Department  of Health  and Human  Services 
OFFICE  OF 
NSPECTOR  GENERAL 
LIMITS ON  BENEFICIARY  FINANCIAL 
LIABILITY 
(BAIANCE  BILLING) 
APRIL  1993  OFFICE  OF INSPECrOR  GENHWL 
The  mission of the Office of Inspector General  (OIG),  as mandated  by Public bw  95452.  .as 
amended,  is to protect  the integrity of the Dcpxtmcnt  of Health  and Human Scmticcs (HHS) 
programs as WCIIas the health  and welfare of bcncficianes  served by those programs.  This 
statuto~  mission is carrjcd OUt  through a nationuidc  nc:work  of audits, investigations,  and 
inspections conducted  by three OIG operating  componcntx  the OKKC of Audit Sc~iccs.  the 
OffiCCof Investigations, and the Office of Evaluation  and Inspections. 
_rhc  O]G  also  informs 
the Sccrctary of HHS of program, and management  problems, and recommends  courses  to 
correct  thcm. 
OFFICE  OF AUDIT  SERVICES 
The  OIGS Office of Audit Semites  (OAS) provides an auditing semces for HHS, either  by 
conducting  audits ~tith its oum audit resourczs or by overseeing  audit work done by others. 
.Audits examine  the performance  of HHS programs and/or its grantees  and contractors  in 
carrjing  out their respective rcsponsl%ilities and are intended  to provide independent 
assessments of HHS programs and operations  in order  to reduce waste, abuse, and 
mismanagement  and to promote  economy and efflcierq  throughout  the Department. 
OFFICE OF INVESTIGATIONS 
The  OIGS Offke  of Investigations  (01)  conducts crimina~ ci@  and administrative 
investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries  and of 
unjust enrichment  by providers.  The investigative efforts of 01 lead to criminal convictions, 
administrative  sanctions, or civil money penalties.  The 01 also oversees State Medicaid  fraud 
control  units which investigate and prosecute  fraud and patient  abuse in the Medicaid  program. 
OFFICE OF EVALUATION  AND  INSPECHONS 
The  OIGS Office of Evaluation  and Inspections  (OEI)  conducts short-term  management  and 
program evaluations  (called inspections) that focus on issues of concern  to the Department, 
the Congress, and the public.  The findings and recommendations  contained  in these  inspection 
reports  generate  rapid, accurate,  and up-to-date  information  on the efficienq,  vulnerability, 
and effectiveness  of departmental  programs.  This report  was prepared  in the New York 
regional office under the direction of Thomas F. Tully, Regional  Inspector  General  and Alan 
S. Meyer, Deputy Regional  Inspector  GeneraL  Project stafE 
REGION  II  HEADQUARTERS 
Joseph  M. Benlioski, Project  Leader  Wayne Powell 
Joseph  J.Corso,Jr., Project  Leader  Brian P. Ritchie 
Lucille M. Cop  Barbara R  Tedesco 
William J. Counihan 
For additional  copies of this report,  contact  the New York regional office at 21U264-1998.  Department  of Health  and Human  Services 
OFFICE  OF 
INSPECTOR  GENERAL 
LIMITS  ON  BENEFICIARY  FINANCIAL 
LIABILITY 
(BALANCE BILLING) 
APRIL  1993  OEI-02-92-00130  EXECUTIVE  SUMMARY 
PURPOSE 
To  repoti  on Medicare  earners  implementation  of limits  on  physicians  charges  to 
beneficiaries. 
BACKGROUND 
Con~essional  interest  in limiting  beneficiary  financial  liability  for  physician  semices 
beg~n  with  the  establishmen~  in  1984, of the  Participating  Physician  Program.  In 
return  for  payment  incentives,  participating  physicians  must  accept  assignment  of 
Medicares  approved  amount  as payment  in full in all cases;  non-participants  may 
accept  assignment  on a case-by-case  basis.  About  19 percent  of all claims  are 
unassigned,  representing  13 percent  of allowed  physician  charges,  or  $5.7 billion,  in 
1990. 
Provisions  of OBIU  1989, effective  Januaxy  1991, Iimited  beneficiary  responsibility  for 
amounts  physicians  charged  in excess  of the  amount  allowed  by Medicare.  These 
provisions  precluded  physicians  who  did not  accept  assignment  in  1991 from  charging 
beneficiaries  more  than  12S percent  of Medicares  allowed  amounts  for  medical 
procedures,  and  more  than  140 percent  of allowed  amounts  for  evaluation  and 
management  services.  This  new  system,  called  limiting  chafg~n  is also  frequently 
referred  to  as Balance  BiIling.  In administering  these  restrictions,  ~ers  monitor  a 
sample  of procedures  and  senkes  for  all physicians  unassigned  claims  for  the  first 
and  second  half  of each  year.  When  the  cumulative  amount  of potential  excessive 
charges  on  individual  claims  in the  6-month  sample  period  exceeds  $300,  a notice  is 
sent  to the  physician  ident@ing  all such  charges  Should  potential  violations  be 
confirme~  physicians  are  intensively  monitored.  If physicians  continue  to violate 
charge  limits,  they  may  be  referred  for  civil monetary  penalty  or  exclusion  proceedings. 
We  collected  data  on monitoring  activities  from  all carriers  for  the  two  monitoring 
periods  in  1991.  We  also  interviewe~  either  by telephone  or  in person,  staff  from  a 
sample  of twelve  Medicare  earners.  Case  files were  reviewed  at  six earners  we visited. 
FINDINGS 
Data  Supplied  By Carriers  Ixxiicated  That  The  Extent  Of Excessive  Charges  By 
Physicians  Appeared  I&nited 
Potential  physician  violations  represented  only four  percent  of all physicians  submitting 
unassigned  claims.  Overcharges  and  beneficiaries  each  represented  one  percent  or  lCSSof the  total  submitwd  charges  on  unassigned  claims  and  of the  total  Medicare 
population. 
Initiatives  Of some  Carriers  Helped  To  Rdua  The Fmcia.1  Impact  On  Some 
Bencficiark 
Some  camiers  asked  physicians  to  make  refunds  to  beneficiaries,  although  this was  not 
required  by HCFA  in  1991.  Sixteen  carriers,  who  accounted  for  60 percent  of all 
physicians  receiving  initial  notices  for  1991, repofi  always  requesting  refunds. 
All Mtiearc  Carriers  Implemented  Required  Monitoring  Of limits  On  Physicians 
Charges  In  1991; Hcnwxer,  Some  Did  So More  Intensively  Than  Others 
Carriers  monitoring  procedures  for  physicians  who  received  initial  notices  of limiting 
charge  violations  differed  in the  manner  of intensive  monitoring.  This  resulted  in
 
