The Medicare Contractors for Jurisdiction 6 Overpaid Providers for Selected Outpatient Drugs

Payments that the Medicare contractors for Jurisdiction 6 made to providers for 531 of the 1,243 line items for outpatient drugs we reviewed were not correct. These incorrect payments resulted in overpayments of $3.1 million and underpayments of $62,000 that the providers had not identified, refunded, or adjusted by the beginning of our audit. Before our fieldwork, providers had refunded $630,000 of overpayments for another 152 line items. The remaining 560 line items were correct.

For the 514 incorrect line items with overpayments of $3.1 million that had not been refunded, providers reported incorrect units of service, reported a combination of incorrect units of service and incorrect Healthcare Common Procedure Coding System (HCPCS) codes, used incorrect HCPCS codes, did not provide supporting documentation, and billed for a drug that was reimbursed by a drug manufacturer. For the 17 incorrect line items with underpayments of $62,000 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 recommended that National Government Services, Inc. (NGS), the Medicare contractor for Jurisdiction 6, (1) recover the $3.1 million in identified overpayments, (2) verify the payment of $62,000 in identified underpayments, and (3) use the results of this audit in its ongoing provider education activities. NGS said that it would begin processing claim adjustments to recover the overpayments and would review the claims associated with the underpayments and adjust them accordingly. NGS also described ongoing provider education activities that it was performing.