Review of Medicare Payments Exceeding Charges for Outpatient Services Processed by Wisconsin Physicians Service Insurance Corporation But Transitioned to Palmetto Government Benefits Administrator in Jurisdiction 1 for the Period January 1, 2006, Th...

Our audit found that 280 of 344 selected line items for which Wisconsin Physicians Service Insurance Corporation (WPS) made Medicare payments to providers for outpatient services during the period January 2006 through June 2009 were incorrect. The 280 incorrect line items included overpayments totaling $2.2 million, which the providers had not refunded by the beginning of our audit. Providers refunded overpayments on five line items totaling $138,000 before our fieldwork. The remaining 59 line items were correct. Effective April 2010, the claims that were originally processed by WPS in Jurisdiction 1 were transitioned to Palmetto Government Benefits Administrator (Palmetto).

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 280 incorrect line items included incorrect units of service, services that lacked supporting documentation, incorrect Healthcare Common Procedure Coding System (HCPCS) codes, services not allowable for Medicare reimbursement, and a combination of incorrect number of units of service and incorrect HCPCS codes.

We recommended that Palmetto (1) recover the $2.2 million in identified overpayments, (2) work with the Centers for Medicare & Medicaid Services to 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. In written comments, Palmetto stated that $1.3 million of the $2.2 million in identified overpayments had been recovered. Palmetto also described actions that it had taken or planned to take to address our recommendations.