Review of High-Dollar Payments for Inpatient Services Processed by Noridian Administrative Services, LLC, for the Period January 1, 2003, Through December 31, 2005

Of the 415 high-dollar Medicare payments ($200,000 or more) that Noridian Administrative Services, LLC (Noridian), made to hospitals for inpatient services for calendar years 2003 through 2005, 306 were appropriate. The 109 remaining payments included net overpayments totaling $3 million. At the start of our audit, hospitals had not refunded $1.9 million of these net overpayments.

Contrary to Federal guidance, hospitals inaccurately reported the number of billing units of service, reported incorrect procedure codes, and reported excessive charges that resulted in inappropriate outlier payments. Hospitals attributed most of the incorrect claims to clerical errors or to billing systems that could not prevent or detect the incorrect billing of units of service and other types of billing errors. Noridian made these incorrect payments because neither the Fiscal Intermediary Standard System nor the Common Working File had sufficient edits in place to prevent or detect incorrect payments.

We recommended that Noridian (1) recover the $1.9 million in net overpayments, (2) determine and recover the overpayment for one inpatient claim still under adjudication, (3) use the results of this audit in its provider education activities, and (4) consider implementing controls to identify and review all payments greater than $200,000 for inpatient services. Noridian concurred with our recommendations and described corrective actions that it had taken or planned to take.