Review of Medicare Payments Exceeding Charges for Outpatient Services Processed by Cahaba Government Benefit Administrators, LLC, in Jurisdiction 10 for the Period January 1, 2008, Through June 30, 2009

Our audit found that 336 of the 452 selected line items for which Cahaba made Medicare payments to providers for outpatient services during the period January 2008 through June 2009 were incorrect. The line items included items totaling approximately $1.9 million, which the providers had not refunded by the beginning of our audit. Providers refunded overpayments on 61 line items totaling $404,000 prior to our fieldwork. The remaining 55 line items were correct.

Medicare uses an outpatient prospective payment system to pay certain outpatient providers. In this method of reimbursement, the Medicare payment is not based on the amount that the provider charges. Billed charges generally exceed the amount that Medicare pays the provider. Therefore, a Medicare payment that significantly exceeds the billed charges is likely to be an overpayment.

The deficiencies in the 336 incorrect line items included (1) incorrect units of service, (2) Healthcare Common Procedure Coding System (HCPCS) codes that did not reflect the procedures performed, (3) a lack of supporting documentation, and (4) a combination of incorrect units of service and incorrect HCPCS codes.

We recommended that Cahaba (1) recover the $1.9 million in identified overpayments, (2) implement system edits that identify line item payments that exceed billed charges by a prescribed amount, and (3) use the results of this audit in its provider education activities. Cahaba generally agreed with our recommendations.