physicians  not  being  not~ed  on  a timely  basis  to  correct  their  charging  practices  to  fall 
within  the  charge  limits,  and  prevented  beneficiaries  ffom  receiving  prompt  refunds. 
HCFAS  Educational  EfYo~  Focused  On  Physicians  And  Gave  Ve~  Little  Attention 
To  Beneficiaries 
Carner  education  on limiting  charges  focused  almost  exclusively  on  physicians,  in an 
attempt  to  reduce  charge  violations  at their  source.  A review  of E@anation  of 
Medicare  Benefits  (EOMB)  forms  for  1991 from  12 sample  earners  showed  that  they 
misstated  the  amount  that  the  beneficiary  was responsl%le  for  payin~ 
. 
RECOMMENDA~ONS 
Our  recommendations  take  into  account  that  during  the  course  of this  study  HCFA 
(1)  had  instructed  earners  to  request  physicians  to  make  refunds  to  beneficiaries  in 
those  cases  where  charges  exceeded  Medicare  l.imi~,  (2)  had  implemented  plans  to 
revise  EOMBS  to  provide  beneficiaries  with  the  neeessa~  information  to  detect 
excessive  charges,  and  (3)  developed  instructions  on  development  and  disposition  of 
intensively  monitored  cases  Also,  legislation  had  been  introduced  in the  Congress 
requiring  physicians  to refund  beneficiaries  any  amounts  found  to  be  in excess  of 
billing  limits.  The  legislation  was  not  enacteq  but  has  been  reintroduced  in the 
current  session  of Congress. 
We  support  these  efforts,  and  in addition,  recommend  that  HCF& 
1.  Contact  those  carriers  who  never  notified  physicians  to voluntarily  refund  or 
credit  beneficiaries  based  on  1991 violations  found  through  monitorin~  and 
request  that  they  send  one  notice  to those  physicians  to  make  refunds  to,  or 
credit  the  accounts  o~ those  benefickks  previously  identified. 
ii  Support  legislation  requiring  physicians  to  make  refunds  to  beneficiaries  for 
amounts  collected  in accssof charge  limits 
COMMENTS 
~~ereceived  comments  from  the  Health  Care  Financing  Administration  (HCFA)  and 
from  the  Assistant  Secretary  for  Planning  and  Evaluation  (ASPE).  Both  disagree  wi[h 
our  recommendation  to  now  contact  physicians  who  had  not  been  requested  to  make 
refunds  to beneficiaries  for  1991 charge  Violations.  Their  reason  is that  there  is no 
statuto~  authority  requiring  physicians  to  make  such  refunds. 
Also,  HCFA  believes  that  it would  be  inappropriate  to  take  the  recommended  action 
on a retroactive  basis  since  at  the  time  the  violations  were  identified,  it did  not  think 
that  it had  authority  to  instinct  carriers  to  request  physicians  to  make  refunds.  The 
ASPE  states  that  Congress  enacted  a different  system  of Iixnits on balance  billing  by 
physicians  since  approtiately  1984, called  Maximum  Allowable  Charges  or  MAACS. 
The  OIGS recommendation  singles  out  only those  beneficiaries  who  were  overcharged 
by the  new  limiting  charge  system  enacted  for  1991. 
Additionally,  HCFA  indicates  that  it has  taken  action  regarding  those  beneficiaries 
who  may  have  been  charged  more  than  the  1991 charge  limits.  The  HCFA  notes  that 
leaflets  describing  the  Medicare  limiting  charge  were  distributed  to beneficiaries 
through  Social  Security  Administration  district  offices  HCFA  regional  offices,  and 
national  beneficiary  organizations.  These  leaflets  advise  beneficiaries  to  contact  their 
Medicar&  carriers  if they  believe  they  had  been  overcharged  for  physician  sefices  in 
1991.  The  HCFA  states  that  it has  instructed  carriers  to  assist  beneficiaries  in 
dete rmining  whether  violations  occurred  and  in contacting  physicians  to  request 
refunds. 
OIG  RESPONSE 
We  understand  that  current  law  does  not  require  physicians  to  make  refunds  and  are 
only recommending  that  HCFA  issue  notices  to physicians  requesting  that  they 
voluntarily  make  refunds.  We  believe  that  many  physicians  will do  so once  notified  of 
the  overcharges.  We  have  clarified  our  recommendation  to  reflect  our  inten~  which  is 
to seek  fair  and  equitable  treatment  for  those  beneficiaries  semiced  by those  carriers 
which  did  not  make  such  requests  of physicians. 
We  recognize  and  appreciate  HCFAS  concern  about  retrospective  actions.  However, 
we believe  that  these  actions  can  be  taken  with  a minimum  of effort  and  cost.  Our 
study  confirmed  that  just  over  half  of the  earners  always  or  sometimes  requested 
refunds  or  adjustments.  However,  there  were  26 earners  who  never  requested  refunds 
or adjustments  of beneficiary  accounts  from  a total  of 3,170  physicians  found  in 
\tiolation  of charge  limits.  That  represents  less than  20 percent  of the  total  physician 
vio]ators.  Only  these  physicians  need  be  sent  a letter  requesting  a refund  or  an 
...
111  adjustment  of beneficiaries  accounts  This  action  would  assure  equal  treatment  to  all 
overcharged  beneficiaries. 
We  commend  HCFAS  initiative  to remedy  the  unequal  treatment  bcncficiarics 
received  in obtaining  tier  assistance  in obtaining  refunds  for  overcharges  in  1991. 
Neverthel~  wc bdicvc  that  it falls short  of remedying  the  unequal  treatment 
beneficiaries  rcceive~  the  burden  for  identifjhg  and  correcting  overcharges  should 
not  be  placed  on beneficiaries  Also,  this remedy  is Iimited  to  only  those  beneficiaries 
who  re&ivcd  and  acted  upon  the  information  in the  leafle~ 
As the  MAAC  provision  on physician  charges  was  not  within  the  scope  of this  study, 
we  arc  not  able  to  comment  on ASPES obsemation  regarding  overcharges  during  the 
MC  program   
The  HCFA  also  provided  general  and  technical  comments  on the  draft  report  which 
we have  incorpo~ated  in h-is report  as appropriate.  Comments  horn  ASPE  and 
HCFA  arc  included  in Appendix  A. 
-.  ....-
-.  .    -- %+--- -.--.- ----- . - .:- .. ------,--.-.-...  .  .  -----.--- .-.,-...--._.---.-7.---_-.-. 
... ...  . .  . ----.--. . . .. 
..-.-*  -
.  .  -... a...+. --++   ..-..
.- ....: ..  ------- .-----,  >A.-*..:-
-- .>-)  .! .-: 4 .&.. .... . . 
. . 
.-  ; ,;-----
--.--: --,-
-- . ;,  :-: 
.-
  --- . ...- ---, 
.  .  .  .  . ..  . .. --
--_ -..- -. ... 
----
-., 
------ ...- .
___
--. 
..  .  --
.
iv  TABLE  OF  CONTENTS 
ExEcuTrvE  SUMMARY 
INTRODUCTION  . . . ...*.  *O*...*  . . . . . . . . . . . . . . . . . . . ...00  00 -0---- 1 
   
