• OIG Audit Attributes Approximately $14 Million in Overpayments to Incorrect “Place-of-Service” Coding
  • August 31, 2010 | Author: Kerrie S. Howze
  • Law Firm: King & Spalding LLP - Atlanta Office
  • According to a recent report from the U.S. Department of Health and Human Services Office of Inspector General (the OIG), Medicare Part B contractors overpaid physicians nearly $14 million in calendar year 2007 due to incorrect place-of-service coding.  Last year, the OIG reported that incorrect place-of-service coding for fiscal years 2005 and 2006 resulted in approximately $20 million in overpayments.   

    The place-of-service code identifies whether a physician performed a service in a facility setting (i.e., a hospital or ambulatory surgery center) or a nonfacility setting (i.e., a physician office or independent clinic).  The reimbursement rate is higher for services provided in a nonfacility setting because the nonfacility rate accounts for practice expenses, which reflect the overhead costs involved in providing the service.  Physicians receive a lower reimbursement rate for services provided in a facility setting because those overhead costs are reimbursed to the facility rather than to the physician.

    The OIG randomly selected 100 claims for review from a population of approximately 484,218 claims from calendar year 2007 coded with a nonfacility place-of-service code.  Out of the 100 claims, 90 were improperly coded as nonfacility even though the services were actually performed in a hospital or ambulatory surgery center, resulting in $4,710 in overpayments.  Based on this sample, the OIG estimated that Medicare contractors overpaid a total of nearly $13.8 million due to incorrect place-of-service coding.  

    The OIG attributed the overpayments to internal control weaknesses at the physician billing level and insufficient postpayment review activities by Medicare contractors to identify place-of-service coding errors.  Accordingly, the OIG recommended that CMS: (1) recover the $4,710 in overpayments; (2) reopen and review the 484,118 nonsampled claims and work with physicians to recover any overpayments; (3) continue to educate physicians and billing agents on the importance of correctly coding the place of service; and (4) continue to work with Medicare contractors to identify physicians at high risk for miscoding and recover any overpayments.  CMS concurred with the recommendations.