Department of Health and Human Services
OFFICE OF 
 
INSPECTOR GENERAL 
 
 
 
 
 
 
 
 
M O
EDICARE  VERPAYMENTS 
 
I   P
DENTIFIED BY  ROGRAM 
 
S C  
AFE GUARD  ONTRACTORS
 
 
 
 
 
 
Daniel R. Levinson  
Inspector General 
 
May 2010 
OEI-03-08-00031   
   
 E X E C U T I V E   S U M M A R Y  
OBJECTIVE
 
To determine the number, dollar amount, and claim type of Medicare 
overpayments that program safeguard contractors (PSC) identified and 
referred to claims processors for collection in 2007. 
BACKGROUND 
This report and a companion Office of Inspector General (OIG) report, 
entitled Collection Status of Medicare Overpayments Identified by 
Program Safeguard Contractors, OEI-03-08-00030, are our response to a 
congressional request regarding the identification and collection of 
PSCs overpayment referrals.   
The Centers for Medicare & Medicaid Services (CMS) had 18 benefit 
integrity task orders with PSCs in 2007.  Each task order covers a 
geographic jurisdiction.  In this report, the term PSC refers to a PSC 
benefit integrity task order.   
PSCs are required to detect and deter fraud and abuse in Medicare  
Part A and/or Part B in their jurisdictions.  PSCs conduct 
investigations; refer cases to law enforcement; and take administrative 
actions, such as referring overpayments to claims processors for 
collection and return to the Medicare program.       
For this report, we collected 2007 overpayment referrals from all  
18 PSCs in operation in 2007.  We also collected from CMS information 
on the dollar amount of Medicare payments for which PSCs had 
oversight responsibility in 2007.  We use the term size of oversight 
responsibility to refer to the amount of these Medicare payments.   
FINDINGS 
PSCs referred $835 million in overpayments to claims processors 
for collection in 2007; however, two PSCs were responsible for  
62 percent of this amount.  All 18 PSCs referred a total of  
4,239 overpayments to claims processors for collection in 2007.  These 
overpayments totaled $835 million.  PSCs differed substantially in the 
dollar amounts of overpayments they referred for collection in 2007.  
PSCs referred from $3 million to $266 million in overpayments for 
collection, with a median of $15 million.  Two PSCs were responsible for 
62 percent, or $519 million, of $835 million in overpayments referred for 
collection.  Both of these PSCs covered at least one State that has a 
  OEI-03-08-00031  MEDICARE OVERPAYMENTS IDENTIFIED BY PSCS  i   
   
EE XX EE CC UU TT II VV EE    SS UU MM MM AA RR YY   
large population of Medicare beneficiaries and is considered by CMS to 
be vulnerable to fraud and abuse.  However, these PSCs were not the 
only PSCs that covered at least one State considered vulnerable to fraud 
and abuse.  
The amounts of overpayment dollars that PSCs referred for collection 
were not always related to the size of PSCs oversight responsibility.  
For example, the PSC with the most overpayment dollars referred for 
collection ($266 million) had the third smallest oversight responsibility  
($5 billion) of all 18 PSCs.     
While Part B payments represented 29 percent of PSCs oversight 
responsibility, Part B overpayments accounted for 89 percent of  
PSCs overpayment dollars referred for collection.  Of the  
$835 million in PSC overpayments referred for collection, $747 million, 
or 89 percent, was for Part B claims.  The remaining $88 million, or  
11 percent of overpayments referred for collection, was for Part A.  
However, Part B payments represented 29 percent of all PSCs oversight 
responsibility ($87 billion of $296 billion), and Part A payments 
represented 71 percent of all PSCs oversight responsibility ($209 billion 
of $296 billion).  Thirteen of eighteen PSCs have responsibility for both 
Parts A and B.  Of these 13 PSCs, 8 had greater overpayment dollars for 
Part B.   
Durable medical equipment, prosthetics, orthotics, and supplies 
(DMEPOS) made up 45 percent of Part B overpayment dollars that 
PSCs referred for collection ($335 million of $747 million) and  
12 percent of PSCs oversight responsibility for Part B ($10 billion of  
87 billion).  Of PSC overpayments referred for collection, the dollars 
referred for every $1 million of oversight responsibility were 79 times 
higher for DMEPOS ($33,210) than for Part A ($420) and 6 times higher 
than other types of Part B ($5,368).   
Two provider types made up 80 percent of the overpayment dollars.  
These two types of providers were physicians ($336 million) and 
DMEPOS suppliers ($335 million).  
RECOMMENDATIONS 
PSCs were established to strengthen CMSs ability to detect and deter 
fraud and abuse in Medicare Parts A and B.  PSCs conduct 
investigations of potential fraud and abuse; refer cases to law 
enforcement; and take administrative actions, such as referring 
  OEI-03-08-00031  MEDICARE OVERPAYMENTS IDENTIFIED BY PSCS  ii   
   