FINDINGS  . . . . . . . . . . .  4 
...0  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .*  .  ...-*    --.0=. 
Extent  Of  Charge Violations  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . 4 
Refunds  To  Beneficiaries  -* --.*-.  .0 ..00.0  . . . . . . . . . . . . . . . . 9..0000- * 5 
Camier  Monitoring  Of Physicians  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Physician  And  Education  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
8 
Comments  . . . . . . . .  8 
  .**.9.  m  9  *..*...  .  .  .  .  .  .  .  .  .  .  .  .  ...*  .  .  .  .  ...*  .  .  .  . 
APPENDIX 
&  CommentsO nD  raftReport.  . . . . . .  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-l  INTRODUCTION

PURPOSE 
To  report  on  Medicare  carriers  implementation  of limits  on  physicians  charges  to 
beneficiaries. 
BACKGROUND 
Since  the  inception  of Medicare,  physicians  have  been  given  the  option  to  receive 
payment  directly  from  Medicare  on  an assigned  basis  or  to be  paid  by the  beneficiary 
on  an  unassigned  basis.  Assignment  is an agreement  by a physician  to  accept

Medicares  allowed  amount  as payment  in full.  The  physician  accepting  assignment  of

a Medicare  claim  receives  80 percent  of the  allowed  amoun~  and  biIls the  beneficia~

for  only the  remaining  20 percent  (coinsurance).  When  assignment  is not  accepted,

the  beneficiary  is respons]%le  for  paying  the  physician.  Medicare  pays  the  beneficiary

80 percent  of the  Medicare-approved  amount  for  the  semice.

Until  recent  years,  when  assignment  was not  accepte~  a physician  could  charge  the

beneficiary  more  than  Medicares  approved  amount  without  any  restrictions.

Medicare  would  pay  80 percent  of its allowed  amoun~  and  the  beneficiary  would  be

responsl%le  for  the  full balance  of the  amount  billed  by the  physician.  Cunently,

however,  when  assignment  is not  accepted  a physician  may  charge  no  more  than  a

specified  percentage  above  an  allowable  amount  established  by Medicare.  This  limit

on  the  Mount  of the  physicians  charge  is referred  to  as the  limiting  charge.

This  inspection  focused  on  unassigned  claims  in  1991 subject  to  Medicares  charge

Iimits.  About  19 percent  of all claims  are  unassigned.  In  1990, they  represented

approximately  13 percent  of physicians  allowed  charges,  or  about  $5.7 billion.

L+@ztive  Hutay

Congressional  interest  in limiting  beneficiary  liabiIity  for  physician  services  began  with

the  passage  of the  Deficit  Reduction  Act  of 1984.  It established  a Medicare  Physician

Participation  Program  designed  to  provide  physicians  with  incentives  to  accept

assignment  on  claims  for  all senkes  rendered.  Participating  physicians  agree  to

accept  assignment  on  all claims  for  sewices  furnished  during  &e  year.  Physicians  who

do not  participate  may  decide  on  a case-by-case  basis  whether  to  accept  or not  accept

assignment.

Since  1984, several  laws have  been  enacted  which  placed  limits  on  the  amounts

nonparticipating  physicians  were  allowed  to charge  beneficiaries.  The  OBW  of  1986

provided  for  limits  on the  actual  charges  that  could  be  made  by nonparticipating

