A federal audit found that Lehigh Valley Hospital in Allentown, Pennsylvania, was overpaid by Medicare on dozens of claims reviewed from a two-year billing period, with the error rate projecting out to millions more across the hospital’s full caseload. The Department of Health and Human Services’ Office of Inspector General estimated the hospital received at least $17.8 million in net Medicare overpayments and recommended the money be returned to the federal government. For older Americans who depend on Medicare, the finding is a reminder that billing errors inside the health care system, not only fraud by individuals, can drain the same program their coverage relies on.
Errors Found in 38 of the 100 Claims Reviewed
The audit, numbered A-03-23-00001 by the HHS Office of Inspector General, examined a sample of 100 inpatient and outpatient claims that Lehigh Valley Hospital submitted to Medicare between October 1, 2020, and September 30, 2022. Investigators found the hospital had followed Medicare’s billing requirements correctly on 62 of those claims. The remaining 38 did not fully comply, with errors ranging from incorrect coding to services that did not meet Medicare’s medical-necessity standards for the level of care billed.
Those 38 errors alone produced net overpayments of $433,723 within the sample OIG reviewed. Because the sample was drawn to represent the hospital’s full volume of claims in the same risk categories, auditors used the results to project that the hospital had received at least $17.8 million in net Medicare overpayments across the full two-year audit period — a figure the report states precisely as $17,838,422.
Why Lehigh Valley Was Chosen for a Closer Look
This review is one in a series of OIG audits aimed at hospitals that submit a high volume of claims already flagged as carrying an elevated risk of billing errors. Lehigh Valley Hospital was selected for exactly that reason: OIG says it had submitted a substantial number of potentially high-risk claims to Medicare during the years under review. The scale of the underlying program helps explain why the agency keeps running these checks. Medicare paid hospitals $182 billion in calendar year 2021 alone, equal to 46 percent of all Medicare fee-for-service payments made that year, according to the audit’s published highlights, so even a small error rate compounds into a large amount of misspent money across the system.
The Breakdowns Involved the Two-Midnight Rule and Rehab Documentation
Auditors concluded the errors happened mainly because the hospital did not consistently follow its own written billing policies and procedures within the specific risk areas that were sampled, rather than any single systemic cause. In its recommendations, the full report directs the hospital to retrain clinical and billing staff on several specific rules: the Two-Midnight Rule that governs when a patient’s stay counts as an inpatient admission rather than outpatient observation, the medical-necessity standards for inpatient services generally, and the separate documentation and admission requirements tied to inpatient rehabilitation facility, or IRF, care. General inpatient and outpatient coding practices were flagged for additional training as well.
A Waiver-of-Liability Rule Could Shrink the Final Number
The recommended $17,838,422 refund excludes any portion of the overpayments that falls under Medicare’s longstanding waiver-of-liability provision, a rule that can excuse repayment when neither the hospital nor the patient could reasonably have known a service was not covered. The report does not say how large that carve-out might turn out to be. It states only that the Hospital should refund the estimated amount “excluding amounts presumed to be unrecoverable” under that provision, leaving the final collected total to be worked out between the hospital and the Centers for Medicare & Medicaid Services.
The Refund Recommendation Remains Open
Lehigh Valley Hospital disagreed with most of OIG’s findings and with all three of its recommendations, the report states. Those recommendations call for the hospital to refund the estimated $17,838,422 in net overpayments to the federal government, to review its own billing from outside the audited window for similar errors and return any it finds, and to retrain staff on the coding and documentation rules involved in the sampled errors.
As of the report’s release, OIG’s public recommendation tracker lists all three recommendations as “Open Unimplemented,” with the next status update expected by December 3, 2026 — the date by which the Centers for Medicare & Medicaid Services is due to report whether Lehigh Valley Hospital has moved toward repaying the money.
The Benefits an Audit Never Touches
Separately, audits like this one concern money a hospital owes the federal government, not money older households are already entitled to but never collect. Programs such as Medicare Savings Programs, state drug-cost assistance, and senior property tax relief are opt-in and require a separate application, and no agency sends a notice inviting someone to enroll. Because of that, many eligible households never file the paperwork and the available help goes unclaimed year after year…