CMS made $7.5 million in incorrect hospital payments

Clinic visit payments not always correct

The Centers for Medicare & Medicaid Services (CMS) found in its improper payment reviews for 2008 through 2011 that evaluation and management (E/M) services were frequently miscoded. On the basis of sample results, the Office of Inspector General (OIG) of the Department of Health and Human Services estimated that CMS made incorrect payments to hospitals totaling $7.5 million during calendar years (CYs) 2010 and 2011.

Medicare payments to hospitals for E/M outpatient clinic visits vary on the basis of whether patients are new or established. An established patient has been treated more than once at the same hospital during a three-year period. In 2009, two healthcare entities paid more than $10 million to settle allegations that they fraudulently billed Medicare for E/M services (OEI 04-10-00180).

This is the first audit that OIG has conducted relating to E/M outpatient clinic visits (clinic visits). The objective of the audit was to determine whether CMS correctly made selected outpatient payments to hospitals for established patients’ clinic visits for CYs 2010 and 2011.

CMS made incorrect outpatient payments to hospitals for established patients’ clinic visits. Of the 110 randomly sampled line items for which CMS made Medicare payments to hospitals for clinic visits (HCPCS 99203 to 99205) during the audit period, two were correct. In addition, OIG treated six line items as non-errors (correct) because, for three line items, hospitals refunded incorrect payments totaling $54 prior to OIG’s fieldwork and, for three line items, hospitals were under investigation. CMS overpaid the remaining 102 line items by a total of $2,190.

The hospitals had not refunded these overpayments by the beginning of the audit:

• For 80 line items, hospitals incorrectly used new patient HCPCS codes to identify clinic visits for established patients, which resulted in incorrect payments totaling $1,653.

• For 19 line items, in addition to incorrectly using new patient HCPCS codes for established patients, hospitals did not use correct HCPCS codes to describe the levels of services furnished, which resulted in incorrect payments totaling $307.

• For three line items, hospital officials informed us that they billed for clinic visits without supporting documentation, which resulted in incorrect payments totaling $230.

The hospitals attributed the incorrect payments to clerical errors, staff not fully understanding Medicare billing requirements for clinic visits, reliance on the code that the physician selected for the visit, or billing systems that could not identify established patients.

Also, CMS does not have edits in place to identify Medicare payments for patients who were already registered at a facility.

OIG recommends that CMS work with its Medicare administrative contractors (MACs) to:

• recover the $2,190 in incorrect payments identified in the sample;

• provide additional guidance to hospitals on billing clinic visits for new or established patients, which could result in savings totaling $7.5 million over a two-year period;

• resolve the remaining 378,376 line items and recover the overpayments to the extent feasible and allowed under the law; and

• direct MACs to instruct hospitals on the need for stronger compliance.

This report is available to the public at http://1.usa.gov/1jHP00U.