physicians,  Imown  as Maximum  Allowable  Actual  Charge  (MAAC)  limits.
 These  provisions  were  replaced,  effective  January  1991, by a new  system  of limits, 
known  as limiting  charges,  resulting  from  OBW  1989.  This  new  s}~tem  is also 
frequently  referred  to  as *Balance Billing.  For  1991, physicians  not  accepting 
assignment  could  charge  no  more  than  125 percent  of Medicares  allowed  amounts  for 
medical  procedures  and,  as required  by OBW  1990,  140 percent  of established 
amounts  for  evaluation  and  management  semices. 
Cuti  Monitohg  of Nonpa@pahg  Physicians 
The  Mcdicarc  Carriers  Manual,  section  7555.1,  required  earners  to  monitor  a sample 
of each  non~articinating  physicians  charges  for  the  first  and  second  half  of each  year. 
(Due  to  delays  experienced  by earners  in calculating  limiting  charges  and  notifjing 
physicians  of them  the  first  monitoring  period  in  1991 was  March  through  June;  the 
first  complete  6-month  period  began  in July).  The  sample  consisted  of the  10 most 
common  procedures  performed  in the  physicians  specialty.  When  the  cumulative 
amount  of potential  excessive  charges  billed  in the  sample  period  exceeds  $300,  a 
notice  is sent  to  the  physician  identi&ing  all procedures  and  related  charges.  The  $300 
threshold  may  consist  of a single  procedure  or multiple  procedures  with  at  least  $1 in 
potentiaI  excessive  charges.  Physicians  are  asked  to  review  the  information  and  noti$ 
the  earner  of charges  they  believe  are  not  excessive  or which  were  submitted  in emor. 
If the  camer  finds  that  excess  charges  are  adequately  explaine~  the  physician  is not 
considered  in violation.  The  initial  notification  also  states  that  a special  follow-up 
review  of charges  will be  conducted  to examine  whether  the  physicians  charging 
practices  have  been  corrected  to be  within  the  charge  limits.  If charges  continue  to 
violate  the  limi~  the  matter  may  be  referred  for  possl%le civil monetary  penalty  or 
exclusion proceedings. 
The  carrier  follow-up  review  of physicians  who  have  not  satisfactorily  explained 
excessive  charges,  known  as intensified  monitoring,  is conducted  over  a three- to  six-
month  penocL  Should  violations  continue  to  occur,  the  earner  sends  a second  notice 
requesting  an  explanation.  It indicates  that  charges  not  adequately  explained  will be 
considered  as violations  of OBW  limits,  and  that  continued  violations  may  result  in 
referral  for  civil monetary  penalty  or  exclusion  proceedings. 
B enejkhy  Ihqu.i&s  On  Chuqp 
If a earner  receives  a beneficiary  complaint  on  a potential  charge  limit  violation  and 
finds  the  complaint  has  meri$  it sends  a notification  letter  to the  physician,  even  if the 
$300  threshold  level  has  not  been  reached.  Many  of these  complaints  are  made  after 
beneficiaries  are  notified  of physicians  charges  by carriers  on Explanation  Of 
Medicare  Benefits  (EOMB)  forms.  During  1991, these  EOMBS  also  contained 
information  on  Medicare  approved  charges  on  the  amount  of Medicare  payment  and 
on  the  beneficiarys  responsl%ility  for  the  balance  of the  physicians  charge. 
2  MErHoDomGY 
At  our  requcsh  all 56 tiers  provided  documentation  on  their  monitoring  activities 
and  on  their  handling  of beneficiary  complaints  for  the  first  monitoring  period.  They 
also  provided  early  information  of a similar  nature  on  the  second  monitoring  period 
(just  beginning  at  the  time  of our  data  collection).  Data  included:  (1)  the  total 
number  of physicians  sent  initial  notices  of potential  charge  limit  violations;  (2)  the 
total  number  of beneficiaries  involved;  and  (3)  the  total  related  excessive  charges. 
While  aIl carriers  provided  information,  the  number  of responses  to  each  of our 
questions  vanex  ranging  from  39 to 56.  Some  carriers  reported  that  ccflain 
information  was  not  available;  thus,  the  data  rcpofled  in our  findings  do  not  represent 
the  full ex~ent  of violations,  excessive  charges  or number  of beneficiaries  involved. 
For  the  purpose  of vcri&ing  earners  monitoring  activities  and  seeing  if there  were  any 
variations  in implementation,  we divided  carriers  into  three  groups.  These  groups 
were  based  upon  the  size  of the  beneficiary  populations  they  seine:  (1)  more  than  11 
milliorq  (2) between  three  and  11 million;  and  (3)  less  than  3 million.  We  randomly 
selected  12 carriers  (four  from  each  group).  From  them  we  obtained  and  analyzed 
documents  regarding  monitoring  procedures,  beneficiary  and  physician 
comespondence,  HCFA  instmctions  to carriers,  and  EOMB  forms  Their  educational 
activities  with  physician  and  beneficiary  organizations  were  also  reviewed. 
We  intefiewed  staff  at  six of the  12 sample  earners  by telephone  (at  least  one  from 
each  group)  regarding  their  monitoring  procedures  and  experiences.  At  the  remaining 
six carriers  (at  least  one  in each  group)  we made  site  visits.  The  six carriers  were 
purposively  selected  to  provide  a geographic  distribution  of different  size  carriers.  At 
these  site% we reviewed  a total  of 221 physicians  who  had  violated  charge  limk  We 
abstracted  and  recorded  data  to veri~  aspects  of the  monitoring  process  including 
intensified  monitoring.  We  also  reviewed  carriers  handling  of complaints.  We 
specifically  identified  excessive  charges  for  approximately  20,000  procedures  billed  in 
the  221 violation  case%  and  placed  them  into  six groups  by amounts  ranging  from  $1 
to  more  than  $100. 
We  also  called  physicians  to  determine  whether  they  made  refunds  to  or  credited 
accounts  of 36 beneficiaries  identified  through  the  case  reviews  as having  been 
overcharged  $100  or  more.  When  physicians  indicated  that  they  had  made  refunds  or 
credited  accounts,  we  requested  documentation  to  that  affect.  In these  cases  there 
was  no  indication  that  carriers  had  requested  that  physicians  make  refunds. 
