitting hospitals during the 11 days prior to the DRG 
window in 2011. 
 
Figure 3: Estimated Number of Related Services Provided at Settings 
Owned by Admitting Hospitals During the 11 Days  Prior to the DRG 
Window  
 
 700,000 
 
 600,000 
 
  500,000 
  400,000  D
R
G
  300,000   W 
  IN
D
 200,000  O
  W
 
 100,000 
 
  
11  10  9  8  7  6  5  4  3  2  1 
 
Days  Prior  to  the  DRG  Window 
 
Source:  OIG analysis of inpatient and  outpatient claims, 2013. 
Medicare and beneficiaries would likely realize the highest cost savings 
during the 4 days immediately preceding the start of the DRG window.  
During the first 4 days preceding the DRG window, Medicare spent an 
Medicare and Beneficiaries Could Save If the DRG Window Were Expanded (OEI-05-12-00480)   12 
   
   
estimated average of $24 million per day for related outpatient services, 
compared to an estimated average of $15.9 million per day for services 
provided on the remaining days.  Similarly, beneficiaries spent an 
estimated average of $6.5 million per day for related outpatient services  
provided on the 4 days immediately preceding the DRG window, 
compared to an estimated average of $4.3 million  per day for services 
provided on the remaining days.  See Table 1 for the point estimates and 
confidence intervals for the amounts Medicare and beneficiaries spent on 
the first 4 days compared to the remaining days preceding the DRG 
window.  Additionally, see Figure 4 for estimates of per-day Medicare and 
beneficiary payments for related services provided at settings owned by 
admitting hospitals.  
 
Table 1: Estimated Average Daily Amounts Paid by Medicare and 
Beneficiaries for Related Services Provided at Settings Owned by  
Admitting Hospitals During the 11 Days Prior to the DRG Window  
First 4 days  immediately prior to  Remaining days prior to the DRG 
  the DRG window   window  
95% confidence   95% confidence  
Amount paid by   Point estimate   interval   Point estimate   interval  
$21,270,201  $14,462,994 
Medicare   $23,900,828*  $26,531,456  $15,881,926*   $17,300,859 
$5,931,567  $3,953,269 
Beneficiaries   $6,494,965*  $7,058,364  $4,286,652*  $4,620,036 
 
Source:  OIG analysis of inpatient and  outpatient claims, 2013. 

 
*These point estimates are  significantly different at the 95-percent confidence level. 
 
 
 
 
   
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Figure 4: Estimated Amounts Paid by Medicare and Beneficiaries for 
Related Services Provided at Settings Owned by Admitting Hospitals 
During the 11 Days Prior to the DRG Window  
 
 
$30,000,000 
 
$25,000,000 
 
 $20,000,000 
D
  R
G
$15,000,000   W 
  IN
D
 $10,000,000  O
W
 
 
$5,000,000 
 
$0 
 
11  10  9  8  7  6  5  4  3  2  1 
  Medicare  paid 
Days  Prior  to  the  DRG  Window 
Beneficiaries  paid 
 
Source:  OIG analysis of inpatient and  outpatient claims, 2013. 
 
Medicare and beneficiaries paid more for related nondiagnostic services 
than for diagnostic services during the 11 days prior to the DRG window 
even though beneficiaries received more related diagnostic services during 
that period. Of the estimated $263 million Medicare and beneficiaries 
paid, an estimated $180 million was for 1.4 million  related nondiagnostic 
services. Examples of such services include the administration of drugs, 
minor procedures, and emergency room or office visits.  The remaining 
$83 million was for 2.9 million related diagnostic services.  Examples of 
these services include laboratory tests, electrocardiograms, and imaging.  
See Table 2 for the point estimates and confidence intervals for the 
number of services received and amounts paid by Medicare and 
beneficiaries for diagnostic and nondiagnostic services.  
 
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Table 2: Estimated Services Received and Amounts Paid by  Medicare and 
Beneficiaries for Diagnostic and Nondiagnostic Services Provided at 
Settings Owned by Admitting Hospitals During the 11 Days Prior to the 
DRG Window 
Amounts paid by  Medicare  
  Services received by  beneficiaries  and beneficiaries 
95%  
95% confidence   Point 
  Point estimate   interval   estimate  confidence 
interval  
4,149,200  $244,474,290 
All services   4,315,769  4,482,339  $262,763,221   $281,052,151 
2,831,977  $77,983,456 
Diagnostic services  2,940,366*  3,048,756  $82,819,478*  $87,655,500 
Nondiagnostic   1,296,801  $163,120,038 
1,375,403*  $179,943,743*  
services   1,454,005  $196,767,447 
 
Source:  OIG analysis of inpatient and  outpatient claims, 2013. 
 
