1. Review of Medicaid Residential Rehabilitation Services for Children in Maryland
2. Review of Outpatient Claims Processed by Cahaba Government Administrators that Included Procedures for the Insertion of Multiple Units of the Same Type of Medical Device in Calendar Years 2008 and 2009
3. Review of Medicare Payments Exceeding Charges for Outpatient Services Processed by First Coast Service Options, Inc., in Jurisdiction 9 for the Period January 1, 2006, through December 31, 2007
4. Review of Medicare Part B Avastin and Lucentis Treatments for Age-Related Macular Degeneration
5. Audit of Oregon’s Medicaid Management Information System Expenditures for the Period October 1, 2007, through September 30, 2009
6. Review of Place-of-Service Coding for Physician Services Processed by Medicare Part B Contractors During Calendar Year 2008
7. Review of Place-of-Service Coding for Physician Services Processed by Medicare Part B Contractors During Calendar Year 2009
8. Review of Medicare Payments Exceeding Charges for Outpatient Services Processed by National Government Services in Jurisdiction 8 for the Period January 1, 2006 through June 30, 2009
9. Review of Medicaid Credit Balances at Private Diagnostic Clinic, PLLC, at Duke University Medical Center as of March 31, 2010
10. Appropriations Funding for National Institute of Allergy and Infectious Diseases Contract HHSN266-2006-00015C with NexBio, Inc.
11. Appropriations Funding for National Institute of Allergy and Infectious Diseases Contract NO1-AI-3-0052 with Avecia Biologics Limited

1. Review of Medicaid Residential Rehabilitation Services for Children in Maryland

The OIG could not determine whether residential rehabilitative services claimed by Maryland complied with Federal and State requirements. The State plan is unclear about the precise definition of a residential rehabilitative service and the requirements for documentation of claims for residential rehabilitative services. Therefore, the OIG was unable to determine whether the documentation that the State submitted as support for the 2,652 claims in the OIG’s 100 sampled beneficiary-months was sufficient to demonstrate that a service had been provided.

The OIG recommends that the State:

• Work with CMS to amend its State plan to define the services provided under the residential rehabilitation program;

• Define the necessary documentation requirements for each service;

• Adjust its reimbursement methodology if needed to reflect costs for services provided.

The State did not concur with the OIG’s draft report findings and recommendation. The OIG considered the State's comments and revised the report and recommendations to reflect that the State plan is unclear about the precise definition of a residential rehabilitative service. The type of claimed service actually provided and the documentation necessary to demonstrate that a service was provided were also unclear.

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2. Review of Outpatient Claims Processed by Cahaba Government Administrators that Included Procedures for the Insertion of Multiple Units of the Same Type of Medical Device in Calendar Years 2008 and 2009

Of the 58 claims that the OIG has reviewed for calendar years 2008 and 2009, Medicare paid 11 incorrectly for outpatient claims processed by Cahaba Government Benefit Administrators, LLC that included procedures for the insertion of multiple units of the same type of medical device. These incorrect payments were due to hospitals overstating the number of units and related charges, resulting in net overpayments to hospitals totaling $29,000.

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3. Review of Medicare Payments Exceeding Charges for Outpatient Services Processed by First Coast Service Options, Inc., in Jurisdiction 9 for the Period January 1, 2006, through December 31, 2007

The OIG’s audit found that 253 of the 326 selected line items for which First Coast Service Options, Inc. (First Coast), made Medicare payments to providers for outpatient services for the period January 2006 through December 2007 were incorrect. The line items included overpayments totaling $1.7 million, which the providers had not refunded by the beginning of the OIG’s audit. Providers refunded overpayments on six line items totaling $73,000 before the OIG’s fieldwork. The remaining 67 line items were correct.

Medicare uses an outpatient prospective payment system to pay certain outpatient providers. In this method of reimbursement, the Medicare payment is not based on the amount that the provider charges. Billed charges generally exceed the amount that Medicare pays the provider. Therefore, a Medicare payment that significantly exceeds the billed charges is likely to be an overpayment.

The deficiencies in the 253 incorrect line items included (1) incorrect units of service, (2) Healthcare Common Procedure Coding System (HCPCS) codes that did not reflect the procedures performed, (3) a combination of incorrect units of service claimed and incorrect HCPCS codes, and (4) a lack of supporting documentation.

The OIG recommends that First Coast:

• Recover the $1.7 million in identified overpayments;

• Implement system edits that identify line item payments that exceed billed charges by a prescribed amount;

• Use the results of this audit in its provider education activities.

First Coast agreed with most of the OIG’s recommendations and provided information on actions that it had taken or planned to take to address them.

