Background

The Centers for Medicare and Medicaid Services (CMS) administers the Medicare program. CMS employs Medicare contractors, including Wisconsin Physicians Services (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 are medical device are "packaged" into the payments for the procedures to insert devices. Hospitals are required to report the number of device units and related charges accurately on their claims. The failure to report device units and related charges accurately could resist 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

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 paid eight correctly for 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.

Source: United States Department of Health and Human Services. (2012). Review of outpatient claims processed by Wisconsin Physicians Services that included procedures for the insertion of multiple units of the same type of medical device in calendar years 2008 and 2009. Retrieved from https://oig.hhs.gov/oas/reports/region1/11100532.pdf

1. as an executive for the Wisconsin Physicians Services (WPS) Insurance Corporation, after reviewing the case, what recommendations would you propose to the Board of Directors that they should prepare for as a response from the OIG?
2. What should WPS do with CMS to improve the process?