Lastly,  we  asked  several  beneficiary  and  physician  advocq  organizations  about  their 
dealings  with  carriers  and  beneficiaries  on Iirniting  charges. 
.  FINDINGS 
DATA  SUPPLIED  BY CARNERS  INDICATED  THAT  THE  EXIENT  OF 
EXCESSIVE  CHARGES  BY PHYSICIANS  APPEARED  LIMITED 
I&nfiJi  pdatid  viohioru  mpmwnkd  0+  a SM.U fmcdora  of d  chaqps  submitld  on 
unussignd  clainq  canit7s  - gpbti  accod  for  some  of  these  idenfi!i 
Vidafwns 
For  the  two  1991 monitoring  peno~  49 carriers  in the  first  monitoring  period  and  46 
earners  in the  second  period  repotied  identifying  potential  overcharges  by 
nonparticipating  physicians  of about  $11 million.  This  total  represented  far  less  than  1 
percent  of total  unassigned  submitted  charges.  It involved  approximately  343,000 
beneficiaries,  or  about  1 percent  of the  total  Medicare  population.  The  average 
excessive  charge  per  overcharged  beneficiary  was  approximately  $32. 
It should  be  noted  that  the  above  data  is not  a complete  picture  of the  extent  of 
excessive  charges  to beneficiaries.  Any violations  which  may have  occurred  during  the 
first  two  months  of  1991 and  any physicians  excessive  charges  which  did  not  total  $300 
are  not  included 
For  the  same  perio~  55 earners  in the  first  monitoring  period  and  52 in the  second 
period  reported  identifying  16,284 non-participating  physicians  whose  cumulative 
potential  overcharges  on aIl unassigned  claims  were  $300  ormore  These  physicians 
represented  four  percent  of the  389,399  non-participating  physicians  who  submitted 
unassigned  claims  to  52 carriers. 
Other  data  reported  by 54 carriers  horn  the  first  monitoring  period  further  suggest  the 
relatively  small  percentage  of potential  physician  violations.  Carriers  resolved  65 
percent  (5,919)  of 9,122 potential  violations  they  identified  without  needing  to  send 
second  notices  to physicians.  Of  these  resolution%  nearly  40 percent  (~166)  of the 
potential  violations  were  caused  by technical  problems  and  not  physician  errors.  In 
these  cases,  earners  inappropriately  cited  physicians  with  vio~tions  for  a variety  of 
reasons,  although,  in many  instances,  potential  overcharges  did  occur.  The  most 
frequently  cited  reasons  were:  (1)  earner  recoding  of semices  which  lowered  limiting 
charges;  (2)  monitoring  staff  using  different  charge  levels  than  those  given  to 
physicians;  (3)  not  sending  correct  charge  limits  to  physicians  before  the  period  being 
monitored;  (4)  miscoding  multiple  semices  as one  semice;  and  (5)  using  incorrect 
physician  specialty  or locality  information. 
A review  of 221 physician  violation  case  files at  the  six visited  earners  revealed  that 
the  amounts  of excessive  charges  per  procedure  were  small.  Eighty-nine  percent  of 
excessive  charges  were  $x  or less,  for  the  near]y  ~(),()()()  procedures  rendered  between 
4  \farch  and  June  1991.  The  balance  included  five percent  in the  S26 to S50 range,  and 
six percent  over  $50. 
INITIATIVES OF  SOME  QWRIERS  HELPED  REDUCE  THE  FrNANCIAL 
IMPA~  ON SOME  BENEFICIARY 
Some  cati  on  their  own  rqzuzstd  that phpkiaru  malz  rejhds  to  bcncjlcianm 
For  the  first  and  second  monitoring  periods,  some  carriers  report  requesting  physicians 
to make  refunds  or  adjustments,  although  they  were  not  required  by HCFA  to  do  so. 
A review  of files  at  six earners  confirmed  this  activity. 
Regarding  excessive  charges  identified  by monitoring,  29 percent  of carriers  (16)  say 
they  always  made  such  requests,  46 percent  (26)  repoti  they  never  made  such 
requests,  and  25 percent  (14)  sometimes  made  them. 
The  sixteen  carriers  who  report  always  requesting  refunds  or credits  made  such 
requests  of 9,614 physicians  in their  semice  area.  These  physicians  accounted  for 
nearly  60 percent  of all those  receiving  initial  notices  for  the  ~o  1991 monitoring 
periods.  They  rendered  sefices  to  46  percent  of the  beneficiaries  who  were 
potentially  overcharged.  Their  excessive  charges  were  approximately  $4 million  in 
1991. 
halysis  of the  biIls from  221 physician-cases  reviewed  at  the  six earners  we visited 
(tWO always  requested  physicians  to make  refunds  and  four  sometimes  did  so)  showed 
that  for  73 percent  of the  13,579 beneficiaries  overcharge  their  physicians  were 
requested  by carriers  to  refund  or  credit  beneficiary  accounts,  or had  voluntarily  done 
so.  However,  we  did  ident@  36 beneficiaries  who  were  overcharged  horn  $122  to 
$1,359.  Her  records  did  not  indicate  that  requests  for  refunds  or  adjustments  had 
been  made.  Documents  we  later  obtained  horn  physicians  conf~ed  that  refunds  or 
adjustments  were  made  for  seven  of the  36 beneficimes,  amounting  to  $2,801. 
However,  no  refunds  or  adjustments  had  been  made  in the  remaining  29 cases, 
representing  total  potential  overcharges  of $14,898. 
There  is no  legal  requirement  that  physicians  make  refunds  to beneficiaries,  even 
when  excessive  charges  are  identtied.  The  limiting  charge  legislation,  section  lW8(g) 
of the  Social  Security  Ac~  provides  only that  physicians  may  be  sanctioned  for 
knowingly,  willfully  and  repeatedly  billing  in violation  of the  charge  limitation. 
However,  the  law is silent  as to  the  extent  of beneficiaries  responsibility  for  excessive 
charges.  Thus,  beneficiaries  lacked  off]cial  recourse  to  obtain  refimds  from  physicians. 
[Note:  In  March  199A HCFA  instructed  camers  to  revise  their  intensive  monitoring 
follow-up  notices  to  advise  physicians  to adjust  their  charges  which  exceeded  the  limits 
and  to  request  that  refunds  be  made  to beneficiaries.  It also  instmcted  carriers  to 
revise  initial  monitoring  notices  to  reflect  its position  on  requesting  physicians  to  adjust 
charges  and  to  make  refunds  where  excessive  charges  are  identified.] 
5  ALL  MEDICARE  cARRrERs  HAVE  IMPLEMENT  D REQUIRED

