ASSGN 1

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Case 3: Claims Processing

BACKGROUND

The Centers for Medicare and Medicaid Services (CMS) administer the Medicare

program. CMS employs Medicare contractors, including Wisconsin Physicians Service

(WPS), to process and pay hospital outpatient claims using the Fiscal Intermediary

Shared System (FISS).

CMS implemented an outpatient prospective payment system (OPPS) for

hospital outpatient services. Under the OPPS, Medicare pays for hospital outpatient

services on a rate-per-service basis that varies according to the assigned ambulatory

payment classification group. Under the OPPS, outlier payments are available when

exceptionally costly services exceed established thresholds.

Common medical devices implanted during outpatient procedures include

cardiac devices, joint replacement devices, and infusion pumps. Generally, a provider

implants only one cardiac device during an outpatient surgical procedure. Under the

OPPS, payments to hospitals for medical devices are “packaged” into the payments for

the procedures to insert devices. Hospitals are required to report accurately the number

of device units and related charges on their claims. The failure to report accurately the

device units and related charges could result in incorrect outlier payments.

Our audit covered $32,860 in Medicare outlier payments to hospitals for 14

claims for outpatient procedures that included the insertion of more than one of the

same type of medical device. The 14 claims had dates of service during calendar years

(CY) 2008 and 2009.

OBJECTIVE

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Our objective was to determine whether Medicare paid hospitals correctly for

outpatient claims processed by WPS that included procedures for the insertion of

multiple units of the same type of medical device.

SUMMARY OF FINDINGS

Of the 14 claims that we reviewed, Medicare correctly paid eight outpatient

claims processed by WPS that included procedures for the insertion of multiple units of

the same type of medical device. However, for the remaining six claims, Medicare did

not pay hospitals correctly. These incorrect payments were due to hospitals overstating

the number of units and related charges, resulting in excessive or unwarranted outlier

payments.

For the six claims, WPS made overpayments to hospitals totaling $17,996.

Incorrect payments occurred because hospitals had inadequate controls to ensure that

they billed accurately for claims that included the insertion of medical devices. In

addition, Medicare payment controls in the FISS were not always adequate to prevent

or detect incorrect payments.