OIG IRF Medical Necessity Audit


The U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) details in its work plan a nationwide audit of Inpatient Rehabilitation Facilities.  IRFs were encouraged to promptly reply to early 2023 requests for documentation.

This audit of 2022 IRF claims follows a previous nationwide audit in 2018 that found an error rate of 84% of IRF Medicare claims.  This was nearly five times higher than the IRF error rate found by the Centers for Medicare and Medicaid Services’ (CMS’) in the same year.  The IRF community strongly disputed the OIG’s 2018 audit findings and recommendations.

As a result of that 2018 report, the American Academy of Physical Medicine and Rehabilitation (AAPM&R), the Federation of American Hospitals (FAH), and the American Medical Rehabilitation Providers Association (AMRPA) (collectively, the “IRF stakeholders”) issued a joint statement raising serious concerns and questioned the validity of the findings.  The stakeholders submitted a Freedom of Information Act (FOIA) request to obtain patient records from the 2018 audit sample and began a dialogue with the OIG to try to understand how the OIG’s contractor could have reached such an unlikely conclusion.

This ongoing dialogue between the IRF stakeholders and the OIG culminated in late 2022 in the launch of OIG’s latest nationwide IRF audit, but this time, OIG is taking a very innovative approach.  While OIG is bound to remain independent in conducting this audit, it will accept data and substantive input from the IRF stakeholders throughout the course of the audit itself.  In fact, the IRF stakeholders will have the opportunity to review denied cases and will meet with the OIG and its contractor to discuss the medical necessity and documentation compliance of each denial. The goal of this innovative project is to help identify any specific areas that might require clarification in the regulations and make meaningful recommendations to decrease the IRF error rate and have a positive impact on the Medicare IRF benefit.

Throughout the forthcoming audit, OIG will gather information on claims from the IRF stakeholders and identify opportunities, if any, for CMS to clarify claims payment criteria to improve program integrity. If warranted based on the findings of the audit, OIG will also make recommendations to clarify the IRF coverage and documentation requirements.

Although the IRF stakeholders will supply the OIG with data and substantive input, the audit will be an independent performance audit in accordance with Generally Accepted Government Auditing Standards (GAGAS). The IRF Stakeholders are not taking part in the audit itself.

The OIG is currently conducting this nationwide IRF audit, with an expected issue date for the report sometime in 2024.