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4. Review of Medicare Part B Avastin and Lucentis Treatments for Age-Related Macular Degeneration

The OIG calculated that if Medicare reimbursement for all beneficiaries treated with Avastin or Lucentis for wet age-related macular degeneration (wet AMD) had been paid at the Avastin rate during calendar years (CY) 2008 and 2009, Medicare Part B would have saved approximately $1.1 billion and beneficiaries would have saved approximately $275 million in copayments. Conversely, the OIG calculated that if Medicare reimbursement for all beneficiaries treated with Avastin or Lucentis for wet AMD had been paid at the Lucentis rate, Medicare Part B would have increased spending by approximately $1.5 billion and beneficiaries would have paid approximately $370 million more in copayments.

Lucentis is FDA-approved for this use while Avastin is not. There is a significant difference in Medicare Part B reimbursement for the two products. Addressing expenditures for the treatment of an increasing number of beneficiaries with wet AMD presents several challenges for the Medicare program. CMS's authority to limit reimbursement for the treatment of wet AMD to the rate of the least costly alternative is questionable.

Finally, despite the magnitude of Medicare expenditures for Biologicals such as Lucentis, CMS does not have the authority to require price concessions or rebates from the manufacturers of such products under the Part B program. As the manufacturer of both Avastin and Lucentis, Genentech faces limited pressure to lower the sales price of Lucentis.

The OIG recommends that CMS:

• Consider the results of this report when evaluating coverage and reimbursement policies related to Avastin and Lucentis, as well as broader strategies to control Part B drug expenditures;

• Evaluate its current authorities and seek additional authorities as necessary to control Part B drug and biological expenditures more effectively.

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5. Audit of Oregon’s Medicaid Management Information System Expenditures for the Period October 1, 2007, through September 30, 2009

The Department of Human Services (State agency) did not always claim enhanced Federal Medicaid reimbursement for Medicaid Management Information System (MMIS) expenditures in compliance with Federal requirements. An MMIS is a system of software and hardware used to process Medicaid claims and manage information about Medicaid beneficiaries and services. Federal law authorizes Federal reimbursement at enhanced rates of 90 percent for the design, development, or installation of an MMIS and 75 percent for the operation of an MMIS.

Of the $31 million that the OIG reviewed, $27.4 million was claimed correctly. For the remaining $3.5 million, the OIG determined that the State agency claimed $655,000 for employee salaries and fringe benefits and contractor and postage expenditures at incorrect Federal reimbursement rates and $548,000 for unallowable contractor and employee expenditures, which resulted in an overpayment of $566,000 (Federal share). The State agency also claimed $2.3 million ($1.7 million Federal share) for contractor expenditures and employee salaries and fringe benefits that may have been unallowable.

The OIG recommends that the State agency:

• Refund $566,000 to the Federal Government;

• Work with the Centers for Medicare & Medicaid Services to determine which portions of the $1.7 million that the OIG set aside were calculated using correct reimbursement rates and were for allowable Medicaid activities and refund to the Federal Government the amounts that were overpaid;

• Strengthen internal controls to ensure that its MMIS expenditures are claimed at correct reimbursement rates and are allowable for Medicaid reimbursement.

The State agency partially concurred with the OIG’s first recommendation and concurred with the OIG’s second and third recommendations.

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6. Review of Place-of-Service Coding for Physician Services Processed by Medicare Part B Contractors during Calendar Year 2008

The OIG estimated that Medicare contractors nationwide overpaid physicians $19.3 million for incorrectly coded Part B services provided during calendar year 2008. Physicians correctly coded the place of service on claims for 11 of the 100 services that the OIG sampled. However, physicians incorrectly coded the claims for 89 sampled services by using non-facility place-of-service codes for services that were actually performed in hospital outpatient departments or ambulatory surgical centers (ASC).

To account for the increased overhead expense that physicians incur by performing services in non-facility locations, Medicare reimburses physicians at a higher rate for certain services performed in these locations. However, when physicians perform these same services in facility settings, such as hospital outpatient departments or ASCs, Medicare reimburses the overhead expenses to the facility, and the physician receives a lower reimbursement rate. :

The OIG recommends that the Centers for Medicare & Medicaid Services (CMS) instruct its Medicare contractors to:

• Recover approximately $5,000 in overpayments for the sampled services;

• Immediately reopen the claims associated with the non-sampled services, review the OIG’s information on these claims (which have estimated overpayments of $19.3 million), and work with the physicians who provided the services to recover any overpayments;

• Continue to strengthen their education process and reemphasize to physicians and their billing agents the importance of correctly coding the place of service and the need for internal controls to prevent Medicare billings with incorrect place-of-service codes;

• Continue to work with program safeguard contractors and, if necessary to coordinate Part A and Part B data matches, with other Medicare contractors to develop a data match that will identify physician services at high risk for place-of-service miscoding and recover any identified overpayments.

