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

Payments that the Medicare contractors for Jurisdiction H made to providers for 1,132 of the 1,905 line items for outpatient drugs we selected for review were not correct. These incorrect payments resulted in overpayments of $3.3 million and underpayments of $3,000 that the providers had not identified, refunded, or adjusted by the beginning of our audit. Before our fieldwork, providers had refunded $980,000 of overpayments for 108 line items. We did not review 33 line items that were identified for a separate overpayment review. The remaining 632 line items were correct.

For the 1,126 incorrect line items with overpayments of $3.3 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, did not provide supporting documentation, billed separately for an outpatient drug for which payment was packaged with the primary service, used incorrect HCPCS codes, and billed for noncovered use of a drug. For the six incorrect line items with underpayments of $3,000 that had not been adjusted, we notified the providers of the underpayments so that they could decide whether to submit adjustment claims. One provider also identified 204 additional line items that we did not review that resulted in overpayments of $267,000.

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 Novitas Solutions, Inc. (Novitas), the Medicare contractor for Jurisdiction H, (1) recover the $3.3 million in identified overpayments, (2) verify the payment of $3,000 in identified underpayments, (3) verify the recovery of $267,000 in additional provider-identified overpayments, and (4) use the results of this audit in its ongoing provider education activities. Novitas indicated that it would pursue recovery of the overpayments and confirm the identified underpayments. Novitas also indicated that its claims processing department would work with its provider education department to create reminders to providers regarding the correct billing of outpatient drugs.