Coding Background Image

Exceptional Coders | Innovative Technology

Medical Coding Errors for Severe Malnutrition Led to $1B in Overpayments, According to OIG

Posted by David Fong on Jul 31, 2020 10:00:00 AM

Free photo 5882479 © X2asompi -

The U.S. Department of Health and Human Services Office of the Inspector General (OIG) recommended earlier this month that the U.S. Centers for Medicare & Medicaid Services (CMS) should recoup the portion of nearly $1 billion that was incorrectly paid to hospitals because of medical coding and billing errors involving severe malnutrition diagnosis codes in FYs 2016 and 2017.


In the report entitled "Hospitals Overbilled Medicare $1 Billion By Incorrectly Assigned Severe Malnutrition Diagnosis Codes to Inpatient Hospital Claims", the report uncovered persistent errors with the medical coding of severe malnutrition diagnosis codes on inpatient hospital claims.

According to the report, nutritional marasmus (diagnosis code E41) and unspecified severe protein-calorie malnutrition (diagnosis code E43) are two types of severe malnutrition. Previous OIG audits of severe malnutrition found that hospitals had incorrectly billed Medicare by using severe malnutrition diagnosis codes when they should have used codes for other forms of malnutrition or no malnutrition diagnosis code at all. Diagnosis codes E41 and E43 (severe malnutrition diagnosis codes) are each classified as a type of major complication or comorbidity (MCC). Adding MCCs to a Medicare claim can result in a higher Medicare payment.

As part of the audit, a random sample of 200 claims with payments totaling $2.9 million from fiscal years (FY) 2016 and 2017 was submitted for medical and coding review to determine whether the services were medically necessary and properly coded. The audit uncovered 86.5% with medical billing and coding mistakes.

According to the OIG, hospitals correctly billed Medicare for severe malnutrition diagnosis codes for 27 of the 200 claims (13.5%) reviewed. However, hospitals did not correctly bill Medicare for the remaining 173 claims (86.5%). For nine of these claims, the medical record documentation supported a secondary diagnosis code other than a severe malnutrition diagnosis code, but the error did not change the DRG or payment. For the remaining 164 claims (82%), hospitals used severe malnutrition diagnosis codes when they should have used codes for other forms of malnutrition or no malnutrition diagnosis code at all, resulting in net overpayments of $914,128. On the basis of its sample results and extrapolating to the broader number of claims with the severe malnutrition diagnosis codes, OIG estimates that hospitals received overpayments of $1 billion for FYs 2016 and 2017.

To address the 164 incorrectly billed hospital claims, OIG has recommended to CMS and it has concurred to work to collect the portion of the $914,128 for the incorrectly billed hospital claims that are within the reopening period and, based upon the results of this audit, notify appropriate providers so that the providers can exercise reasonable diligence to identify, report, and return any overpayments in accordance with the 60-day rule. To attempt recovery of the overpayment estimated to be valued at $1 billion during the audit period and to ensure claims after audit period are correct, CMS has been advised to review all other inpatient claims with the similarly used E41 and E43 diagnosis codes.


Aviacode's AAPC and AHIMA certified medical coders are capable and knowledgeable on current coding guidelines for coding and providing necessary clinical documentation recommendations. In addition, Aviacode offers experienced experts to help health systems on coding audits to ensure compliance to CMS and other federal guidelines.


Topics: ICD-10, Medical Coding, Clinical Documentation, Medical Coding Audits, Pro-Fee Coding, Facility Coding, Outpatient Coding