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Medicare Part B Overpaid Millions for Selected Outpatient Drugs

Medicare contractors in 13 jurisdictions overpaid providers $35.8 million for selected outpatient drugs during our audit period (July 1, 2009, through June 30, 2012). For the majority of the overpayments (88 percent), providers billed either incorrect units of service or a combination of incorrect units of service and incorrect Healthcare Common Procedure Coding System (HCPCS) codes. During our audit period, the Medicare claims processing systems did not have sufficient prepayment edits in place to prevent all overpayments. In particular, Medically Unlikely Edits (MUEs) did not exist for many of the HCPCS codes associated with the outpatient drugs in our review. The 13 Medicare contractors concurred with our recommendations in the individual reports to recover the identified overpayments and use the results of our audits in ongoing provider education. CMS informed us that, as of May 4, 2015, Medicare contractors had recovered 63 percent of the $35.8 million in overpayments, and 10 of the 13 Medicare contractors had used the results of our audits in ongoing provider education activities.

We identified actions taken during and after our audit period by CMS to prevent overpayments to providers incorrectly billing for outpatient drugs. CMS has educated providers on avoiding common Medicare billing errors through published articles and newsletters. In addition, during our audit period, CMS required Medicare contractors to begin implementing line item MUEs for certain HCPCS codes related to outpatient drugs. After our audit period, CMS began converting some line item MUEs to date-of-service MUEs. If the Medicare contractors had had these line item and date-of-service MUEs in place during our entire audit period, $23.7 million, or 66 percent, of the $35.8 million in total overpayments could have been prevented.

We identified potential overpayments for outpatient drugs that were billed after our audit period. Specifically, Medicare contractors could recover as much as $11.5 million in overpayments if they were to review payments to providers for line items billed from July 2012 through June 2014 that (1) had units of service that exceeded the MUE values or (2) did not have established MUE values but had units of service that exceeded the number of units a provider would reasonably administer to a beneficiary on a single date of service.

We recommended that CMS (1) ensure that Medicare contractors collect the remaining overpayments identified in our individual reviews; (2) continue to educate providers on correct billing of outpatient drugs; (3) instruct Medicare contractors to review payments to providers for outpatient drugs billed from July 2012 through June 2014, which could represent overpayments of $11.5 million; and (4) continue to implement line item and date-of-service MUEs for additional outpatient drugs. CMS concurred with all of our recommendations and provided information on actions that it has taken or planned to take to address our recommendations. Regarding our third recommendation, CMS requested that we provide the necessary claim data, and we plan to provide those data to CMS.

Copies can also be obtained by contacting the Office of Public Affairs at Public.Affairs@oig.hhs.gov.

Download the complete report.

Office of Inspector General, U.S. Department of Health and Human Services | 330 Independence Avenue, SW, Washington, DC 20201