Review of Payments Exceeding Charges for Outpatient Services Processed by Wisconsin Physicians Service Insurance Corporation for Calendar Years 2004 Through 2007

We found that certain Medicare payments in excess of charges that Wisconsin Physicians Service Insurance Corporation (WPS), a Medicare contractor, made to hospitals for outpatient services for calendar years 2004 through 2007 were incorrect. The incorrect payments included overpayments totaling $9.2 million, which hospitals had not refunded by the start of our audit. Medicare uses the hospital outpatient prospective payment system to pay hospitals for outpatient services. In this method of reimbursement, the Medicare payment is not based on the amount that the hospital charges. Consequently, the billed charges (the prices that a hospital sets for its services) do not affect the current Medicare payment amounts. Billed charges generally exceed the amount that Medicare pays the hospital. Therefore, a Medicare payment that significantly exceeds the billed charges is at high risk of overpayment.

The incorrect payments involved excessive units of service, Healthcare Common Procedure Coding System codes that did not reflect the procedures performed, unallowable services, and lack of supporting documentation.

We recommended that WPS recover the $9.2 million in identified overpayments and use the results of this audit in its hospital education activities. In response, WPS described actions that it had taken or planned to take to address our recommendations.