The Medicare Contractors for Jurisdiction 12 Overpaid Providers for Selected Outpatient Drugs

Payments that the Medicare contractor for Jurisdiction 12 made to providers for 607 of the 1,254 line items for outpatient drugs we reviewed were not correct. These incorrect payments resulted in overpayments of $3.7 million that the providers had not identified, refunded, or adjusted by the beginning of our audit. Before our fieldwork, providers refunded $570,000 of overpayments for another 59 line items. The remaining 588 line items were correct.

For the 607 incorrect line items with overpayments of $3.7 million that had not been refunded, providers reported incorrect units of service, did not provide supporting documentation, billed separately for outpatient drugs for which payment was packaged with the primary service, reported a combination of incorrect units of service and incorrect Healthcare Common Procedure Coding system (HCPCS) codes, billed for noncovered use of a drug, and used incorrect HCPCS codes.

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 contractor overpaid these providers because there were insufficient edits in place to prevent or detect overpayments.

We recommend that Novitas, the Medicare contractor for Jurisdiction 12, recover the $3.7 million in identified overpayments and use the results of this audit in its ongoing provider education activities. Novitas concurred with our recommendations and described corrective actions it had taken or planned to take to address them.