E X E C U T I V E   S U M M A R Y  
overpayments to claims processors for collection and return to the 
Medicare program.   
In this report, we found that PSCs overpayment amounts varied and 
were not always related to the size of their oversight responsibility.  We 
also found that there were greater overpayment amounts for Part B 
than Part A, even though Part A represents the greater amount of 
PSCs oversight responsibility.  
Based on the substantial differences between individual PSCs 
overpayment referrals and the significant difference between Part A 
and Part B referrals, we recommend that CMS:  
Determine why certain PSCs have low levels of overpayment dollars 
referred for collection compared to their oversight responsibility.  
CMS should determine whether these PSCs are taking all necessary 
steps to identify overpayments during their investigative work. 
Determine why certain PSCs have low Part A overpayment dollars 
referred for collection compared to their Part B overpayment dollars 
referred for collection.  CMS should determine whether these PSCs are 
taking all necessary steps to identify Part A overpayments.  
 
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
CMS concurred with both recommendations.  In response to the first 
recommendation, CMS agreed that there has not been a clear 
correlation between the levels of overpayment dollars recovered and the 
scope of PSCs oversight responsibility.  CMS is in the process of 
transitioning PSCs to seven Zone Program Integrity Contractors (ZPIC).  
Each ZPIC will be responsible for all claim types in its geographic zone. 
CMS believes that the new strategy should address OIGs concerns 
regarding the gap between scope of responsibility and level of dollars 
recovered.   
In response to the second recommendation, CMS stated that in the new 
ZPIC contracting strategy, each ZPIC has responsibility for all claim 
types in its geographic zone and is required to have staff with expertise 
in each claim type.  CMS also stated that this approach will allow for 
greater recoveries as overpayment issues can be identified across 
multiple payors and benefit categories.  CMS reported that it will 
  OEI-03-08-00031  MEDICARE OVERPAYMENTS IDENTIFIED BY PSCS  iii   
   
E X E C U T I V E   S U M M A R Y  
monitor both overpayment and collection activities to ensure that its 
contractors are adequately performing their oversight responsibilities. 
OIG believes it is too early to determine whether the ZPIC contracting 
strategy will address all the issues in this report.  Until the transition 
from PSCs to ZPICs is complete and the results of ZPICs overpayment 
identification activities are evaluated, CMSs monitoring of 
overpayment and collection activities is critical.  OIG believes that until 
the ZPICs are fully transitioned, CMS should also monitor the 
overpayment activities of the remaining PSCs.   
  OEI-03-08-00031  MEDICARE OVERPAYMENTS IDENTIFIED BY PSCS  iv   
 T A B L E   O F   C O N T E N T S  
EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
 
 
I N T RO DUC T IO N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 
 
 
F I N D IN G S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 
  PSCs referred $835 million in overpayments to claims processors      
for collection in 2007; however, two PSCs were responsible for           
62 percent of this amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 
  While Part B payments represented 29 percent of PSCs oversight  
responsibility, Part B overpayments accounted for 89 percent of        
PSCs overpayment dollars referred for collection. . . . . . . . . . . . . . 8 
 
 
R E C O MMEN D A T ION S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 
  Agency Comments and Office of Inspector General Response . . . . 12 
 
 
APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 
  A:  Benefit Integrity Task Orders in 2007 . . . . . . . . . . . . . . . . . . . 13 
  B:  Parts A and B Overpayments That Program Safeguard  
        Contractors Referred for Collection in 2007 by Provider Type. 14 
  C:  Agency Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 
 
