The Medicare Contractor for Jurisdiction 5 Overpaid Providers for Selected Outpatient Drugs

Payments that the Medicare contractor for Jurisdiction 5 made to providers for 759 of the 1,428 line items for outpatient drugs we reviewed were not correct. These incorrect payments resulted in overpayments of $3.5 million (757 of the 759 line items) and underpayments of $11 (2 of the 759 line items) that the providers had not identified, refunded, or adjusted by the beginning of our audit. Before our fieldwork, providers refunded $610,000 of overpayments for another 149 line items. The remaining 520 line items were correct.

For the 757 incorrect line items with overpayments of $3.5 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, billed for noncovered use of a drug, used incorrect HCPCS codes, and did not provide supporting documentation. For the two incorrect line items with underpayments of $11 that had not been adjusted, we notified the providers of the underpayments so that they could decide whether to 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 recommended that Wisconsin Physicians Service Insurance Corporation (WPS), the Medicare contractor for Jurisdiction 5, recover the $3.5 million in identified overpayments, verify the payment of $11 in identified underpayments, and use the results of this audit in its ongoing provider education activities. WPS described corrective actions that it had taken or planned to take to address our recommendations.