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Medicare Part B Overpaid Millions for Selected Outpatient Drugs

Adam Cramer, a senior auditor for the Office of Audit Services, is interviewed by Iman Zbinden, a senior auditor for the Office of Audit Services in San Diego.

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[Iman Zbinden] Hello, I'm Iman Zbinden, a senior auditor in San Diego, speaking with Adam Cramer, also a senior auditor in our San Diego field office, about a report titled Medicare Part B Overpaid Millions for Selected Outpatient Drugs. Adam, tell us what you found?

[Adam Cramer] Sure, Iman. OIG has conducted several reviews of outpatient services, which included outpatient drugs. We identified selected outpatient drugs that Medicare overpaid to providers. We reviewed billing for these drugs at 39 providers, and identified $4.6 million dollars in overpayments over 4 years. These overpayments are primarily the result of providers billing for more units of services than they would reasonably administer to a patient in a single day.

[Iman Zbinden] So what did you focus on in this specific review?

[Adam Cramer] Based on the results of our review at the 39 providers, we expanded our reviews to all 13 Medicare contractor jurisdictions. We wanted to see if Medicare contractor payments to providers, for selected outpatient drugs, were correct.

[Iman Zbinden] To get an understanding of how this system works, can you tell us how Medicare contractors pay providers for outpatient drugs?

[Adam Cramer] Sure. Medicare contractors use established rates for each service. Providers use standardized codes, called Healthcare Common Procedure Coding System codes, for drugs they give to patients during each service. We found that providers billed for the incorrect number of units of services - resulting in overpayments of more than $26 million dollars over 3 years.

[Iman Zbinden] What were the other causes of overpayments?

[Adam Cramer] We found a number of billing errors that led to net overpayments totaling $35.8 million dollars over 3 years. Some of the other billing errors included providers using incorrect codes, or billing Medicare for the non-covered use of outpatient drugs.

[Iman Zbinden] So what did you do with these results?

[Adam Cramer] We consolidated the results for the Centers for Medicare & Medicaid Services, or CMS. CMS runs Medicare Part B, and contracts with Medicare contractors to determine reimbursement amounts and pay claims. We also identified actions that CMS has taken to prevent overpayments for selected outpatient drugs.

[Iman Zbinden] What type of actions?

[Adam Cramer] CMS has educated providers on avoiding common Medicare billing errors through articles and newsletters. CMS also required Medicare contractors to implement nationwide prepayment edits related to outpatient drugs.

[Iman Zbinden] What are edits?

[Adam Cramer] Edits are like controls programmed into claims processing systems - they help check for irregularities. If the Medicare contractors had these edits in place during our entire audit period, Medicare could have prevented almost $24 million dollars of the $35.8 million dollars in total overpayments.

[Iman Zbinden] Wow! What else did the audit team do for this report?

[Adam Cramer] We identified potential overpayments for outpatient drugs that were billed after our audit period. We determined that Medicare contractors could recover as much as $11.5 million dollars in overpayments.

[Iman Zbinden] How could they recover these overpayments?

[Adam Cramer] Contractors should review payments to providers for line items where services exceeded a set value, or exceeded the number of units a provider would reasonably administer to a patient on a single date of service.

[Iman Zbinden] What were the recommendations for this review?

[Adam Cramer] We recommended four things. One, CMS should ensure that Medicare contractors collect the remaining overpayments identified in our individual reviews. Two, continue to educate providers on correct billing of outpatient drugs. Three, instruct Medicare contractors to review provider payments for outpatient drugs billed after our audit period. And four, continue to implement line item and date-of-service edits for additional outpatient drugs.

[Iman Zbinden] How did CMS respond?

[Adam Cramer] CMS agreed with all of our recommendations. It also provided information on actions that it had taken, or planned to take, to address our recommendations.

[Iman Zbinden] That's great! Thank you, Adam, for sharing this important work regarding Medicare Part B payments for selected outpatient drugs.

[Adam Cramer] Thank you, Iman.