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Audit (A-04-10-06120)

Review of Medicare Payments Exceeding Charges for Outpatient Services Processed by First Coast Service Options, Inc., in Jurisdiction 9 for the Period January 1, 2006, Through December 31, 2007

Executive Summary

Our audit found that 253 of the 326 selected line items for which First Coast Service Options, Inc. (First Coast), made Medicare payments to providers for outpatient services for the period January 2006 through December 2007 were incorrect. The line items included overpayments totaling $1.7 million, which the providers had not refunded by the beginning of our audit. Providers refunded overpayments on six line items totaling $73,000 before our fieldwork. The remaining 67 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 253 incorrect line items included (1) incorrect units of service, (2) Healthcare Common Procedure Coding System (HCPCS) codes that did not reflect the procedures performed, (3) a combination of incorrect units of service claimed and incorrect HCPCS codes, and (4) a lack of supporting documentation.

We recommended that First Coast (1) recover the $1.7 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. First Coast agreed with most of our recommendations and provided information on actions that it had taken or planned to take to address them.

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