Review of Medicare Payments Exceeding Charges for Outpatient Services Processed by Cahaba Government Benefit Administrators, LLC, in Jurisdiction 10 for the Period January 1, 2006, Through December 31, 2007

Our audit found that 555 of the 749 selected line items for which Cahaba made Medicare payments to providers for outpatient services during the period January 2006 through December 2007 were incorrect. The line items included items totaling approximately $2.8 million, which the providers had not refunded by the beginning of our audit. Providers refunded overpayments on 148 line items totaling $893,000 prior to our fieldwork. The remaining 46 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 555 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, (4) unallowable services, and (5) a lack of supporting documentation.

We recommended that Cahaba (1) recover the $2.8 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. Cahaba generally agreed with our recommendations.