CMS concurred with the OIG’s recommendations and described the corrective actions that it was taking or planned to take.

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7. Review of Place-of-Service Coding for Physician Services Processed by Medicare Part B Contractors during Calendar Year 2009

The OIG estimated that Medicare contractors nationwide overpaid physicians $9.5 million for incorrectly coded services provided during calendar year 2009. Physicians correctly coded the claims for 17 of the 100 services that the OIG sampled. However, physicians incorrectly coded the claims for 83 sampled services by using non-facility place-of-service codes for services that were actually performed in hospital outpatient departments or ambulatory surgical centers (ASC).

To account for the increased overhead expense that physicians incur by performing services in non-facility locations, Medicare reimburses physicians at a higher rate for certain services performed in these locations. However, when physicians perform these same services in facility settings, such as hospital outpatient departments or ASCs, Medicare reimburses the overhead expenses to the facility, and the physician receives a lower reimbursement rate.

The OIG recommends that the Centers for Medicare & Medicaid Services (CMS) instruct its Medicare contractors to:

• Recover approximately $3,000 in overpayments for the sampled services;

• Immediately reopen the claims associated with the non-sampled services, review the OIG’s information on these claims (which have estimated overpayments of $9.5 million), and work with the physicians who provided the services to recover any overpayments;

• Continue to strengthen their education process and reemphasize to physicians and their billing agents the importance of correctly coding the place of service and the need for internal controls to prevent Medicare billings with incorrect place-of-service codes;

• Continue to work with program safeguard contractors and, if necessary to coordinate Part A and Part B data matches, with other Medicare contractors to develop a data match that will identify physician services at high risk for place-of-service miscoding and recover any identified overpayments.

CMS concurred with the OIG’s recommendations and described the corrective actions that it was taking or planned to take.

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8. Review of Medicare Payments Exceeding Charges for Outpatient Services Processed by National Government Services in Jurisdiction 8 for the Period January 1, 2006 through June 30, 2009

The OIG’s audit found that 957 of the 1,407 selected line items for which National Government Services made Medicare payments to providers for outpatient services for the period January 2006 through June 2009 were incorrect. The line items included overpayments totaling $7 million, which the providers had not refunded by the beginning of the OIG’s audit. Providers refunded overpayments on 60 line items totaling $964,000 before the OIG’s fieldwork. The remaining 390 line items were correct.

Medicare uses an outpatient prospective payment system to pay certain outpatient providers. In this method of reimbursement, the Medicare payment is not based on the amount that the provider charges. Billed charges generally exceed the amount that Medicare pays the provider. Therefore, a Medicare payment that significantly exceeds the billed charges is likely to be an overpayment.

The deficiencies in the 957 incorrect line items included (1) incorrect units of service, (2) a combination of incorrect units of service claimed and incorrect Healthcare Common Procedure Coding System (HCPCS) codes, (3) HCPCS codes that did not reflect the procedures performed, and (4) a lack of supporting documentation.

The OIG recommends that National Government Services:

• Recover the $7 million in identified overpayments;

• Implement system edits that identify line item payments that exceed billed charges by a prescribed amount;

• Use the results of this audit in its provider education activities.

National Government Services generally agreed with the OIG’s recommendations.

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9. Review of Medicaid Credit Balances at Private Diagnostic Clinic, PLLC, at Duke University Medical Center as of March 31, 2010

Some of the Medicaid credit balances recorded for patient services in Private Diagnostic Clinic, PLLC (Duke Clinic)'s accounting records as of March 31, 2010, constituted overpayments. The OIG estimated that the State should return $235,000 ($154,000 Federal share) to Medicaid. Also, Duke Clinic had not submitted to the State the required quarterly Medicaid credit balance report; however, it had previously identified and repaid some overpayments to the State. These deficiencies occurred because Duke Clinic's policies and procedures were not adequate to ensure that it reconciled the invoice records in a timely manner to identify and return overpayments that were due the State.

The OIG recommends that the State:

• Refund $154,000 to the Federal Government for overpayments paid to Duke Clinic;

• Work with Duke Clinic to ensure that it reconciles credit balances and identifies overpayments in a timely manner and reports and refunds Medicaid overpayments.

The State concurred with the OIG’s findings and recommendations.

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10. Appropriations Funding for National Institute of Allergy and Infectious Diseases Contract HHSN266-2006-00015C with NexBio, Inc.

