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Audit (A-03-10-00004)

Review of Medicare Payments Exceeding Charges for Outpatient Services Processed by Highmark Medicare Services in Jurisdiction 12 for the Period January 1, 2006, Through June 30, 2009

Executive Summary

Our audit found that 1,027 of the 1,507 selected line items for which Highmark Medicare Services (Highmark) made Medicare payments to providers for outpatient services for the period January 1, 2006, through June 30, 2009, were incorrect. The line items included overpayments totaling approximately $6.8 million that the providers had not refunded by the beginning of our audit. Providers refunded overpayments on 71 line items totaling approximately $2.0 million before our fieldwork. The remaining 409 line items were correct.

Medicare uses an outpatient prospective payment system to pay certain outpatient providers. In this method of reimbursement, the Medicare payment is not based on the amount that the provider charges. Billed charges generally exceed the amount that Medicare pays the provider. Therefore, a Medicare payment that significantly exceeds the billed charges is likely to be an overpayment.

The deficiencies in the 1,027 incorrect line items included (1) incorrect units of service, (2) packaged services billed separately, (3) Healthcare Common Procedure Coding System (HCPCS) codes that did not reflect the procedures performed, (4) unallowable services, (5) unlabeled use of a drug/biological, (6) a lack of supporting documentation, (7) a combination of incorrect units of service and incorrect HCPCS codes, and (8) incorrectly calculated payments.

We recommended that Highmark (1) recover the approximately $6.8 million in identified overpayments, (2) implement system edits that identify line item payments that exceed billed charges by a prescribed amount, and (3) use the results of this audit in its provider education activities. Highmark generally concurred with our recommendations.

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