*These point estimates are  significantly different at the 95-percent confidence level.  
 
Medicare and beneficiaries could realize savings if the 
DRG window were applied to other hospital ownership 
structures 
If the current, 3-day DRG window policy were applied to groups of 
affiliated hospitals, Medicare and beneficiaries could save millions by no 
longer paying for some outpatient services that are related to inpatient 
admissions.  During the timeframe of the current DRG window (the date 
of the inpatient admission and the preceding 3 days), Medicare and 
beneficiaries paid an estimated $45 million for an estimated 
777,000  related outpatient services provided at affiliated hospitals.  See 
Appendix C for estimates of the number of services provided, the number 
of diagnostic and nondiagnostic services provided, and the amounts paid 
by Medicare and beneficiaries for those services provided at affiliated 
hospitals during the timeframe of the current DRG window in 2011. 
Most of the services provided at affiliated hospitals were provided on the 
day of the inpatient admission or on the day immediately preceding the 
inpatient admission.  On those 2 days, Medicare and beneficiaries paid an 
estimated $42 million for an estimated 723,000 services.  See Table 3 for 
the point estimates and confidence intervals for the amounts spent by 
Medicare and beneficiaries on the first 2 days compared to the remaining 
days preceding the inpatient admission. 
 
 
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Table 3: Estimated Average Daily Amounts Paid by Medicare and 
Beneficiaries for Related  Services Provided at Affiliated Hospitals During 
the Timeframe of the Current DRG Window  
The day of the inpatient admission 
The remaining 2 days in the DRG 
  and the day immediately   window timeframe  
preceding it  
95% confidence   95% confidence  
  Point estimate   interval   Point estimate   interval  
Amount paid by  
$37,736,578  $1,779,369 
Medicare and  $42,448,200*  $2,858,334*  
$47,159,823  $3,937,299 
beneficiaries  
Source:  OIG analysis of inpatient and  outpatient claims, 2013. 
 
*These point estimates are  significantly different at the 95-percent confidence level.  
 
Medicare and beneficiaries paid more for related nondiagnostic services 
than for diagnostic services during the timeframe of the current DRG 
window, even though beneficiaries received more diagnostic services 
during that period.  Of the estimated $45 million that Medicare and 
beneficiaries paid, an estimated $27 million was for 293,000 related 
nondiagnostic services. Examples of such services provided during these 
4 days include minor procedures, the administration of drugs, and 
emergency room or office visits.  The remaining $18 million was for 
484,000  related diagnostic services.  Examples of these services include 
laboratory tests, electrocardiograms, and imaging.  See Table 4 for the 
point estimates and confidence intervals for the number of services 
received and the amounts spent by Medicare and beneficiaries for 
diagnostic and nondiagnostic services provided at affiliated hospitals.  
   
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Table 4: Estimated Services Received and Amounts Paid by  Medicare and 
Beneficiaries for Diagnostic and Nondiagnostic Services Provided at 
Affiliated Hospitals During the Timeframe of the Current DRG Window  
Amounts paid by  Medicare  
Services received by  beneficiaries 
and beneficiaries 
95%  
95% confidence   Point 
  Point estimate   interval   estimate  confidence 
interval  
$40,366,899 
All services   777,223  702,135852,312  $45,306,534   $50,246,170 
$16,084,467 
Diagnostic services  484,461*  436,511532,410  $18,465,170*   $20,845,873 
Nondiagnostic   $23,722,530 
292,763*  262,517323,009  $26,841,365*  
services   $29,960,199 
 
Source:  OIG analysis of inpatient and  outpatient claims, 2013. 
 
*These point estimates are  significantly different at the 95-percent confidence level.  
 
Finally, Medicare and beneficiaries would realize even more savings if an 
expanded DRG window were applied to groups of affiliated hospitals.  In 
2011, an estimated 157,000 related outpatient services were provided at 
hospitals other than the admitting hospitals during the 11 days preceding 
the DRG window.  These other hospitals were affiliated with the admitting 
hospitals. Medicare and beneficiaries paid an estimated $10 million for 
these services. See Appendix C for a description of the number of services 
provided, the number of diagnostic and nondiagnostic services provided, 
and the amounts paid by Medicare and beneficiaries for those services 
provided at affiliated hospitals during the 11 days prior to the DRG 
window. 
 