MONITORING  OF  LIMITS  ON  PHYSICIANS  CHARGES  XN 1991;  HOWEVER

SOME  DID  SO MORE  1NTENSEL%  THAN  OTHERS

All 56 Medicare  earners  repoti  having  implemented  HCFAS  instructions  to  monitor

phvsician  charges  in both  of the  1991 semi-annual  monitoring  periods.  During  the  first

m&itonng  period  (March  - June  1991) 55 earners  report  that  9,122  physicians

received  ini~ial noti-ms of charge  violations.  Carriers  reso}ved  and  closed  85 percent  of

these  cases  as of March  1992  The  open  =es  were  still under  intensive  monitoring.

No  cases  were  referred  for  punitive  action  as of that  time.

Our  review  of cases  during  site  visits revealed  that  carriers  procedures  differ  in the

manner  of intensive  monitoring.  This  resulted  in physicians  not  being  notified  on  a

timely  basis  to  correct  their  charging  practices  and  prevented  beneficiaries  from

receiving  prompt  refunds.  These  differences  in monitoring  procedures  were  not  found

to be  related  to  Carner  size.  Lacking  specific  instructions  from  HCF~  carriers

monitored  physicians  intensively  anywhere  horn  three  to  six months  after  sending  a

notice  of the  initial  violation.  As a resul$  subsequent  notices  to  physicians  of new

violations  vary  in the  degree  of carrier  efforts  in that  some  notices  1) were  sent  every

mont~  regardless  of the  size  of the  excessive  charges;  2) were  sent  only  after  three

months  showing  all accumulated  excessive  charges;  or 3) were  not  sent  if the  amount

is considered  smalL

For  the  first  monitoring  period  52 carriers  reported  receiving  877 beneficiary

complainantsof limiting  charge  violations.  Of that  number,  703, or  80 percenq  were

reported  to have  merk  Carriers  had  resolved  84 percent  of the  cases  as of March

