Department of Health and Human Services 


OFFICE OF 

INSPECTOR GENERAL 

CONSECUTIVE MEDICARE 


INPATIENT STAYS


 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 Investiga ions t

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. 
∆ EXECUTIVE SUMMARY 

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. 

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EXECUTIVE SUMMARY 

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. 

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EXECUTIVE SUMMARY

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. 

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EXECUTIVE SUMMARY

AGENCY COMMENTS 

CMS concurred with the OIG’s 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 OIG’s 

recommendations. CMS agreed with OIG’s 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 CMS’s 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 

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EXECUTIVE SUMMARY 

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 Center’s 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 CMS’s planned effort to prepare and distribute a “Medlearn 

Matters” provider education article to remind providers of the 

appropriate uses of skilled nursing swing beds. 

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∆ 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 

consecutive inpatient stay sequences ........................ 9

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

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

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

Appendix A: Estimates and Confidence Intervals ............ 16

Appendix B: Centers for Medicare & Medicaid Services’ 

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

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

ACKNOWLEDGMENTS ......................................... 21 
.. INTRODUCTION

OEI-03.01-00430

OBJECTIVE

To review servces provided to beneficiaries with consecutive Medicare

inpatient stays involving acute care hospitals, rehabilitation units,

psychiatric units, and skiled 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

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

stays) involving one or more of the four facility types in our review. All

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.

CONSECUTIVE MEDICARE INPATIENT STArS 1
INTRODUCTION

Table 1: Medicare Payments for Inpatient Stays, FY 2002 

All Inpatient Stays Consecutive Inpatient Stays 

Type of 

Inpatient 

Stay 

Number of 

Stays 

Medicare 

Payments 

Number of 

Stays 

Medicare 

Payments 

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 

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INTRODUCTION 

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 CMS’s 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 CMS’s Health Care Quality Improvement Program. 

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INTRODUCTION 

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 

Medicare’s 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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INTRODUCTION

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 CMS’s 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. 

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INTRODUCTION

1 

Medicare 

payment per 

sequence < 

$27,000 

2 

Medicare 

payment per 

sequence > 

$27,000 and < 

$54,000 

3 

Medicare 

payment per 

sequence > 

$54,000 

 Totals 

Table 2: Sample for Medical Review 

$631,573,087 

$702,820,090 

$570,688,708 

$1,905,081,885 

38,007 

19,000 

6,338 

63,345 

40 

40 

40 

120 

125 

135 

147 

407 

Stratum 

Sequence 

Description 

Total Medicare 

Payments 

Sampling 

Frame 

Sample 

Sequences 

for Review 

Stays in 

Sample 

Sequences 

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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INTRODUCTION

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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INTRODUCTION

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 stratifiedcluster 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 President’s Council on Integrity and 

Efficiency and the Executive Council on Integrity and Efficiency. 

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∆ FINDINGS 

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 patient’s course of care. Although there 

were multiple inpatient stays in these sequences, reviewers could not 

identify discernible breaks in the patient’s treatment across stays or 

could not clearly determine the need for multiple inpatient admissions 

in two of these sequences. 

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FINDING S 

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 

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FINDINGS 

separated the pages by dates and could find no clinical reason for 

dividing this patient’s 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 

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FINDINGS FINDINGS 

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. 

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.. 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

using a random sample of individual inpatient stays. This approach

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

vulnerabilties 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, 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 13
RECOMMENDATIONS RECOMMENDATIONS 

AGENCY COMMENTS 

CMS concurred with OIG’s 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 OIG’s 

recommendations. CMS agreed with OIG’s 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 CMS’s 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 C ONSECUTIVE MEDICARE I NPATIENT S TAYS 14 
RECOMMENDATIONS 

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 Center’s 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 CMS’s 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 C ONSECUTIVE MEDICARE I NPATIENT S TAYS 15 
∆ APPENDIX ~ 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 

Unnecessary Fragmentation of Health Care Services 18 20.14% 11.30% - 28.98% 

Estimated Medicare Payments for Sequences of 

Consecutive Inpatient Stays Associated With Poor 

Quality of Care and Unnecessary Fragmentation of $266,711,464 $154,692,649 - $378,730,279 

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 

Addition to Other Problems 4 1.60% 0.03% - 3.17% 

Inpatient Stays Associated With Medically Unnecessary 

Admissions, Medically Unnecessary Treatment, 

Inappropriate Setting, Premature Discharge, and Treatment 9 3.21% 0.84% - 5.58% 

That Was Not Appropriate to the Facility Where It Occurred 

Estimated Medicare Payments for Consecutive Inpatient 

Stays Associated With Poor Quality of Care $171,457,370 $96,778,160 - $246,136,580 

Source: Independent medical review contractor, OIG analysis of medical review results 

OEI-03-01-00430 C ONSECUTIVE MEDICARE I NPATIENT S TAYS 16 
∆ APPENDIX ~ B 

Centers for Medicare & Medicaid Services’ Comments 

OEI-03-01-00430 C ONSECUTIVE MEDICARE I NPATIENT S TAYS 17 
APPENDIX~B 

OEI-03-01-00430 C ONSECUTIVE MEDICARE I NPATIENT S TAYS 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 patient’s 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 CMS’s National Claims History 

100 Percent Nearline File. 

OEI-03-01-00430 C ONSECUTIVE MEDICARE I NPATIENT S TAYS 19 
ENDNOTES 

4 

5 

6 

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. 

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. 

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 C ONSECUTIVE MEDICARE I NPATIENT S TAYS 20 
∆ APPENDIX ~ A ACKNOWLEDGMENTS 


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, P oj ad r ect Le er 

Edward Burley, Program Analyst 

Bambi Straw, Program Specialist 

Doris Jackson, Program Specialist 

Barbara Tedesco, Mathematical Statistician 

Robert Gibbons, Prog m Analyst ra

OEI-03-01-00430 C ONSECUTIVE MEDICARE I NPATIENT S TAYS 21