The U.S. Department of Health and Human Services, Office of Inspector General (“OIG”) issued two September 2011 reports analyzing place-of-service coding for physician services provided in 2008 and 2009. The OIG reports found that over 80% of the sampled claims were coded with the incorrect place-of-service, which resulted in overpayments for the physician services.  

Medicare claim forms for physician services require that the physician identify the place-of-service on the claim, which categorizes services as being provided either in a facility or nonfacility setting. When services are provided in a nonfacility setting, such as a physician office or urgent care center, Medicare provides additional reimbursement for some services to account for the overhead expense associated with the practice setting. In contrast, in the facility setting, such as a hospital outpatient department or ambulatory surgery center (“ASC”), the overhead expense is paid directly to the facility and Medicare reimbursement for the physician component of the service is decreased. Based on this reimbursement structure, a provider may be overpaid for physician services if the incorrect place-of-service is indicated on the claim form.  

In conducting its reviews, the OIG audited nonfacility coded physician services that matched hospital outpatient or ASC claims for the same type of service provided to the same beneficiary on the same day. For the review of 2008 claims, the OIG sampled 100 claims and found that 89 of the claims were incorrectly coded as being provided in a nonfacility, when the services were actually performed in a hospital outpatient department or an ASC. The OIG provided the following example of an incorrectly coded claim:  

A carrier paid a physician $837 for performing a balloon angioplasty procedure coded as having been performed in his office. Our analysis showed that the physician actually performed this procedure in a hospital outpatient department and that a 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 $239, which would not have included overhead costs. As a result of the incorrect coding, the physician was overpaid $598.

The OIG reported that the 89 claims incorrectly coded resulted in overpayments of $4,639 for the claims sampled. Based on the sample results, the OIG estimates physicians were overpaid $19.3 million in 2008 as a result of place-of-service coding errors. For the review of 2009 claims, the OIG sampled 100 claims and found that the place-of-service was incorrectly coded for 83 of the claims, resulting in overpayments of $2,979 for the claims sampled. Based on these sample results, the OIG estimates incorrect place-of-service coding resulted in physician overpayments of $9.5 million in 2009.  

In response to the OIG’s findings, the Centers for Medicare & Medicaid Services (“CMS”) acknowledged that place-of-service coding is complex and indicated that it would issue comprehensive instructions on the proper use of place-of-service codes. CMS anticipates issuing the instructions by the end of 2011 and indicated that it would conduct provider outreach and education. In addition, CMS plans to direct its contractors to perform data analysis to identify and recover overpayments resulting from incorrect place-ofservice coding.

The September 2011 OIG report evaluating 2008 claims is available here1; the September 2011 OIG report evaluating 2009 claims is available here2 .