The Medicare Contractor for Jurisdiction 14 Overpaid Providers for Selected Outpatient Drugs

Payments that the Medicare contractor for Jurisdiction 14 made to providers for 295 of the 779 line items for outpatient drugs we reviewed were not correct. These incorrect payments resulted in overpayments of $1.3 million and underpayments of $5,000 that the providers had not identified, refunded, or adjusted by the beginning of our audit. Before our fieldwork, providers refunded $206,000 of overpayments for another 53 line items. The remaining 431 line items were correct.

For the 290 incorrect line items with overpayments of $1.3 million that had not been refunded, providers reported incorrect units of service, did not provide supporting documentation, used incorrect HCPCS codes, reported a combination of incorrect units of service and incorrect HCPCS codes, billed separately for an outpatient drug for which payment was packaged with the primary service, and billed for a noncovered use of a drug. For the five incorrect line items with underpayments of $5,000 that had not been adjusted, we notified the providers of the underpayments so that they could 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 contractor overpaid these providers because there were insufficient edits in place to prevent or detect overpayments.

We recommend that National Government Services, Inc. (NGS), the Medicare contractor (1) recover the $1.3 million in identified overpayments, (2) verify the payment of $5,000 in identified underpayments, and (3) use the results of this audit in its ongoing provider education activities. NGS stated that it would review the line items paid in error to adjust and recover any overpayments and verify the underpayments. NGS said that it had conducted educational sessions with providers and that it would enhance its educational materials as needed based on the results of this review.