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Medicare Overpaid $22.5M for Incorrect Place-of-Service Codes

Analysis  |  By Jay Asser  
   June 02, 2023

The Office of Inspector General (OIG) uncovered overpayments in 2019 and 2020 for care provided to Medicare beneficiaries.

Medicare overpaid $22.5 million in 2019 and 2020 for physician services while enrollees were hospital inpatients or in skilled nursing facilities, according to an audit by OIG.

Researchers conducted analysis of the 2.1 million physician service claim lines identified at risk of overpayment because of non-compliance with the place-of-service policy.

Medicare pays for physician services separately from the payments it makes to inpatient facilities like skilled nursing facilities and hospitals. However, practitioners may not always correctly report the place-of-service code on a claim line, causing Medicare to pay more at higher nonfacility rates than at lower facility rates while beneficiaries were inpatients of facilities, OIG stated.

"CMS has expressed reluctance to take enforcement action for these claim lines because neither statute nor CMS's regulation specifically addresses situations in which a SNF or hospital inpatient leaves to receive a physician service in a nonfacility setting."

In its report, OIG recommended that CMS:

  1. Direct Medicare to recover the $22.5 million in overpayments
  2. Notify the practitioners so they can identify, report, and return overpayments within 60 days
  3. Establish and apply common work file edits to detect when practitioners incorrectly use the nonfacility place-of-service code
  4. Take steps to revise its regulations to ensure that Medicare make appropriate payments for physician services
  5. Considering developing a mechanism for facilities to indicate when an inpatient leaves a facility and returns the same day
  6. Provide additional education to practitioners on properly using place-of-service codes

OIG said CMS concurred with and will take action on recommendations one, two, three, and six, while stating it will consider the findings for recommendations four and five before taking action.

Jay Asser is the contributing editor for strategy at HealthLeaders. 


An OIG audit revealed that Medicare overpaid millions of dollars because of incorrect place-of-service coding by practitioners.

OIG offered several recommendations to CMS, with the agency saying it concurred with and planned to act on most.

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