CGS Administrators, LLC, Made Medicare Payments for Diabetic Test Strips When Beneficiaries Had Not Nearly Exhausted Previously Dispensed Supplies

CGS Administrators, LLC (CGS), made payments for calendar year (CY) 2012 to suppliers that dispensed diabetic test strips when the beneficiaries had not nearly exhausted test strips previously dispensed by different suppliers.

On the basis of our sample results, we estimated that $7.6 million, or 74 percent, of the $10.3 million that CGS paid to suppliers may have been unallowable for Medicare reimbursement. (Because a medical review of the sampled line items was not performed, we could not conclusively determine whether the $7.6 million represented overpayments.)

Of the 100 line items in our sample, 12 were allowable. We considered an additional 17 line items to be non errors because the suppliers were no longer in business and the supporting documentation could not be obtained for review. The remaining 71 line items may not have been allowable because the suppliers dispensed test strips before the beneficiaries' existing supplies were nearly exhausted; i.e., sooner than 10 calendar days before the expected end of usage for the current product. For 35, or almost half, of the 71 line items, the suppliers dispensed test strips when there were more than 60 days remaining in the beneficiaries' existing supplies.

These potential overpayments occurred because CGS's system edit was not designed to identify for review claims submitted by multiple suppliers with overlapping service dates for test strips dispensed to the same beneficiary. Rather, the system edit was designed to identify claims with a quantity of test strips that exceeded the utilization guidelines.

We recommended that CGS implement a system edit to identify for review claims submitted by multiple suppliers with overlapping service dates for test strips dispensed to the same beneficiary. Implementing this edit could have saved Medicare an estimated $7.6 million for CY 2012. CGS did not concur with our findings or recommendation.