Review of Place-of-Service Coding for Physician Services Processed by Medicare Part B Contractors During Calendar Year 2008

Based on our sample results, we estimated that Medicare contractors nationwide overpaid physicians $19.3 million for incorrectly coded Part B services provided during calendar year 2008. Physicians correctly coded the place of service on claims for 11 of the 100 services that we sampled. However, physicians incorrectly coded the claims for 89 sampled services by using nonfacility place-of-service codes for services that were actually performed in hospital outpatient departments or ambulatory surgical centers (ASC).

To account for the increased overhead expense that physicians incur by performing services in nonfacility locations, Medicare reimburses physicians at a higher rate for certain services performed in these locations. However, when physicians perform these same services in facility settings, such as hospital outpatient departments or ASCs, Medicare reimburses the overhead expenses to the facility, and the physician receives a lower reimbursement rate.

We recommended that the Centers for Medicare & Medicaid Services (CMS) instruct its Medicare contractors to (1) recover approximately $5,000 in overpayments for the sampled services; (2) immediately reopen the claims associated with the nonsampled services, review our information on these claims (which have estimated overpayments of $19.3 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 the need for internal controls to prevent Medicare billings with incorrect place-of-service codes; and (4) continue to work with program safeguard contractors and, if necessary to coordinate Part A and Part B data matches, with 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.