Review of Medicare Payments Exceeding Charges for Outpatient Services Processed by TrailBlazer Health Enterprises, LLC, in Jurisdiction 4 for the Period January 1, 2006, Through June 30, 2009

Our audit found that 3,353 of 3,942 selected line items for which TrailBlazer Health Enterprises, LLC (TrailBlazer), made Medicare payments to providers for outpatient services during the period January 2006 through June 2009 were incorrect. The line items included items totaling approximately $12 million, which the providers had not refunded by the beginning of our audit. Providers refunded overpayments on 216 line items totaling $1.35 million before our fieldwork. The remaining 373 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 3,353 incorrect line items included incorrect units of service, a combination of incorrect units of service and incorrect Healthcare Common Procedure Coding System (HCPCS) codes, lack of supporting documentation, HCPCS codes that did not reflect the procedures performed, unallowable services, and other reasons.

We recommended that TrailBlazer (1) ensure that the $12 million in identified overpayments been recovered, (2) implement system edits that would identify claims with line items having an abnormal number of service units, (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. In written comments, TrailBlazer said that all adjustments had been processed and collections completed.