CMS Did Not Always Correctly Make Clinic Visit Payments to Hospitals

The Centers for Medicare & Medicaid Services (CMS) made incorrect outpatient payments to hospitals for established patients' clinic visits. On the basis of our sample results, we estimated that CMS made incorrect payments to hospitals totaling $7.5 million during 2010 and 2011.

The Medicare payment for clinic visits depends on whether the patient is identified as "new" or "established" at a particular hospital. If the patient has a hospital medical record that was created within the past 3 years, that patient is considered an established patient at the hospital.

Of the 110 randomly sampled line items for which CMS made Medicare payments to hospitals for clinic visits during our audit period, 2 were correct. In addition, we treated six line items as non-errors (correct) because, for three line items, hospitals refunded incorrect payments totaling $54 prior to our fieldwork and, for three line items, hospitals were under investigation. CMS overpaid the remaining 102 line items by a total of $2,200. The hospitals had not refunded these overpayments by the beginning of our audit.

The hospitals attributed the incorrect payments to clerical errors, staff not fully understanding Medicare billing requirements for clinic visits, reliance on the code that the physician selected for the visit, or billing systems that could not identify established patients. Also, CMS does not have edits in place to identify Medicare payments for patients who were already registered at a facility.

We recommended that CMS work with its Medicare administrative contractors (MACs) to

(1) recover the $2,200 in incorrect payments identified in our sample; (2) provide additional guidance to hospitals on billing clinic visits for new or established patients, which could result in savings totaling $7.5 million over a 2-year period; (3) resolve the remaining 378,376 line items and recover the overpayments to the extent feasible and allowed under the law; and (4) direct MACs to instruct hospitals on the need for stronger compliance controls that ensure proper billing of clinic visits. CMS partly agreed and partly disagreed with our recommendations.