Medicare Contractors' Payments Made to Providers in Jurisdiction 7 for Full Vials of Herceptin Were Often Incorrect

Most payments that the Medicare contractors made to providers in Jurisdiction 7 for full vials of Herceptin were incorrect. Herceptin (trastuzumab) is a Medicare-covered drug used to treat breast cancer that has spread to other parts of the body.

Of the 1,607 selected line items, 1,466 (91 percent) were incorrect and included overpayments totaling $1.8 million. These providers had not identified or refunded these overpayments by the beginning of our audit. Providers refunded overpayments on 56 line items totaling $92,000 by the beginning of our fieldwork. The 85 remaining line items were correct. As of November 30, 2012, the amount of overpayment for 122 of the 1,466 line items had not been determined because they had not been reprocessed and the correct line payment amounts identified.

For the 1,466 incorrect line items that had not been refunded, providers reported incorrect units of service on 1,455 line items and did not provide supporting documentation for 11 line items. The providers attributed the incorrect payments to clerical errors, chargemaster errors, and billing systems that could not prevent or detect the incorrect billing of units of service. (A provider's chargemaster contains data on every chargeable item or procedure that the provider offers, including a factor that converts a drug's dosage to the number of units to bill and whether to charge for waste.) The Medicare contractors made these incorrect payments because neither the Fiscal Intermediary Standard System nor the Common Working File had sufficient edits in place during our audit period to prevent or detect the overpayments.

We recommend that Novitas Solutions, Inc. (Novitas), the Medicare administrative contractor for Jurisdiction 7, (1) recover the $1.8 million in identified overpayments, (2) determine and recover the amount of overpayment for the 122 line items that had not been processed and correct payment amounts identified, (3) implement or update system edits that identify for review multiuse-vial drugs that are billed with units of service equivalent to the dosage of an entire vial(s), and (4) use the results of this audit in its provider education activities. Novitas concurred with our recommendations and described corrective actions that it had taken or planned to take.