The Medicare Contractors for Jurisdiction 11 Overpaid Providers for Selected Outpatient Drugs

Payments that the Medicare contractors for Jurisdiction 11 made to providers for 900 of the 2,135 line items for outpatient drugs we reviewed were not correct. These incorrect payments resulted in overpayments of $2.2 million and underpayments of $16,000 that the providers had not identified, refunded, or adjusted by the beginning of our audit. Before our fieldwork, providers had refunded $1.7 million of overpayments for another 672 line items. The remaining 563 line items were correct.

For the 862 incorrect line items with overpayments of $2.2 million that had not been refunded, providers reported a combination of incorrect units of service and incorrect HCPCS codes, reported incorrect units of service, billed separately for an outpatient drug for which payment was packaged with the primary service, billed for noncovered use of a drug, did not provide supporting documentation, and used incorrect HCPCS codes. For the 38 incorrect line items with underpayments of $16,437 that had not been adjusted, we notified the providers of the underpayments so that they could decide whether to submit adjustment claims.

Providers attributed the incorrect billings to clerical errors and to provider billing systems that could not prevent or detect the incorrect billing of outpatient drug services. The Medicare contractors overpaid these providers because there were insufficient edits in place to prevent or detect the overpayments.

We recommend that Palmetto GBA, the Medicare contractor for Jurisdiction 11, (1) recover the $2.2 million in identified overpayments, (2) verify the payment of $16,000 in identified underpayments, and (3) use the results of this audit in its ongoing provider education activities. Palmetto GBA concurred with our findings and recommendations and described corrective actions it had taken or planned to take to address them.