The United States Health and Human Services Department (HHS) Inspector General states the Centers for Medicare and Medicaid Services (CMS) overpaid claims by $502 million from 2011 through 2014. The error was allegedly due to a malfunction in the outlier payment review process.
What is an outlier payment?
An outlier payment occurs when the cost of care for a specific procedure exceeds the threshold amount set by the CMS. In some cases, the agency will reconcile these disparities.
The reconciliation generally involves a cost-to-charge ratio. This ratio is the yearly Medicare cost divided by the amount charged to Medicare. The ratio used is generally the previous year’s ratio, as the current year’s ratio is not yet available. As such, errors can occur.
If the actual year’s calculation turns out to be 10% off from the one used, it is repriced. The HHS states outlier payments for time period in question were all closer to 5% off and did not trigger further review. However, even at a difference of 5% the error resulted in millions of lost funds.
What does the agency want?
In addition to requesting an update to the outlier review process, the agency has also called on those who billed Medicare to reconcile overpayments if the actual cost-to-charge ratio, as opposed to the estimated ratio using the data from the previous year, was 10% higher or lower than the previous ratio and the outlier payment is greater then $500,000.
Private practices and hospitals that are impacted by this change may consider seeking legal counsel to represent their interests. An attorney experienced in Medicare overpayment issues can review the situations. In some cases, an appeal may be required to resolve the situation.