 
A C K NO WL E D G M E N T S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18   
   
 I N T R O D U C T I O N  
OBJECTIVE 
To determine the number, dollar amount, and claim type of Medicare 
overpayments that program safeguard contractors (PSC) identified and 
referred to claims processors for collection in 2007. 
BACKGROUND 
This report and a companion Office of Inspector General (OIG) report, 
entitled Collection Status of Medicare Overpayments Identified by 
Program Safeguard Contractors, OEI-03-08-00030, were prepared in 
response to a request from the Committee on Energy and Commerces 
Subcommittee on Oversight and Investigations in the U.S. House of 
Representatives.  
Although past OIG studies have looked at fraud and abuse detection 
and deterrence by PSCs,1 this is the first work to address overpayment 
referrals by PSCs to claims processors for collection.  The referral of 
overpayments to claims processors for collection is an important PSC 
activity because it may lead to the recovery of funds to the Medicare 
program.  This report provides information on how PSCs are performing 
regarding the number and dollar amount of overpayments that they 
refer for collection.      
Program Safeguard Contractors  
PSCs conduct investigations; refer cases to law enforcement; and take 
administrative actions, such as referring overpayments to claims 
processors.  In their investigative work, PSCs review Medicare 
payments and may identify overpayments.2  When they do so, they are 
required to refer overpayments that they identify to Medicare claims 
processors for collection and return to the Medicare program.3    
CMS awards benefit integrity task orders to PSCs.  These task orders 
require PSCs to detect and deter fraud and abuse in Medicare Part A 
and/or Part B.  Each task order covers a specific geographic jurisdiction.  
 
1 OIG, Medicares Program Safeguard Contractors:  Performance Evaluation Reports, 
OEI-03-04-00050, March 2006.  Accessed at http://oig.hhs.gov/oei/reports/oei-03-04-
00050.pdf on August 11, 2009.  OIG, Medicares Program Safeguard Contractors:  Activities 
to Detect and Deter Fraud and Abuse, OEI-03-06-00010, July 2007.  Accessed at 
http://oig.hhs.gov/oei/reports/oei-03-06-00010.pdf on August 11, 2009. 
2 PSCs were authorized to perform such work pursuant to the Medicare Integrity 
Program.  Social Security Act,  1893, 42 U.S.C.  1395ddd. 
3 Centers for Medicare & Medicaid Services (CMS), Medicare Program Integrity Manual, 
Pub. No. 100-08, ch. 3,  3.8. 
  OEI-03-08-00031  MEDICARE OVERPAYMENTS IDENTIFIED BY PSCS  1   
   
II NN TT RR OO DD UU CC TT II OO NN    
In 2007, CMS had 18 benefit integrity task orders with PSCs, which are 
listed in Appendix A. In this report, the term PSC refers  to a PSC 
benefit integrity task order. 
In 2007, 13 of the 18 PSCs had responsibility for both Medicare Parts A  
and B; 1 had Part A only; 1 had Part B only; and 3 had only Part B 
durable medical equipment, prosthetics, orthotics, and supplies 
(DMEPOS).   
PSCs had oversight responsibility for Medicare Part A and Part B 
payments totaling $296 billion in 2007. We refer to this as PSCs size 
of oversight responsibility. Seventy-one percent of their oversight 
responsibility was for Part A and 29 percent was for Part B. Other 
Medicare contractors also have oversight of Part A and Part B  
payments; however, PSCs focus specifically on detecting and deterring 
fraud and abuse related to these payments. 
Zone Program Integrity Contractors 
CMS is in the process of transitioning PSCs to Zone Program Integrity  
Contractors  (ZPIC). Until the transition from PSCs to ZPICs is 
complete, ZPICs and PSCs will both be responsible for Parts A and B 
and for referring identified overpayments to claims processors for  
collection.     
The transition of PSCs to ZPICs is part of CMSs consolidation of 
fraud-fighting work so that Parts A, B, C, and D will be under one type 
of contractor, the ZPIC.  CMS expects to have a total of seven ZPICs.   
Two ZPICs became operational in February 2009, and CMS expects that 
by the end of 2010, all PSC work will be transitioned to ZPICs. 
According to CMS staff, five ZPICs that cover high-fraud regions will be 
expected to focus on quick response to fraud and administrative 
actions.4     
Claims Processors  
Among their responsibilities, Medicare claims processors collect 
overpayments that are identified by PSCs and other sources. In 2007, 
the claims processors that received overpayment referrals from PSCs  
were fiscal intermediaries, carriers, or Medicare administrative 
contractors. These claims processors had responsibility for specific 
geographic jurisdictions and claim types. Fiscal intermediaries were 
 