1992

HCFAS  EDUCATIONAL  EFFORTS  FOCUSED  ON PHYSICIANS  AND  GAVE 
VERY  LITTLE  A~  ONTO  BENEFICIARIES 
Carner  education  activities  on  limiting  charges  were  focused  almost  exclusively  on 
physicians  in an  attempt  to  reduce  limiting  charge  violations  at  their  source.  Sample 
carriers  provided  examples  of agendas  for provider  seminars  they  conducted,  bulletins 
they  issued  descniing  Iimiting  charges  and  literature  they  sent  to  all physicians.  Their 
efforts  were  considered  welcome  and  effective,  according  to  several  physician 
organizations  we  contacted. 
However,  earners  did  not  receive  instructions  from  HCFA  to educate  beneficiaries  on 
1991 limiting  charges,  according  to  contacts  within  HCFA  and  at  12 sample  Carne= 
Nevertheless,  these  earners  reported  that  they  were  responsive  to  most  requests  from 
beneficiary  groups  to  provide  speakers  at  meetings  where  limiting  charges  were  among 
the  topics  discussed. 
6
 E@uwion  QfMdkan  Bcn@k (EOMB)  Jo in 1991 incormdy  Cncoumgd 
bcnejii  qxy@ullihlaccssiv  echmgCs 
Our  review  of EOMBS  for  1991 from  12 sample  camem  showed  that  beneficiaries 
received  misleading  information  on  Explanation  of Medicare  Benefits  (EOMB)  forms, 
regarding  the  amount  they  were  responsible  for  paying  physicians.  These  EO?VIBS 
overstated  the  amount  physicians  could  legally  charge  them,  leading  beneficiaries  to 
believe  that  they  were  responsible  for  the  full difference  between  Medicares  payments 
and  physicians  charge%  including  amounts  in excess  of limiting  charges. 
In response  to public  concerns  about  this  issue,  HCFA  instructed  carriers  in early  1992 
to  delete  all  reference  to  patients  respons]%ilities  for  physicians  charges  on  EOMBS. 
However,  beneficiaries  still were  not  alerted  to  excessive  charges. 
[Note:  The  HCFA  added  a message  on  the  back  of the  EOMB,  effective  June  1992, 
which  notes  that  doctors,  generally,  may  not  charge  more  than  120 percent  of the 
Medicare  approved  amount  Beneficiaries  are  advised  to  contact  carriers  if they  think 
their  doctors  have  charged  more  than  the  limiting  charge.  This  message  also  refers 
beneficiaries  to  the  1992 Medicare  Handbook  for  information  on  limiting  charges. 
HCFA  indicated  that  by the  end  of  1992 the  EOMB  wilI display  the  physicians  charge 
limit  and  the  amount  of actual  charges.  This  will enable  beneficiaries  to know  if the 
charge  exceeded  the  Medicare  limiL 
Odzet oqprziaztiow  have pkzyed  a de  h  &&g  benej%iah 
Most  be~eficianes have  their  own health  insurance  plans  which  supplement  Medicare 
payments.  These  plans  play  a role  in noti@ing  beneficiaries  about  limiting  charge% 
according  to  our  review  of documents  in carrier  files  and  discussions  with  both  carrier 
staff  and  members  of beneficiary  advocacy  groups  The  information  provided  by these 
plans  (though  not  always  accurate)  alerts  beneficiaries  to  limiting  charge  violations  and 
refers  them  to their  physicians  or  carriers  to  resolve  questions  about  excessive  charges. 
Our  contacts  with  community-based  advocacy  groups  indicate  that  they  have  been 
taking  active  roles  in assisting  beneficiaries  with  limiting  charge  problems.  These 
groups  often  query  carriers  about  limiting  charge  violations  on behalf  of beneficiaries. 
7  RECOMMENDATIONS 
Our  recommendations  take  into  account  that  during  the  course  of this  study  HCFA. 
(1)  has  instructed  carriers  to  request  phpicians  to make  refunds  to  beneficiaries  in 
those  cases  where  charges  exceeded  Medime  limits,  (2)  has  implemented  plans  to 
revise  EOMBS  to  provide  beneficimes  with  the  necessaxy  information  to  detect 
excessive  charges,  and  (3)  has  developed  instmctions  on  development  and  disposition 
of intensively  monitored  cases.  Also,  legislation  had  been  introduced  in the  Congress 
requiring  physicians  to refund  beneficiaries  any  amounts  found  to be  in excess  of 
billing  limits.  The  legislation  was  not  enacted,  but  has  been  reintroduced  in the 
cument  session  of Congress. 
We  support  these  efforts,  and  in addition,  recommend  that  HCFk 
1.  ~ntact  those  carriers  who  never  notified  physicians  to vohmtaxily  refund  or 
credit  beneficiaries  based  on  1991 violations  found  through  monitorin~  and 
request  that  they  send  one  noti=  to those  physicians  to  make  refunds  to,  or 
credit  the  accounts  o~ those  beneficiaries  previously  identifkxi 
z  Support  legislation  requiring  physicians  to make  refimds  to beneficiaries  for 
. 
amounts  collected  in excess  of charge  limits 
cob4MENTs 
We  received  comments  horn  the  Health  Care  Financing  Administration  (HCFA)  and 
from  the  Assistant  Secretary  for  Planning  and  Evaluation  (ASPE).  Both  disagree  with 
our  recommendation  to  now  contact  physicians  who  had  not  been  requested  to  make 
refunds  to beneficiaries  for  1991 charge  violations.  Their  reason  is that  there  is no 
statutory  authority  requiring  physicians  to make  such  refunds 
Also,  HCFA  believes  that  it would  be  inappropriate  to  take  the  recommended  action 
on  a retroactive  basis  since  at  the  time  the  violations  were  identifie~  it did  not  think 
that  it had  authority  to  instinct  carriers  to request  physicians  to  make  refunds.  The 
ASPE  states  that  Congress  enacted  a different  system  of limits  on balance  billing  by 
physicians  since  approximately  1984, called  Maximum  Alowable  Charges  or  WCS. 
The  OIGS recommendation  singles  out  only those  beneficiaries  who  were  overcharged 
by the  new  ~imiting charge  system  enacted  for  1991. 
Additionally,  HCFA  indicates  that  it has  taken  action  regarding  those  beneficiaries 
who  may  have  been  charged  more  than  the  1991 charge  limits.  The  HCFA  notes  that 
leaflets  describing  the  Medicare  limiting  charge  were  distributed  to  beneficiaries 
through  Social  Security  Administration  district  offices,  HCFA  regional  offices,  and 
8  national  beneficiary  organizations.  These  leaflets  advise  beneficiaries  to  contact  their 
Medicare  carriers  if they  believe  they  had  been  overcharged  for  physician  sewices  in 
1991.  The  HCFA  states  that  it has  instructed  carriers  to  assist  beneficiaries  in 
determining  whether  Violations  occurred  and  in contacting  physicians  to  request 
refunds. 
OIG  RESPONSE 
We  understand  that  current  law does  not  require  physicians  to make  refunds  and  are 
only  recommending  that  HCFA  issue  notices  to  physicians  requesting  that  they 
voluntarily  make  refunds.  We  believe  that  many  physicians  wiJl do  so once  notified  of 
the  overcharges.  We  have  clarified  our  recommendation  to reflect  our  inten~  which  is 
to seek  fair  and  equitable  treatment  for  those  beneficiaries  seticed  by those  earners 
which  did  not  make  such  requests  of physicians. 
We  recognize  and  appreciate  HCFAS  concern  about  retrospective  actions.  However, 
we believe  that  these  actions  can  be  taken  with  a minimum  of effort  and  COSL Our 
study  confirmed  that  just  over  half  of the  earners  always  or sometimes  requested 
refunds  or  adjustments.  However,  there  were  26 carriers  who  never  requested  refunds 
or  adjustments  of beneficiary  accounts  ffom  a total  of 3,170  physicians  found  in 
violation  of charge  limits  That  represents  less than  20 percent  of the  total  physician 
violators.  Only  these  physicians  need  be  sent  a letter  requesting  a refund  or  an 
adjustment  of beneficimes  accounts.  This  action  would  assure  equal  treatment  to  all 
overcharged  beneficiaries. 
We  co&end  HCFAS  initiative  to remedy  the  unequal  treatment  beneficiaries 
received  in obtaining  carrier  assistance  in obtaining  refunds  for  overcharges  in  1991. 
Nevertheles~  we believe  that  it falls short  of remedying  the  uneqti  treatment 
beneficiaries  receive~  the  burden  for identifying  and  correcting  overcharges  should 
not  be  placed  on beneficiaries.  Also,  this remedy  is Iimited  to  only those  beneficiaries 
who  received  and  acted  upon  the  information  in the  leaflet 
As the  MAAC  provision  on  physician  charges  was  not  within  the  scope  of this  study, 
we are  not  able  to  comment  on ASPES obse~ation  regarding  overcharges  during  the 
M_/WC  program 
The  HCFA  also  provided  general  and  technical  comments  on the  draft  report  which 
we have  incorporated  in this  report  as appropriate.  Comments  from  ASPE  and 
HCFA  are  included  in Appendix  A 
9  -..  --- .  .. .  ..  ...-.  .  . .  . 
APPENDIX  A

