Review of Medicare Payments Exceeding Charges for Outpatient Services Processed by Palmetto GBA, LLC, in Jurisdiction 11 for the Period January 1, 2006, Through June 30, 2009

Our audit found that 746 of the 1,592 selected line items for which Palmetto GBA, LLC (Palmetto), made Medicare payments to providers for outpatient services for the period January 2006 through June 2009 were incorrect. The line items included overpayments totaling $4.7 million, which the providers had not refunded by the beginning of our audit. Providers refunded overpayments on 680 line items totaling $2.4 million before our fieldwork. The remaining 166 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 746 incorrect line items included (1) incorrect units of service, (2) lack of supporting documentation, (3) a combination of incorrect units of service and incorrect Healthcare Common Procedure Coding System (HCPCS) codes, (4) billing for the unlabeled use of a drug/biological, (5) billing for unallowable services, (6) billing separately for services for which payment was packaged in the payment for the primary service, (7) incorrect HCPCS codes, and (8) incorrectly calculating a line item payment.

We recommended that Palmetto (1) recover the $4.7 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. Palmetto generally concurred with our findings and recommendations and described corrective actions that it had taken or planned to take.