Review of Place-of-Service Coding for Physician Services Processed by Medicare Part B Carriers During Calendar Year 2007

We found that physicians did not always correctly code nonfacility places of service on Medicare Part B claims. Based on our sample results, we estimated that Medicare contractors nationwide overpaid physicians $13.8 million for incorrectly coded services provided during calendar year 2007. To account for the increased overhead expense that physicians incur by performing services in nonfacility locations, such as physician's offices, Medicare reimburses physicians at a higher rate for certain services performed in these locations and at a lower rate for services performed in facility settings, such as hospital outpatient departments or ambulatory surgical centers. Physicians are required to identify the place of service on the health insurance claim forms that they submit to Medicare contractors. However, for 90 of the 100 services in our sample, physicians used nonfacility place-of-service codes on their claims for services that were actually performed in hospital outpatient departments or ambulatory surgical centers.

We recommended that the Centers for Medicare & Medicaid Services instruct its Medicare contractors to (1) recover the $4,700 in overpayments for the sampled services; (2) immediately reopen the claims associated with the nonsampled services, review our information on these claims (which had estimated overpayments of $13.8 million), and work with the physicians who provided the services to recover any overpayments; (3) continue to strengthen their education process and reemphasize to physicians and their billing agents the importance of correctly coding the place of service; and (4) continue to work with program safeguard contractors and other Medicare contractors to develop a data match that will identify physician services at high risk for place-of-service miscoding and recover any identified overpayments. CMS concurred with our recommendations and described the corrective actions that it was taking or planned to take.