Review of Medicare Payments Exceeding Charges for Outpatient Services Processed by Noridian Administrative Services, LLC, in Jurisdiction 6 - Minnesota for the Period January 1, 2006, Through June 30, 2009

Our audit found that 367 of the 520 selected line items for which Noridian Administrative Services, LLC (Noridian), made Medicare payments to providers for outpatient services for the period January 2006 through June 2009 were incorrect. The line items included overpayments totaling approximately $3.6 million, which the providers had not refunded by the beginning of our audit. Providers refunded overpayments on 94 line items totaling approximately $2.6 million before our fieldwork. The remaining 59 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 367 incorrect line items included (1) incorrect units of service (the amount of overpayment for 4 line items has not been determined), (2) unallowable services, (3) a lack of supporting documentation, (4) Healthcare Common Procedure Coding System (HCPCS) codes that did not reflect the procedures performed, and (5) a combination of incorrect units of service and incorrect HCPCS codes.

We recommended that Noridian (1) recover the approximately $3.6 million in identified overpayments, (2) determine the amount of overpayment for the four incorrect line item payments and recover that amount, (3) implement system edits that identify line item payments that exceed billed charges by a prescribed amount, and (4) use the results of this audit in its provider education activities. Noridian concurred with our recommendations and described corrective actions that it had taken or planned to take.