Medicare contractors overpaid $35.8 million for outpatient drugs

Medicare contractors in 13 jurisdictions across the country overpaid for outpatient drugs to the tune of $35.8 million between July 2009 and June 2012, according to a report released by the Office of Inspector General (OIG).

The audit attributed 88 percent of overpayments to providers that billed incorrect units of service as well as incorrect Healthcare Common Procedure Coding System (HCPCS) codes. HCPCS codes are used by providers to report both the type and amount of a drug administered to Medicare beneficiaries. In order to prevent unnecessary payments, Medicare contractors conduct an automatic review of claims using Medically Unlikely Edits (MUEs), which identify the maximum number of units that would be administered to a beneficiary. If an HCPCS code exceeds that amount, the claim is denied.

The OIG report acknowledged that Medicare contractors had used the results of the audit to educate providers about the accuracy of HCPCS codes. The Centers for Medicare & Medicaid Services (CMS) informed the OIG that as of May 5, Medicare contractors recovered 63 percent of the overpayments identified by the watchdog agency.

However, the OIG pointed to gaps in the MUE process that could have prevented overpayments in the first place. After the audit period, CMS modified MUEs to include the same services billed on the same day on multiple line items. If this process was in place during the three-year audit period, Medicare contractors could have prevented $23.7 million overpayments, 66 percent of the total amount identified by the OIG.

Additionally, the OIG indicated that Medicare contractors could recover $11.5 million in overpayments for outpatient drugs from July 2012 through June 2014.

The OIG issued four recommendations, all of which CMS agreed with:

  • Medicare contractors should collect the remaining overpayments.
  • CMS should continue to educate providers on correct billing codes.
  • Medicare contractors should review outpatient drug payments from July 2012 through June 2014.
  • Contractors should continue to implement line item and date of service MUEs for other outpatient drugs.

An OIG report released in 2012 identified clerical errors as the reason for noncompliant Medicare outpatient billing for selected drugs that led to $143,000 in overpayments at two hospitals. This kicked off a string of reports identifying Medicare billing noncompliance for drugs within specific hospitals. In many cases, these errors occurred because hospital staff did fully understand the billing requirements.  

For more:
- read the OIG report

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