Review of Medicare Payments Exceeding Charges for Outpatient Services Processed by Wisconsin Physicians Service Insurance Corporation in Jurisdiction 5 for the Period January 1, 2006, Through June 30, 2009

Our audit found that 1,609 of the 2,197 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 line items included items totaling $6.2 million, which the providers had not refunded by the beginning of our audit. Providers refunded overpayments on 52 line items totaling $526,000 before our fieldwork. The remaining 536 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 1,609 incorrect line items included incorrect units of service (the amount of overpayment for 1 line item has not been determined), a combination of incorrect number of units of service claimed and incorrect Healthcare Common Procedure Coding System (HCPCS) codes, unallowable services, incorrect HCPCS codes, and a lack of supporting documentation.

We recommended that WPS (1) recover the $6.2 million in identified overpayments, (2) determine the amount of overpayment for the one incorrect line item payment and recover that amount, (3) 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 (4) use the results of this audit in its provider education activities. WPS described corrective action that it had taken or planned to take.