The OIG’s review found that during fiscal years 2006 through 2009, NIH's National Institute of Allergy and Infectious Diseases (NIAID) did not comply with the time requirements and may not have complied with the amount requirements specified in appropriations statutes in administering contract HHSN266-2006-00015C (the Contract) with NexBio, Inc. An agency may obligate appropriations for goods and services when (1) the purpose of the obligation or expenditure is authorized, (2) the obligation occurs within the time limits for which the appropriation is available, and (3) the obligation and expenditure are within the amounts provided by Congress. Federal statutes specify that a fiscal year appropriation may be obligated only to meet a legitimate, or bona fide, need arising in or continuing to exist in the appropriation's period of availability. The Antideficiency Act prohibits an agency from obligating or expending funds in advance of or in excess of an appropriation unless specifically authorized by law.

NIAID funded only $19.8 million of the $49.8 million Contract obligation with fiscal year 2006 appropriations. NIAID obligated a total of $20.0 million in violation of the bona fide needs rule: $10.0 million of fiscal year 2007 appropriated funds and $10.0 million of fiscal year 2009 appropriated funds. NIAID planned to obligate future-year appropriated funds as well. Because the Contract was a nonseverable service contract (a single undertaking that provides for a single outcome chargeable to the fiscal year in which the contract is awarded), NIAID was required to record the full amount of the Contract using fiscal year 2006 appropriated funds. By not doing so, NIAID potentially violated the Antideficiency Act. (When services are severable they are continuing and recurring and chargeable to the fiscal year in which the services are provided.) NIAID complied with the purpose requirements of appropriations statutes.

The OIG recommends that NIAID:

• Deobligate $10.0 million of fiscal year 2007 funds and $10.0 million of fiscal year 2009 funds;

• Record the remaining $30.0 million of the $49.8 million Contract obligation against fiscal year 2006 funds;

• Report an Antideficiency Act violation if fiscal year 2006 funds are not available.

NIH concurred with the findings that the Contract is nonseverable and that it should have been funded at the time the Contract was awarded. NIH said that the Department of Health and Human Services would report the violation as required. NIH did not address the OIG’s recommendations to correct the improper funding for the first 4 years of the Contract.

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11. Appropriations Funding for National Institute of Allergy and Infectious Diseases Contract NO1-AI-3-0052 with Avecia Biologics Limited

The OIG’s review found that during fiscal years 2003 through 2009, NIH's National Institute of Allergy and Infectious Diseases (NIAID) did not comply with the time and amount requirements specified in appropriations statutes in administering contract N01-AI-3-0052 (the Contract) with Avecia Biologics Limited. An agency may obligate appropriations for goods and services when (1) the purpose of the obligation or expenditure is authorized, (2) the obligation occurs within the time limits for which the appropriation is available, and (3) the obligation and expenditure are within the amounts provided by Congress. Federal statutes specify that a fiscal year appropriation may be obligated only to meet a legitimate, or bona fide, need arising in or continuing to exist in the appropriation's period of availability. The Antideficiency Act prohibits an agency from obligating or expending funds in advance of or in excess of an appropriation unless specifically authorized by law.

NIAID funded only $40.0 million of the $71.3 million initial Contract obligation with fiscal year 2003 appropriations. NIAID obligated a total of $31.3 million in violation of the bona fide needs rule: $26.0 million of fiscal year 2004 appropriated funds and $5.3 million of fiscal year 2005 appropriated funds. Because the Contract was for nonseverable services, NIAID was required to record the full amount of the Contract using fiscal year 2003 appropriated funds. By not doing so, NIAID potentially violated the Antideficiency Act. (When services are severable they are continuing and recurring and chargeable to the fiscal year in which the services are provided).

NIAID complied with the purpose requirements of appropriations statutes. NIAID correctly funded two modifications for additional work with $8.4 million of fiscal year 2006 appropriated funds and $38.0 million of fiscal year 2007 appropriated funds. In April 2009, NIAID transferred the remaining Contract balance totaling $32.5 million of fiscal year 2007 funds to the Biomedical Advanced Research and Development Authority (BARDA), and BARDA correctly obligated those funds to the Contract.

The OIG recommended that NIAID:

• Deobligate $26.0 million of fiscal year 2004 appropriations and $5.3 million of fiscal year 2005 appropriations and return the canceled funds to the Treasury;

• Record the remaining $31.3 million of the $71.3 million Contract obligation against current fiscal year appropriations;

• Report an Antideficiency Act violation if sufficient current-year appropriations are not available;

• Report the adjustment to the Contract using current fiscal year appropriations.

NIH concurred with the OIG’s findings that the Contract is nonseverable and that it should have been funded at the time the Contract was awarded. NIH said that the Department of Health and Human Services would report the violation, as required.

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