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Incorrect Place-of-Service Coding Resulted in Potential Medicare Overpayments Costing Millions

Physicians did not always correctly code nonfacility places of service on Part B claims submitted to, and paid by, Medicare contractors nationwide. We determined that Medicare contractors potentially overpaid physicians approximately $33.4 million for incorrectly coded services provided from January 2010 through September 2012. Physicians performed these services in facility locations, but physicians incorrectly coded the services as performed in nonfacility locations. We attribute the overpayments to internal control weaknesses at the physician billing level and to insufficient postpayment reviews at the Medicare contractor level to identify potential place-of-service billing errors.

We recommend that CMS direct its Medicare contractors to (1) initiate, in accordance with CMS policies, the immediate recovery of $7.3 million in potential overpayments from physicians who incorrectly coded physician services performed in ambulatory surgical centers; (2) monitor the recoveries from the 87 physicians who expressed their intent to refund approximately $7.1 million in potential overpayments for incorrectly coded physician services performed in hospital outpatient locations; (3) recover, in accordance with CMS policies, the additional $19 million in potential overpayments related to the services that may have been performed in hospital outpatient locations that we identified through our computer match; (4) continue to educate physicians and billing personnel on the importance of internal controls to ensure the correct place-of-service coding for physician services; and (5) expand and strengthen efforts to perform coordinated data matches of nonfacility-coded physician services and facility claims to identify physician services that are at a high risk for place-of-service miscoding and recover overpayments.

In written comments on our draft report, CMS concurred with our recommendations and described corrective actions it has taken.