   
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CONCLUSION AND RECOMMENDATIONS 
The DRG window was intended to ensure that Medicare and beneficiaries 
were not paying the same organization twice for preadmission services 
that had been included in the DRG payment.  However, the DRG window 
does not capture all preadmission services, as Medicare and beneficiaries 
paid the same organizations for millions of services that were related to 
inpatient admissions during the 11 days prior to the start of the DRG 
window in 2011.  The DRG window may not have captured these related 
services because of evolving medical practices (e.g., performing 
preadmission services further from the date of admission to allow for 
treatment of any issues discovered). 
Medicare and beneficiaries are paying admitting hospitals for related 
outpatient services provided on the days immediately preceding the start 
of the DRG window.  In 2011, Medicare and beneficiaries paid 
$263 million for related outpatient services provided at settings owned by 
admitting hospitals during the 11 days prior to the DRG window. 
Medicare and beneficiaries are also paying organizations that own groups 
of affiliated hospitals for related outpatient services provided at hospitals 
affiliated with, but not owned by, admitting hospitals.  In 2011, Medicare 
and beneficiaries paid $55 million for related outpatient services provided 
at affiliated hospitals both during the timeframe of the current DRG 
window and during the 11 days prior.   
If the DRG window policy were expanded to include more days, or 
expanded to include other hospital ownership structures, the policy would 
cover more related outpatient services.  As a result, Medicare and 
beneficiaries could save money.   To better ensure that the DRG window 
covers more related outpatient services, we recommend that CMS: 
Seek legislative authority to expand the DRG window to 
include additional days prior to the inpatient admission 
Medicare and beneficiaries would realize millions of dollars in savings for 
each additional day that the DRG window covered.  In 2011, more than 
4.3 million related outpatient services were provided at settings owned by 
admitting hospitals in the 11 days preceding the DRG window.  The 
majority of those services were performed during the 4 days immediately 
preceding the start of the DRG window. 
Although CMS has concurred with previous OIG recommendations to 
include additional days in the DRG window, CMS has also expressed 
concern that doing so may compromise beneficiaries quality of care 
specifically, that adding more days to the DRG window may incentivize 
providers to perform preadmission services too far in advance of the 
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admission date to be useful.  However, guidance from the medical 
community suggests performing many preadmission services weeks or 
months in advance of an admission so that any problems can be identified 
and corrected. This guidance suggests that expanding the DRG window 
may not compromise the quality of care Medicare beneficiaries receive.  
Seek legislative authority to expand the DRG window to 
include other hospital ownership arrangements, such as 
affiliated hospital groups 
Almost half of all acute-care hospitals in the United States belong to a 
group of affiliated hospitals.  However, services provided at affiliated 
hospitals are not covered by the current DRG window.  CMS should 
expand the DRG window to treat affiliated hospital groups the same as 
settings owned by admitting hospitals.  This would help to ensure that  
Medicare and beneficiaries are not paying the same organizationhere, 
the chain owner of the affiliated hospital groupseparately for related 
outpatient services. 
 
   
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AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL  
RESPONSE 
CMS did not concur with our first recommendation, to seek legislative 
authority to expand the DRG window to include additional days prior to 
the inpatient admission.  CMS noted that adopting this recommendation 
would require legislation and that such a proposal is not currently included 
in the FY 2014 Presidents Budget.  CMS also noted that we did not 
specify the number of days that the DRG window should be expanded. 
CMS also did not concur with our second recommendation, to seek 
legislative authority to expand the DRG window to include other hospital 
ownership arrangements.  CMS noted that adopting this recommendation 
would require legislation and that such a proposal is not included in the 
FY 2014 Presidents Budget.   
We continue to recommend that CMS draft, and submit for review, two 
legislative proposalsone that expands the DRG Window to include 
additional days and one that expands the DRG Window to include other 
hospital ownership arrangementsfor consideration for inclusion in 
future budget and legislative agendas. While CMS cannot dictate what 
legislative proposals are included in the Presidents Budget, CMS does 
have the authority to develop legislative proposals for Medicare.  We look 
forward to CMSs final management decision in light of this clarification 
of the intent of our recommendations. 
We leave the number of days that should be included in an expanded DRG 
window to CMSs discretion.  Any number of days added to the DRG 
window would likely result in savings to Medicare and beneficiaries.   
For the full text of CMSs comments, see Appendix D. 
 
