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Review of Medicare Payments Exceeding Charges for Outpatient Services Processed by National Government Services but Transitioned to Palmetto GBA, LLC, in Jurisdiction 11 for the Period January 1, 2006, Through June 30, 2009

Our audit found that 695 of 942 selected line items for which National Government Services (NGS) made Medicare payments to providers for outpatient services during the period January 2006 through June 2009 were incorrect. The line items included overpayments totaling $5.2 million that the providers had not refunded by the beginning of our audit. Providers refunded overpayments on 85 line items totaling $318,000 before our fieldwork. The remaining 162 line items were correct. Because Palmetto GBA, LLC (Palmetto), has assumed responsibility for claims paid by NGS, we have addressed our findings and recommendations to Palmetto for review and comment.

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 695 incorrect line items included (1) incorrect units of service, (2) lack of supporting documentation, (3) a combination of incorrect units of service and incorrect Healthcare Common Procedure Coding System (HCPCS) codes, (4) billing separately for services for which payment was packaged in the payment for the primary service, (5) incorrect HCPCS codes, (6) unallowable services or drugs, and (7) billing for the unlabeled use of a drug/biological.

We recommended that Palmetto (1) recover the $5.2 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. Palmetto generally concurred with our findings and recommendations and described corrective actions that it had taken or planned to take.

Filed under: Center for Medicare and Medicaid Services