4 Director, Program Integrity  Group, CMS, presentation slides (p. 4), PI Contracting  
Overview  MEDIC vs. ZPIC, July 29, 2009, for American Health Lawyers Association 
Part D Compliance Webinar. 
OEI-03-08-00031   MEDICARE OVERPAYMENTS  IDENTIFIED BY  PSCS   2   
   
I N T R O D U C T I O N  
responsible for Part A, carriers for Part B, and Medicare administrative 
contractors for Parts A and/or B.  
Claims processors in a PSCs jurisdiction are known as the PSCs 
affiliated contractors.  Because PSCs and claims processors do not cover 
identical jurisdictions and claim types, a PSC may have more than one 
affiliated claims processor and a claims processor may have more than 
one PSC in its jurisdiction.   
The claims processors are also responsible for keeping track of collection 
information on the overpayments they seek to recover.  At the time of 
our review, PSCs were not required to keep track of the amount claims 
processors collect on PSC overpayment referrals.  However, as of 2009, 
CMS is providing ZPICs with incentives to keep track of the amounts 
claims processors collect on ZPIC overpayment referrals.  CMS is also 
providing claims processors with incentives to provide collection 
information to ZPICs.  These incentives involve reimbursement to 
ZPICs and claims processors under their respective contracts 
performance award fee provisions.   
Overpayment Collection Process  
Dollar amount of overpayment.  A single overpayment that a PSC 
identifies and refers for collection may include numerous claims.  In 
addition, the PSC may identify either an actual dollar amount that the 
provider owes or an extrapolated dollar amount based on a sample of 
the providers claims.5  The claims processor reviews all the 
overpayment referral information provided by the PSC and makes a 
final determination as to the dollar amount to be collected.6  The dollar 
amount that the claims processor seeks to collect from the provider 
based on this final determination may be the same as, more than, or 
less than the overpayment dollar amount that the PSC referred for 
collection.   
 
5 CMS, Medicare Program Integrity Manual, ' 3.8.1. 
6 CMS, Medicare Financial Management Manual, Pub. No. 100-06, ch. 4, '' 10 and 80.2.  
  OEI-03-08-00031  MEDICARE OVERPAYMENTS IDENTIFIED BY PSCS  3   
   
I N T R O D U C T I O N  
 
METHODOLOGY 
Scope 
We reviewed PSC data on overpayments that each PSC referred to 
claims processors for collection in 2007.   
Data Sources and Data Collection 
Centers for Medicare & Medicaid Services.  From CMSs Program 
Integrity Group in the Office of Financial Management, we collected the 
following information: 
  a list of PSCs and their jurisdictions in 2007; 
  the dollar amount of each PSCs oversight responsibility for 2007 by 
Part A, Part B (excluding DMEPOS), and DMEPOS; and 
  contact information for each PSC.  
Program safeguard contractors.  We collected information from all  
18 PSCs during the timeframe May to October 2008.  We requested 
information regarding each overpayment that each PSC referred to 
claims processors for collection in 2007.  The information included: 
   the date that the overpayment was referred to the claims 
processor, 
   the dollar amount of the overpayment,7 
   the provider name and identification number, 
   the provider type (e.g., hospital), and 
   the claim type (e.g., Part A).  
Analysis 
PSCs provided information for 4,242 overpayment referrals.  We 
removed three of these overpayments from our analysis because neither 
the PSC nor the claims processor provided the referral dollar amounts.  
Therefore, we reviewed 4,239 overpayment referrals for this report.8  
For each PSC, we identified the total dollar amount of overpayments 
referred for collection and calculated its percentage of aggregated PSC 
overpayments referred for collection.  We also compared the total 
 