COHKENTS  OH THZSD- REPORT 
. . .. 
----
.  . . 
.-
-. 
*-P.  - -.  @  ..l 
.--,---.-.- ._._ ---+-.- .------0. -.-.---. -.--------.=-.- .. -   - .-.  ---- --.. .-.-..-.  .--.. ....  -,.-.----..-  - ..- .  . .  -..- .... -. ... Q.: .   -..- -+------- --+-.&-  --2-+.---J.%>_-..-_- : -A..  --+x---.---: .---::~:z-~---- .4  ----+
...  -. .. 
. ---- . .  -  ---
..  -- -- ---- ,. 
.. 
-...   -- - -...,  -.-  --. -.--- .  ..-.  .. 
8.   
.- ..- -.  ------- .  ..  .. ,--- ------.. ..-.  -. 4-
...- ,.-..  .. ,. -- .---.- ---.-.--.-.. 
-.  . . .,,
. ..  ..-. .  ..  .,  .-------.-.-. -.-  .:-- -.  -.- 
-.- - . .  -. 
-- -. 
A-1
 . 
Heatth  cdrO 
Stnanc:ng  Adnmistratlon 
Data 
Ac~ing  Administrator 
From 
~A~  _  -+!!. 
office  of Inspector  General  (OIG)  Draft  Repon:  tits  on  Beneficiary  Fhancial 
Subject 
Liability  (B&mcc  Billing)  OEI-02-92-00130 
B~  B. MitchcIl 
To  . 
Principal  Deputy  Inspector  General 
WC reviewed  the  subject  OIG draftrepoti  concerning  Medi=e  carriers 
implementation  of tits  on  physician  charges  to  beneficiaries  as  set  forth  in  the 
Omrxi%us Budget  Reconciliation  Act  of  1989. 
OIG  found  that  data  supplied  by carriers  indicated  that  the  extent  of  excessive 
charges  by physicians  appeared  limited  in the  fit  two monitoring  periods  in  1991, 
potentiaI  overcharges  represented  less  than  1 percent  of total  unassigned  submitted 
chargeq  or about  $11  miI1iom 
OIG  &o  found  that  although  all Medicare  m-em  implemented  required 
monitoring  of limits  on  physicians  charges  in  1991,  some  czmiers  are  monitoring 
more  intensively  than  others.  Initiatives  among  some  carnem  helped  reduce  the 
financi&l  imnact  on  beneficiaries.  However,  not  all beneficiaries  are  as 
knowledgeable  of this  issu~  nor  are  they  able  to  pursue  refimds  &om  physicians  who 
have  biIIed  above  the  statutory  liik  OIG  also  noted  that  the  Health  Care 
Financing  Administrations  (HCFA)  educational  efforts  focused  on  physicians  while 
@ving little  attetition  to  beneficiaries 
OIG  recommends  that  HCFA contact  those  carriers  that  did  not  not~ 
physicians  to  refund  or  credit  beneficiaries  based  on  1991 violations  found  through 
monitoring  The  carriers  should  send  a notice  to  those  physicians  to  make  refunds 
to,  or  credit  the  accounts  o~  those  beneficiaries  who  were  prmously  identified. 
HCFA  disagrees  with  this  recommendation. 
Our  specific  comments  on  the  repofis  recommendation  are  attached  for your 
conside~tio~  along  with  general  and  technical  comments.  We  appreciate  OIGS 
acknowledgement  of  our  effo~  to  improve  implementation  of  the  limiting  charge 
provision.  -
Thank  you  for  the  oppo~unity  to  review  and  comment  on  this  draft  report. 
Please  advise  us whether  you  agree  with  our  position  on  the  repofls 
?~  .: 
recommendation  at  your  earliest  convenience.  -- ,...  ~!
Attachment  . 
Comments  of  the  Health  Care  Fmancin~  Administmtion  (H~.A~ 
on  Office  of Inspector  Genexal  fOIG\  Ddt  RcPo~: 
Limits  on  Bencficiam  Financial  liability 
@a?ance  F3i?1iEnl?  0EI~2-9Z-00130 
Recommendation 
That  HCFA  contact  those  camcrs  who  never  noticd  physici=  to  refund  or  credit 
bcne~ciaries  based  on  1991 violations  found  through  rnonitotig  and  request  that  they 
send  one  notice  to  those  physicians  to  make  refunds  tq  or  credit  the accounts  O& those 
beneficiaries  who  were  previously  identified 
HCFA  Response 
We  disayee.  &  OIG  noted,  HCFA  does  not  have  statuto~  authority  to  require  that 
physicians  refund  excess  charges  to  beneficiaries.  To  take  the  recommended  action  on  a 
ret~oactive  basis  would  be  inappropriate  since  at  the  time  these  violations  were  idenfie~ 
we  did  not  believe  we  had  the  authority  to  instruct  eamiers  to  reques~  much  less  requires 
refunds  of excessive  charges 
HCFA  has  taken  adrninis~rative  action  that  addresses  OIGS  mncem  about  biting 
charge  violations  that  may  have  occurred  in 1991.  HCFA  developed  a leaflet  that 
specifically  explains  the  Medicare  limiting  charge  requi,rernen~  and  invites  beneficiaries 
to  contact  their  fiers  if they  believe  they  have  been  overcharged  for  semices  furnished 
in  1991.  Th*e leaflets  were  distributed  to  beneficiaries  through  Social  %euri~ 
Administration  di~ri~t  offices,  HCFA  regional  offices  and  63 national  beneficiary 
organizations  Medicare  carriers  have  been  instructed  to  assist  beneficiaries  b 
determining  whether  violations  occurred  in the  past  and  in  con~ct.ing  physici- to 
request  refunds. 
In view  ofthecurrentabsenceofstatuto~  language  requiring  refun~  we  believe  that 
addressing  possible  1991 violations  in  this-way  ~  more  appropriate  effectiv~  and 
administratively  feasl%le  than  the  approach  outiincd  in OIGS  draft  recommendation 
Since  the  legislation  referenced  on  page  eight  of the  draft  report  was  not  enacte~  OIG 
may  want  to  substitute  a recommendation  re!ating  to  the  introduction  or  support  of 
legislation  requiring  physicians  to  make  refunds  to beneficiari~  for  amounts  collected  in 
excess  of  the  limiting  charge  amount. DEPARTMENT  OF HUL~  & HUMAN SERVICES 
on 
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