 
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APPENDIX A 
Types of Inpatient and Outpatient Diagnosis Code Matches  
     
Table A-1: Types of Inpatient and Outpatient Diagnosis Code Matches in the Datasets Used To  
Identify Related Services Performed Outside of the DRG Window  
  Dataset used to identify related services performed outside the DRG window at: 
Type of match (inpatient   Settings owned by the admitting  Settings affiliated with the admitting  
to outpatient)  hospitals  hospitals  
Primary to primary  25,183 (50%)   5,888 (54%)  
Primary to secondary  12,556 (25%)   1,531 (14%)  
Admitting to primary  7,473 (15%)   2,411 (22%)  
Admitting to secondary  3,478 (7%)   829 (8%)  
Secondary to primary  754 (2%)   161 (2%)  
Secondary to secondary  1,031 (2%)   109 (2%)  
 
Source:  OIG analysis of inpatient and  outpatient claims, 2013.  
 
   
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APPENDIX B 
Related Outpatient Services Provided at Settings Owned by Admitting Hospitals 
 
Table B-1: Related Outpatient Services Provided at Settings Owned by Admitting Hospitals During the 11 Days  
Prior to the DRG Window 
 
Total number of  
Total number of  
Total number of   Amount paid by   related 
  Amount paid by Medicare  related diagnostic 
related services   beneficiaries   nondiagnostic 
services  
services  
Point estimate   Point estimate   Point estimate   Point estimate  
Point estimate  
Day  N  (95% confidence   (95% confidence   (95% confidence   (95%confidence  
(95% confidence interval) 
interval)  interval)  interval)  interval) 
514,045  $26,327,570  $6,108,497  353,213  160,831 
1  785  
(466,190561,899)   ($18,514,191$34,140,949)  ($5,129,731$7,087,263)  (318,918387,509)   (141,600180,063) 
452,824  $19,876,918   $5,631,796  305,588  147,236 
2  749  
(410,321495,328)   ($16,794,375$22,959,462)  ($4,716,881$6,546,710)  (275,909335,267)   (128,018166,455)  
502,587   $21,547,899  $5,994,013  357,831   144,757 
3  863  
(459,311545,864)   ($18,024,613$25,071,184)  ($5,028,420$6,959,607)  (325,894389,768)   (126,190163,323) 
602,284  $27,850,926  $8,245,554  426,490  175,794 
4  956  
(553,204651,364)   ($23,503,372$32,198,481)  ($6,883,178$9,607,930)   (390,109462,870)   (154,691196,898)  
381,087   $18,512,217  $5,008,833  253,089   127,998 
5  659  
(342,380419,795)   ($15,058,849$21,965,585)  ($4,095,940$5,921,725)  (226,432279,747)   (108,873147,124)  
302,938   $13,475,968  $3,868,070  198,709  104,228  
6  488  
(266,754339,121)   ($11,094,171$15,857,766)  ($3,116,785$4,619,356)  (173,476223,943)   (87,649120,808)  
276,517  $11,619,738  $3,072,185  181,609  94,908 
7  486  
(243,181309,854)   ($9,782,853$13,456,624)   ($2,557,819$3,586,551)   (158,200205,018)   (80,409109,408) 
  275,577  $13,531,657  $3,860,863  181,780  93,797 
8  478 
(243,029308,125)   ($10,706,588$16,356,726)  ($3,074,076$4,647,650)  (158,735204,825)   (79,134108,460) 
274,379   $12,888,968  $3,534,244  194,263   80,116  
9  510 
(242,567306,192)   ($9,990,899$15,787,037)  ($2,811,478$4,257,009)  (170,281218,245)   (67,25392,980)  
354,923  $17,988,444  $4,905,350  234,193  120,730 
10  595 
(317,271392,576)   ($14,221,441$21,755,448)  ($4,034,026$5,776,675)   (208,026260,360)   (103,038138,423) 
378,608   $23,156,489  $5,757,020  253,602  125,006 
11  625 
(340,480416,735)   ($17,513,902$28,799,076)  ($4,777,269$6,736,772)  (226,549280,656)   (107,427142,584) 
 
Source:  OIG analysis of inpatient and  outpatient claims, 2013.  
 