7 For one PSC for which the claims processor had to calculate the overpayment, we used 
the claims processors information as the overpayment amount.  
8 Of the 4,239 overpayments, only 1 was made to a beneficiary. 
  OEI-03-08-00031  MEDICARE OVERPAYMENTS IDENTIFIED BY PSCS  4   
   
II NN TT RR OO DD UU CC TT II OO NN   
overpayment dollars it referred for collection with its oversight 
responsibility and calculated the dollar amount of overpayment 
referrals for every $1 million in oversight responsibility.   
We reviewed each PSCs overpayment referrals by claim type and 
summarized the dollar amounts of overpayments by Part A and Part B 
(including DMEPOS).  We compared these dollar amounts with the 
PSCs oversight responsibility by Part A and Part B (including 
DMEPOS).  We also calculated the percentage of Part B overpayment 
dollars that represented DMEPOS overpayments.  
We summarized all overpayment referral data by individual PSC and 
for all PSCs.  We also reviewed and summarized overpayment referrals 
by provider type. 
We assigned an identification number, from 1 to 18, to the 18 PSCs in 
our review.  We use these identification numbers in our report to enable 
the reader to identify information related to the same PSC across the 
different tables without disclosing details on specific PSCs.   
Limitations 
We did not independently verify the dollar amount of Medicare 
payments provided by CMS or the overpayment referral data provided 
by PSCs.   
Standards 
This study was conducted in accordance with the Quality Standards for 
Inspections approved by the Council of the Inspectors General on 
Integrity and Efficiency. 
  OEI-03-08-00031  MEDICARE OVERPAYMENTS IDENTIFIED BY PSCS  5   
   
 F I N D I N G S  
 
PSCs referred $835 million in overpayments to  All 18 PSCs referred a total of  
claims processors for collection in 2007;  4,239 overpayments to claims 
processors for collection in 2007.  
however, two PSCs were responsible for     
These overpayments totaled       
62 percent of this amount  
$835 million.  However, the dollar 
amounts of overpayments referred varied substantially by PSC.  As 
shown in Table 1, PSC 1 referred $266 million in overpayments.  This 
amount was more than 100 times greater than PSC 18s amount.  The 
median dollar amount of overpayments referred for collection was  
$15 million.    
Table 1 also shows that two PSCs (PSC 1 and PSC 2) were responsible 
for 62 percent, or $519 million, of the $835 million in total PSC 
overpayments referred for collection in 2007.  Both of these PSCs  
                                                               
Table 1:  Overpayments That PSCs Referred for Collection in 2007 
 
Number of 
Dollar Amount of  Percentage of Total 
PSC    Overpayment 
Overpayments    Overpayment Dollars 
  Referrals 
1  353  $265,887,671   32% 
   
2  203  $252,721,299   30% 
 
3  123  $53,669,785   6% 
 4  1,409  $52,667,600   6% 
5  65  $38,796,266   5% 
 
6  495  $35,004,560   4% 
 
7  21  $27,486,724   3% 
 8  71  $19,299,679   2% 
9  97  $15,957,395   2% 
 
10  344  $13,442,469   2% 
 
11  451  $12,171,683   1% 
 12  47  $11,647,722   1% 
13  82  $10,951,325   1% 
 
14  245  $10,655,761   1% 
 15  107  $4,478,215   1% 
 16  19  $3,951,992   Less than 1% 
17  72  $3,721,667   Less than 1% 
 
18  35  $2,544,128   Less than 1% 
      Total  4,239  $835,055,941   
S ource:  OIG analysis of responses from PSCs and claims processors. 
  OEI-03-08-00031  MEDICARE OVERPAYMENTS IDENTIFIED BY PSCS  6   
   
