OIG Audit Uncovers Medicare Overpayments for Incorrect Place of Service Codes

An audit conducted by the Office of Inspector General (OIG) revealed that Medicare overpaid millions of dollars due to incorrect place of service (POS) code reporting in 2019 and 2020. This audit focused on physician services provided for Medicare beneficiaries that were hospital inpatients or in skilled nursing facilities (SNFs); and included analysis of over 2 million claim lines identified at risk for overpayment because of non-compliance with the POS policy.

Medicare pays for physician services differently when those services are performed in a facility setting (inpatient hospital or SNF) vs a nonfacility setting (office), with the nonfacility payment being higher to account for physician overhead and other expenses. Practitioners may not always report the correct POS code for those services being performed in a facility setting, resulting in a higher nonfacility payment rather than the lower facility payment.

In its report, the OIG offered several recommendations to CMS, including:

  1. Directing Medicare to recover the $22.5 million in overpayments;
  2. Notifying the practitioners so they can identify, report, and return overpayments within 60 days;
  3. Establishing and applying common work file edits to detect when practitioners incorrectly use the nonfacility POS code;
  4. Taking steps to revise its regulations to ensure that Medicare make appropriate payments for physician services;
  5. Considering development of a mechanism for facilities to indicate when an inpatient leaves a facility and returns the same day; and
  6. Providing additional education to practitioners on properly using POS codes.

CMS concurred with and will take action on recommendations one, two, three, and six, while stating it will consider the findings for recommendations four and five before taking action.