Knowledge Base Article

On Friday, March 15, 2024, the Office of Inspector General (OIG) updated their Work Plan with eight new items. One item that hospitals will want to follow is related to hospital billing for sepsis.

OIG Work Plan Item (OEI-02-24-00230): Medicare Inpatient Hospital Billing for Sepsis

“Sepsis is the body’s extreme response to infection. It is a life-threatening, emergency medical issue that often progresses quickly and responds best to early intervention. The definition of and guidance for sepsis have changed over the years in attempts to identify it more accurately. The definition of sepsis was updated in 2016 by an international task force to better differentiate sepsis from a general infection. This narrower definition is widely recognized by groups such as the World Health Organization. However, CMS and CDC currently recognize an older, broader definition. Sepsis is a frequently billed diagnosis in Medicare. There are concerns that hospitals may be taking advantage of this broader definition, as they have a financial incentive to do so. This study will analyze Medicare claims to assess patterns in the inpatient hospital billing of sepsis in 2023 and describe how billing of sepsis varied among hospitals. We will also estimate the costs to Medicare associated with using the broader, rather than the narrower, definition of sepsis.” The OIG’s expected report issue date is in Fiscal Year (FY) 2025.

Sepsis, Not a New Target

OIG and Sepsis

This is not the first time that the OIG has had sepsis MS-DRG’s in their crosshairs. For example, sepsis was mentioned in the February 2021 OIG Report: Trend Toward More Expensive Inpatient Hospitals Stays Emerged Before COVID-19 and Warrant’s further Scrutiny.

In their report results, the OIG indicated that “the most frequently billed MS-DRG in FY 2019 was septicemia or severe sepsis with a major complication (MS-DRG 871). Hospitals billed for 581,000 of these stays, for which Medicare paid $7.4 billion.”

The following data compares Medicare Fee-for-Service paid claims data by calendar year from pre-COVID 2019 to after then end of the COVID-19 public health emergency (PHE) in May 2023.

MS-DRG 871 Medicare Fee-for-Service Paid Claims Data Trend

Calendar Year 2019

Claims Volume: 620,927

Claims Payment: $7.992,972,329

Calendar Year 2020

Claims Volume: 611,140

Claims Payment: $8,481,178,934

Calendar Year 2021

Claims Volume: 556,680

Claims Payment: $8,152,439,134

Calendar Year 2022

Claims Volume: 566,387

Claims Payment: $8,392,707,197

Calendar Year (January 1 – September 30, 2023) Annualized

Claims Volume: 546,496

Claims Payment: $8,238,024,702

The data shows that claims volume and payment has declined since the height of the COVID-19 pandemic in 2020. However, when you annualize calendar year 2023 claims data (January 1 through September 30, 2023), Medicare payment for sepsis continues to be immense at just over $8.2 billion for one MS-DRG. This data was provided by our sister company, RealTime Medicare Data (RTMD).

Livanta and Sepsis

Livanta is the National Medicare Review Claim Contractor that is contracted to review short stay claims and higher weight DRG reviews. In their year one HWDRG review results they indicated that Sepsis DRGs (871 and 872) comprised the largest percentage of DRGs found to be in error.

In a related March 13, 2024 MMP article, we reported on Livanta’s recent release of their year two HWDRG review findings. DRGs 871 and 872 again comprised the largest percentage of HWDRGs found to be in error.

PEPPER and Sepsis

Sepsis DRGs 871 and 872 have long been a DRG target on the short-term acute care Program for Evaluating Payment Patterns Electronic Report (PEPPER). In the thirty-sixth edition User’s Guide, there are suggested interventions for high and low outliers to review for potential over-coding or under-coding. There is also a reminder for providers “that a diagnosis of septicemia/sepsis must be determined by the physician. A coder should not code based on a laboratory finding without seeking clarification from the physician.”

Even though there is a temporary pause in the distribution of PEPPERs, I encourage you to look at your last report to see if you were an outlier.

Medicare Advantage and Sepsis

At this point, I can visualize you raising your hand to remind me of the ongoing struggle with Medicare Advantage (MA) denials based on the SEP-3 definition.

To validate your frustration, at a meeting I attended last year, a Medical Director for a MA plan indicated that he would be happy to meet with anyone over a cup of coffee to discuss patient specific examples. However, if the documentation did meet SEP-3 he would continue to agree to disagree that the patient was truly septic. This insistence that meeting SEP-3 is absolute before an MA plan approves a claim is an ongoing concern for hospitals.  

However, on the opposite end of the spectrum, I have reviewed short stay records where a patient presented to the ED, was admitted with sepsis, and was discharged to home, self-care the following day. When I questioned whether the patient was truly septic, the response I got from the hospital was that they had identified the sepsis early, were proactive in their care, and the patient improved overnight and was ready for discharge. In this case, I agreed to disagree that the patient was truly septic.  

Given that the OIG included the following in the Work Plan item description, “CMS currently recognizes an older, broader definition of sepsis (SEP-2),” this will be interesting to follow to read the OIG's findings and recommendations to CMS.