F I N D I N G S  
covered at least one State that has a large population of Medicare 
beneficiaries and is considered by CMS to be vulnerable to fraud and 
abuse.  However, these PSCs were not the only PSCs that covered at 
least one State considered vulnerable to fraud and abuse.    
The amounts of overpayment dollars that PSCs referred for collection were 
not always related to the size of PSCs oversight responsibility  
Although PSCs might be expected to differ in the dollar amounts of 
overpayments referred for collection, the amounts of PSC overpayments 
in 2007 did not always correspond to the size of PSCs oversight 
responsibility in 2007.  As shown in Table 2, PSCs with the largest 
overpayment amounts did not always have the largest oversight 
responsibility (Medicare payments).  PSC 1 referred the most  
Table 2:  Comp arison of PSC Overpayment Dollars Referred for Collection 
and PSC Oversight Responsibility in 2007 
  Oversight  Dollar Amount of 
Dollar Amount of 
Responsibility  Dollar Amount of  Overpayments Referred 
Overpayments 
PSC   Ranking From  Oversight Responsibility  for Collection for Every 
Referred for 
  Largest to  (Medicare Payments)     $1 Million in Oversight 
Collection   
Smallest  Responsibility 
1  $265,887,671  16  $4,732,243,732   $56,186 
 
2  $252,721,299  5  $19,980,994,913   $12,648 
 
3  $53,669,785  1  $62,447,462,696   $859 
4  $52,667,600  18  $2,162,988,566   $24,349 
 
5  $38,796,266  2  $31,516,939,545   $1,231 
6    $35,004,560  14  $7,062,482,499   $4,956 
7  $27,486,724  7  $17,947,334,212   $1,532 
 
8  $19,299,679  13  $8,490,980,519   $2,273 
9    $15,957,395  17  $3,177,404,337   $5,022 
10  $13,442,469  3  $28,093,398,172   $478 
 
11  $12,171,683  9  $15,960,804,802   $763 
12    $11,647,722  11  $10,179,022,445   $1,144 
13  $10,951,325  4  $21,695,035,563   $505 
 
14  $10,655,761  8  $16,227,439,361   $657 
15    $4,478,215  12  $10,100,139,551   $443 
16  $3,951,992  15  $5,720,592,445   $691 
 
17  $3,721,667  10  $11,236,890,885   $331 
18  $2,544,128  6  $19,634,590,542   $130 
 
     Total  $835,055,941     $296,366,744,785     
Source:  OIG analysis of responses from PSCs, claims processors, and CMS. 
  OEI-03-08-00031  MEDICARE OVERPAYMENTS IDENTIFIED BY PSCS  7   
   
F I N D I N G S  
 
overpayment dollars for collection ($266 million), but it had the third 
smallest oversight responsibility ($5 billion) of all 18 PSCs.  In addition, 
PSCs 3 and 4 referred similar amounts of overpayment dollars for 
collection, $54 million and $53 million, respectively, but had vastly 
different oversight responsibility, $62 billion and $2 billion, 
respectively.   
PSC 4, which had the lowest oversight responsibility ($2 billion), 
referred $24,349 in overpayments for every $1 million of its oversight 
responsibility.  This is in contrast to PSC 16 that had $6 billion in 
oversight responsibility but referred $691 in overpayments for every  
$1 million in oversight responsibility.   
Fourteen of eighteen PSCs referred less than $5,000 in overpayments 
per $1 million in oversight responsibility.  The range in oversight 
responsibility for these 14 PSCs was $6 billion to $62 billion.     
While Part B payments represented 29 percent  Of the $835 million in PSC 
of PSCs oversight responsibility, Part B  overpayments referred for 
collection in 2007, $747 million, or 
overpayments accounted for 89 percent of  
89 percent, was for Part B claims.  
PSCs overpayment dollars referred for 
The remaining $88 million, or      
collection  
11 percent, was for Part A claims.  
However, Part B payments represented 29 percent of all PSCs oversight 
responsibility ($87 billion of $296 billion), and Part A payments 
represented 71 percent of all PSCs oversight responsibility ($209 billion 
of $296 billion).  Table 3 provides the Part A and Part B overpayment 
amounts and oversight responsibility for each PSC.       
Thirteen of eighteen PSCs have responsibility for both Parts A and B.  
Of these 13 PSCs, 8 had greater overpayment dollars for Part B.  The 
range of overpayment dollars by PSCs for Part B is $366,709 to almost 
$266 million.  For Part A, the range is $421,033 to almost $37 million.    
DMEPOS made up 45 percent of Part B overpayment dollars that PSCs 
referred for collection and 12 percent of PSCs oversight responsibility for 
Part B 
Of the $747 million in Part B overpayments that PSCs referred for 
collection, $335 million, or 45 percent, was for DMEPOS claims.  Of the 
$87 billion in PSC oversight responsibility for Part B payments,  
$10 billion, or 12 percent, was for DMEPOS payments. 
  OEI-03-08-00031  MEDICARE OVERPAYMENTS IDENTIFIED BY PSCS  8   
   
