Federal audit seeks $3.2 million refund from U hospital

Federal auditors said the University of Minnesota Medical Center should refund more than $3.2 million in estimated overpayments for services they said were incorrectly billed to the Medicare program, according to a report being released Wednesday.

Auditors reviewed 225 claims for payments in 2012 and 2013 and found the hospital did not fully comply with Medicare billing requirements in 130 cases, said the report from the Office of the Inspector General for the U.S. Department of Health and Human Services.

Based on the sample results, auditors estimate the U hospital received overpayments totaling more than $3.2 million during the time period.

"These errors occurred primarily because the hospital did not have adequate controls to prevent the incorrect billing of Medicare claims within the selected risk areas that contained errors," auditors concluded.

The University of Minnesota Medical Center said it would repay the government the full refund amount but is appealing the findings in 23 of the 130 specific cases, according to a statement from Minneapolis-based Fairview Health Services, which owns the U hospital.

"If those appeals are successful, Fairview would then get some of that back," said spokeswoman Cindy Fruitrail. "We aren't able to quantify the amount at this time."

More broadly, the hospital said it would appeal the government's method for extrapolating costs from the sample of claims reviewed. The auditors "found only $565,286 in actual overpayment," Fruitrail said in the statement.

The audit goes to the federal Centers for Medicare and Medicaid Services, which will make a final determination on how much money to seek after hearing from the U hospital.

Located in Minneapolis, the University of Minnesota Medical Center is one of the state's largest medical centers. It's the U's primary teaching hospital and is jointly managed by Fairview and the University of Minnesota Physicians.

Medicare is the federal health insurance program for people who are 65 or older and for certain special populations. Medicare paid the U hospital about $376 million for 12,864 inpatient and 262,335 outpatient claims for services in 2012 and 2013, according to the report.

The government launched the audit as part of a series of compliance reviews being conducted at medical centers across the country. Auditors used computer matching, data mining and analysis techniques to identify certain types of hospital claims that are at risk for noncompliance with Medicare billing requirements.

The audit found eight types of billing errors at the U hospital. The largest dollar value was connected to 71 claims where the hospital billed Medicare for outpatient dental services at a total cost of $240,352, according to the report. Medicare generally does not cover hospital outpatient dental services, the audit noted.

In a response that's part of the audit report, the U hospital said it agreed with those findings. "Since these patients had Minnesota Medicaid which does provide dental coverage, a billing process had been created to bill primary insurance before billing secondary insurance," wrote John Doherty, interim president at University of Minnesota Medical Center. "Denials … were expected but apparently did not occur."

But Doherty's letter said the U hospital disagreed with audit findings in four categories. It questioned the finding that certain rehabilitation services were incorrectly billed at an inpatient level. Doherty also disagreed with the report on whether certain cases of Medicare payment for inpatient care should have been billed for outpatient or "outpatient with observation" care.

Auditors said they stood by their findings. "We subjected these [contested] claims to a focused medical review to determine whether the services met medical necessity and coding requirements," the report said. "Each case that was denied was reviewed by two clinicians, including a physician. We stand by those determinations."

Christopher Snowbeck • 612-673-4744

Twitter: @chrissnowbeck