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OIG Estimates $20million in Overpayments to Physicians Due to Place of Service Errors on Claims

The Office of the Inspector General’s (OIG) Work Plan for 2009 stated that place of service (POS) errors on physician claims would be an area of focus due to the potential for overpayment based on the site of service billed. Here is a recap of what the Work Plan says:

Place of Service Errors
We will review physician coding of place of service on Medicare Part B claims for services performed in ambulatory surgical centers (ASC) and hospital outpatient departments. Federal regulations at 42 CFR § 414.22(b)(5)(i)(B) provide for different levels of payments to physicians depending on where the services are performed. Medicare pays a physician a higher amount when a service is performed in a nonfacility setting, such as a physician’s office, than it does when the service is performed in a hospital outpatient department or, with certain exceptions, in an ASC. We will determine whether physicians properly coded the places of service on claims for services provided in ASCs and hospital outpatient departments.
(OAS; W-00-08-35113; various reviews; expected issue date: FY 2009; work in progress)

The OIG released the audit results last week – you can find the report at: http://www.oig.hhs.gov/oas/reports/region1/10800528.pdf

OIG Audit Results
The report states “Physicians did not always correctly code the office place of service on claims submitted to and paid by Part B carriers. Physicians correctly coded the claims for 21 of the 150 services that we sampled. However, physicians incorrectly coded the claims for 129 sampled services by using the office place-of-service code for services that were actually performed in outpatient hospitals or ASCs. “

While the incorrect coding resulted in overpayments totaling only $6,797, the OIG estimates that nationwide that the POS errors overpaid physicians $20.2 million for incorrectly coded services provided during the 2-year period that ended December 31, 2006.

The OIG attributes the overpayments to “internal control weaknesses at the physician billing level” and to “insufficient postpayment reviews at the Medicare contractor level to identify potential place-of-service coding errors”.

Example of Incorrect Coding
The OIG audit report cites the following example for a POS overpayment:

The carrier paid a physician $443 for performing a hand surgery procedure coded as having been performed in his office. Our analysis showed that the physician actually performed this procedure in an outpatient hospital and that the fiscal intermediary had reimbursed the hospital for the overhead portion of the service. If the claim had been coded correctly, the physician would have received a payment of $223, which would not have included overhead costs. As a result of the incorrect coding, the physician was overpaid $220.”


  1. Review the place of service codes and definitions with your staff to make sure you are using them accurately.
  2. Review all preprinted/electronic charge capture tools to make sure the place of service codes are accurate
  3. Perform a prospective internal audit of your next 50 cases - in-office, ASC and hospital - to ensure you are using the POS codes correctly.

Where can you find the place of service definitions? The front page of the CPT® 2009 Professional Edition or on the CMS website at: http://www.cms.hhs.gov/MedHCPCSGenInfo/Downloads/Place_of_Service.pdf.

2009 Otolaryngology Course Dates at a Glance

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July 30, 2009
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(800) 214-4220
Oct 8, 2009
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(800) 996-3426
Oct 21, 2009

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