FF II NN DD II NN GG SS   
The overpayment dollars PSCs referred for every $1 million of oversight 
responsibility were much higher for DMEPOS than for either Part A or 
the portion of Part B representing claims other than DMEPOS  
(e.g., physician services).  For every $1 million of oversight 
responsibility for DMEPOS, PSCs referred $33,210 in DMEPOS 
overpayments.  This $33,210 was 79 times the amount PSCs referred in 
Part A overpayments ($420 for every $1 million) and 6 times the 
amount they referred in Part B other than DMEPOS overpayments 
($5,368 for every $1 million). 
Table 3:  PSC Overpayments and Oversight Responsibility by Parts A and B 
(Table is sorted by Part B overpayment dollars.) 
Part A Oversight  Part B Oversight 
     Part A Overpayment  Part B Overpayment 
PSC   Responsibility  Responsibility   
Dollars    Dollars   
(Medicare Payments)   (Medicare Payments) 
1  No Part A Responsibility  No Part A Responsibility  $265,887,671   $4,732,243,7321 
2  $3,481,851   $12,070,613,345  $249,239,448   $7,910,381,568 
4  No Part A Responsibility  No Part A Responsibility  $52,667,600   $2,162,988,5661 
5  $866,508   $21,707,089,556  $37,929,758   $9,809,849,989 
6  No Part A Responsibility  No Part A Responsibility  $35,004,560   $7,062,482,499 
3  $36,555,396   $52,756,042,136  $17,114,389   $9,691,420,560 
8  $2,750,087   $4,279,908,962  $16,549,592   $4,211,071,557 
9  No Part A Responsibility  No Part A Responsibility  $15,957,395   $3,177,404,3371 
11  $421,033   $11,193,436,002  $11,750,650   $4,767,368,800 
10  $2,311,651   $19,021,729,177  $11,130,818   $9,071,668,995 
13  $1,482,400   $15,227,410,607  $9,468,925   $6,467,624,956 
7  $19,179,904   $13,733,706,121  $8,306,820   $4,213,628,091 
12  $4,319,131   $7,424,014,110  $7,328,591   $2,755,008,335 
14  $5,647,201   $12,442,205,187  $5,008,560   $3,785,234,174 
17  $1,158,425   $8,053,052,238  $2,563,242   $3,183,838,647 
15  $3,670,740   $7,384,097,684  $807,475   $2,716,041,867 
18  $2,177,419   $18,419,225,539  $366,709   $1,215,365,003 
16  $3,951,992   $5,720,592,445  No Part B Responsibility      No Part B Responsibility 
    Total  $87,973,738   $209,433,123,109  $747,082,203   $86,933,621,676 
Source:  OIG analysis of responses from PSCs and claims processors. 
1This PSC has oversight responsibility for DMEPOS claims only. 
 
Two provider types made up 80 percent of the overpayment dollars  
The overpayment dollars for both Parts A and B by provider types 
ranged from $2,982 to $336 million.  Two types of providers made up  
80 percent of the overpayment dollars referred for collection.  These two 
types of providers were physicians ($336 million) and DMEPOS 
  OEI-03-08-00031  MEDICARE OVERPAYMENTS IDENTIFIED BY PSCS  9   
   
F I N D I N G S  
suppliers ($335 million).  Provider types with the next highest amounts 
of overpayments were ambulance suppliers ($38 million), clinical labs  
($29 million), and home health providers ($29 million).  Appendix B 
contains the number of overpayment referrals and overpayment dollars 
for each provider type. 
  OEI-03-08-00031  MEDICARE OVERPAYMENTS IDENTIFIED BY PSCS  10   
   