   
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Table B-2: Summary of Related Outpatient Services Provided at Settings Owned by Admitting Hospitals During 
the 11 Days  Prior to the DRG Window 
 
Total number of   Amount paid by Medicare and   Total number of related  Total number of related 
 
related services   beneficiaries   diagnostic services  nondiagnostic services  
Point estimate  
Point estimate   Point estimate   Point estimate  
Day  n  (95% confidence  
(95% confidence interval)  (95% confidence interval)  (95% confidence interval) 
interval) 
All  4,315,769  $262,763,221   2,940,366  1,375,403 
5,279 
days   (4,149,2004,482,339)   ($244,474,290$281,052,151)  (2,831,9773,048,756)   (1,296,8011,454,005) 
 
Source:  OIG analysis of inpatient and  outpatient claims, 2013.  
 
   
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APPENDIX C 
Related Outpatient Services Provided at Affiliated Hospitals 
 
Table C-1: Related Outpatient Services Provided at Affiliated Hospitals During the Timeframe of the Current DRG 
Window  
 
Total number of   Amount paid by Medicare   Total number of related  Total number of related 
 
related services   and beneficiaries  diagnostic services  nondiagnostic services  
Point estimate  
Point estimate   Point estimate   Point estimate  
Day   n  (95% confidence  
(95% confidence interval)  (95% confidence interval)  (95% confidence interval) 
interval) 
Inpatient Admission  723,014  $42,448,200   449,404  273,610 
509 
and DRG day 1   (651,598794,430)   ($37,736,578$47,159,823)  (403,816494,992)   (244,834302,386) 
DRG  54,209   $2,858,334  35,056   19,153 
67 
days 2-3   (36,00872,410)   ($1,779,369$3,937,299)  (23,28246,830)   (11,72726,578) 
 
Source:  OIG analysis of inpatient and  outpatient claims and cost reports, 2013.  
 
Table C-2: Summary of Related Outpatient Services Provided at Affiliated Hospitals During the Timeframe of the 
Current DRG Window  
 
Total number of   Amount paid by Medicare and   Total number of related  Total number of related 
 
related services   beneficiaries   diagnostic services  nondiagnostic services  
Point estimate  
Point estimate   Point estimate   Point estimate  
Day   n  (95% confidence  
(95% confidence interval)  (95% confidence interval)  (95% confidence interval) 
interval) 
All  777,223  $45,306,534   484,461   292,763 
551 
days    (702,135852,312)   ($40,366,899$50,246,170)  (436,511532,410)   (262,517323,009) 
 
Source:  OIG analysis of inpatient and  outpatient claims and cost reports, 2013.  
 
 
Table C-3: Summary of Related Outpatient Services Provided at Affiliated Hospitals During the 11 Days Prior to 
the DRG Window  
 
Total number of related  Amount paid by Medicare and   Total number of related  Total number of related 
 
services   beneficiaries   diagnostic services  nondiagnostic services  
Point estimate  
Point estimate   Point estimate   Point estimate  
Day   n  (95% confidence  
(95% confidence interval)  (95% confidence interval)  (95% confidence interval) 
interval) 
All  157,240  $9,561,618   98,671  58,570 
223 
days   (124,627189,853)   ($7,225,066$11,898,169)   (79,129118,212)   (41,43975,700) 
 
Source:  OIG analysis of inpatient and  outpatient claims and cost reports, 2013. 
 
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Table C-4: Summary of Related Outpatient Services Provided at Affiliated Hospitals During the Timeframe of the 
DRG Window  and the 11 Days Prior to the DRG Window  
 
Total number of related  Amount paid by Medicare and   Total number of related  Total number of related 
 
services   beneficiaries   diagnostic services  nondiagnostic services  
Point estimate   Point estimate   Point estimate   Point estimate  
Day   n 
(95% confidence interval)  (95% confidence interval)  (95% confidence interval)  (95% confidence interval) 
934,463   $54,868,152  583,131   351,332 
All days   741 
(849,1401,019,787)   ($49,233,160$60,503,144)  (529,478636,784)   (314,825387,840) 
 
Source:  OIG analysis of inpatient and  outpatient claims and cost reports, 2013. 
 
