Incorrect Coding Results in Potential Medicare Overpayments to Physicians

blog 1.11.2016.jpg

In a review conducted by the Office of the Inspector General (OIG) and featured in their Semiannual Report to Congress,  Medicare contractors were found to have overpaid physicians approximately $33.4 million dollars due to incorrect submissions of Part B claims reviewed during the period from January 2010 through September 2012.  The OIG conducted a nationwide review using a computer match program to identify non-facility coded physician services against submitted Part B claims. The findings revealed that physicians or their billing personnel were incorrectly identifying the locations of the services provided on the Medicare Part B claim form, resulting in these huge overpayments nationwide. The review also discovered that services provided in a facility location, such as an ambulatory surgical center or hospital outpatient center, are reimbursed at a higher rate to cover the facility cost with a separate payment made to the physician for a specific procedure or service. When a physician provides a service in a nonfacility location, such as an office or clinic, the physician receives compensation through a set rate allowance for those services.

The findings of the review show that $7.3 million in potential overpayments were for incorrect non-facility place-of- service billing; $7.1 million in incorrect non-facility place-of-service billing for services provided in hospital outpatient locations; $18.2 million in potential overpayments for the services of the remaining unselected hospital outpatient location-based claims; and $800,000 in potential overpayments for disputed claims. Causes for overpayments were determined to be due to billing personnel following past practices of applying the nonfacility codes; isolated data entry errors; or by undetected flaws in the design or implementation of billing systems, which affected the coding of the place-of-service.

The Centers for Medicare and Medicaid Services (CMS) recommends the following:

  1. Medicare contractors continue their efforts to recover these overpayments;

  2. Educate physicians and billing personnel on the importance of internal controls to ensure the correct place-of-service coding; and

  3. To expand and strengthen the efforts to perform coordinated data matches to identify claims that are at high risk for place-of-service miscoding and recover payments.

Physicians and other providers must familiarize themselves with the Medicare guidelines for submitting clean claims to Medicare. Physician practices should develop strong internal processes and procedures, including a claims review, to ensure that correct service codes are applied correctly and is an important step prior to conducting a comprehensive review of all Part B claims prior to submission. Also, physician practices should consider proactively hiring a third party billing service to provide an external review of their billing practices, specifically their Part B claims, in order to identify any potential miscoding errors and reduce the risk for overpayments occurring.


  1. Semiannual Report to Congress,

  2. Incorrect Place-of-Service Coding Resulted in Potential Medicare Overpayments Costing Millions.