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  APPENDIX D 
Agency Comments 
.,..,.....,'s ... 
(-/- DEPARTMENT OF HEALTH & HUMAN SERVICES  Centers for Medicare & Medicaid Services 
Administrator 
Washington, DC 20201 
DATE:  DEC 13  2013 
TO: 	 Daniel R. Levinson 
Inspectw General 
FROM: 	 Mal'i.lyn TaVenner 
Administrator 
SUBJECT: 	Office of Inspector General (OIG) Draft Report:  "Medicare and 

Beneficiaries Could Realize Substantial Savings If the Diagnosis Related 

Group Window (DRG) Were Expanded, OEI-05-12-00480" 

The Centers for Medicare & Medicaid Services (CMS) appreciates the opportunity to review and 
comment on above subject OIG Draft Report. OIG's objective for this report was to identify 
how much money Medicare and its beneficiaries paid in 2011 for services related to inpatient 
admissions but not captured by the current DRG window policy. Under the current DRG 
window, Medicare's hospital inpatient prospective payment system includes payment for all 
diagnostic services and related non-diagnostic services provided by the hospital (or by an entity 
wholly owned or operated by the hospital) to the patient during the 3-days immediately 
preceding the date of the patient's admission. The study calculated the potential savings 
associated with expanding the 3-day payment window to include more days preceding the 
inpatient admission and expanding it to affiliated hospitals. 
OIG determined that in 2011, Medicare and beneficiaries paid $263 million for related outpatient 
services provided at settings owned by admitting hospitals during the 11-days prior to the DRG 
window.  Medicare and beneficiaries are also paying organizations that own groups ofaffiliated 
hospitals for related outpatient services provided at hospitals affiliated with, but not owned by, 
admitting hospitals. In 2011, Medicare and beneficiaries paid $55 million for related outpatient 
services provided at affiliated hospitals both during the timeframe of the current DRG window 
and during the 11-days prior. 
The O!G recommendations and CMS responses to those recommendations are discussed below. 
OIG Recommendation 
The OIG recommends that CMS seek legislative authority to expand the DRG window to include 
additional days prior to the inpatient admission. 
CMS Response 
The CMS does not concur with this recommendation. As OIG's recommendation indicates, 

adopting this recommendation would require legislation and such a proposal is not currently 

Medicare and Beneficiaries Could Save If the DRG Window Were Expanded (OEI-05-12-00480)  26   
   
 
Medicare and Beneficiaries Could Save If the DRG Window Were Expanded (OEI-05-12-00480)   27 
   
   
ACKNOWLEDGMENTS 
This report was prepared under the direction of  Ann Maxwell, Regional Inspector General for 
Evaluation and Inspections in the Chicago regional office; Thomas Komaniecki, Deputy 
Regional Inspector General; and Laura Kordish, Deputy Regional Inspector General.  
Lisa Minich served as the team leader for this study, and Beth McDowell served as the lead 
analyst.  Other Office of Evaluation and Inspections staff from the Chicago regional office who 
conducted the study include Elliot Curry and Brian Jordan.  Central office staff who provided 
support include Kevin Farber, Kevin Manley, Christine Moritz, and Sherri Weinstein.  
Consolidated Data Analysis Center staff who provided support include Mara Werner. 
 
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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 Office  of  Audit Services  (OAS) provides 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.  These assessments help reduce waste, abuse, and  
mismanagement and promote economy and efficiency  throughout  HHS. 
Office of Evaluation and Inspections 
The Office  of  Evaluation and Inspections (OEI)  conducts national evaluations to  provide 
HHS, Congress, and the public with timely, useful, and reliable information on significant 
issues.  These evaluations focus on preventing fraud,  waste, or abuse  and promoting  
economy, efficiency, and effectiveness of departmental programs.  To promote impact, OEI 
reports also present practical recommendations for improving program operations.  
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative investigations  
of  fraud and misconduct  related to HHS programs, operations, and beneficiaries.  With 
investigators working in all 50 States and the District of Columbia, OI  utilizes its resources 
by actively  coordinating with the Department  of Justice  and other Federal, State, and local 
law enforcement authorities.  The investigative efforts of OI often lead to  criminal 
convictions, administrative sanctions,  and/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 for OIGs  internal operations.  OCIG represents  OIG in all civil and 
administrative fraud and abuse cases involving HHS programs,  including False Claims Act, 
program exclusion, and civil monetary penalty cases.  In  connection with these cases, OCIG 
also negotiates and monitors corporate integrity agreements.  OCIG renders advisory 
opinions, issues compliance program  guidance, publishes fraud alerts, and provides other  
guidance  to  the health care industry concerning the anti-kickback statute and other  OIG  
enforcement authorities.