 R E C O M M E N D A T I O N S  
 
 
This OIG report presents the number, amount, and claim type of 
overpayments that PSCs identified and referred to claims processors for 
collection in 2007.  A companion OIG report, entitled Collection Status 
of Medicare Overpayments Identified by Program Safeguard 
Contractors, OEI-03-08-00030, presents the status of collections, as of 
June 2008, for these PSC overpayment referrals.         
PSCs were established to strengthen CMSs ability to detect and deter 
fraud and abuse in the Medicare program.  PSCs conduct investigations; 
refer cases to law enforcement; and take administrative actions, such as 
referring overpayments to claims processors for collection and return to 
the Medicare program.  As CMS transitions PSCs to ZPICs, CMS 
expects ZPICs in high-fraud regions to focus on quick response to fraud 
and administrative actions.  Because of the emphasis on administrative 
actions and the Medicare dollars at risk, it is important for CMS to 
know the actual amount of Part A and Part B overpayments that PSCs 
and ZPICs refer to claims processors.    
In 2007, PSCs referred overpayments for collection that totaled  
$835 million; two PSCs were responsible for 62 percent of this amount.  
Although PSCs referred between $3 million and $266 million in 
overpayments, the amounts of PSCs overpayment dollars were not 
always related to the size of PSCs oversight responsibility (i.e., dollar 
amounts of Medicare payments).  PSCs oversight responsibility was 
$296 billion.  Of this $296 billion, 71 percent was for Part A payments 
and 29 percent was for Part B payments.  However, PSC overpayment 
referrals for Part A claims represented 11 percent of all PSC referrals, 
and Part B claims represented 89 percent of all PSC overpayment 
referrals.   
Based on the substantial differences between individual PSCs 
overpayment referrals and the significant difference between Part A 
and Part B referrals, we recommend that CMS:  
Determine why certain PSCs have low levels of overpayment dollars 
referred for collection compared to their oversight responsibility 
For PSCs that have low levels of overpayment dollars compared to their 
oversight responsibility, CMS should determine whether these PSCs are 
taking all necessary steps to identify overpayments during their 
investigative work. 
 
  OEI-03-08-00031  MEDICARE OVERPAYMENTS IDENTIFIED BY PSCS  11   
   
R E C O M M E N D A T I O N S  
Determine why certain PSCs have low Part A overpayment dollars referred 
for collection compared to their Part B overpayment dollars referred for 
collection 
For PSCs that have low levels of Part A overpayment dollars compared 
to their Part B overpayment dollars, CMS should determine whether 
these PSCs are taking all necessary steps to identify Part A 
overpayments. 
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
CMS concurred with both recommendations.  In response to the first 
recommendation, CMS agreed that there has not been a clear 
correlation between the levels of overpayment dollars recovered and the 
scope of PSCs oversight responsibility.  CMS stated that one of the 
limitations of the original PSC structure was that PSCs were organized 
by specific payment type and geographical area.  CMS explained that in 
an effort to improve its ability to more effectively fight fraud and abuse, 
it has established the new ZPIC contracting strategy.  The new strategy 
allows ZPICs to review claims across all benefit categories.  CMS 
believes that the new strategy should address OIGs concerns regarding 
the gap between scope of responsibility and level of dollars recovered.   
In response to the second recommendation, CMS stated that the PSC 
contracting strategy limited the effectiveness of certain PSCs to collect 
larger amounts of overpayments.  Under the new ZPIC strategy, each 
ZPIC has responsibility for all claim types in its geographic zone and is 
required to have staff with expertise in each claim type.  CMS stated 
that this approach will allow for greater recoveries as overpayment 
issues can be identified across multiple payors and benefit categories.  
CMS also reported that it will monitor both overpayment and collection 
activities to ensure that its contractors are adequately performing their 
oversight responsibilities.   
OIG believes it is too early to determine whether the ZPIC contracting 
strategy will address all the issues in this report.  Until the transition 
from PSCs to ZPICs is complete and the results of ZPICs overpayment 
identification activities are evaluated, CMSs monitoring of 
overpayment and collection activities is critical.  OIG believes that until 
the ZPICs are fully transitioned, CMS should also monitor the 
overpayment activities of the remaining PSCs.   
The full text of CMSs comments is provided in Appendix C.  
  OEI-03-08-00031  MEDICARE OVERPAYMENTS IDENTIFIED BY PSCS  12   
   
R E C O M M E N D A T I O N S  
 AA PP PP EE NN DD II XX ~~ BA   
A P P E N D I X ~ A  
 
 
 
  Table A-1:  Benefit Integrity Task Orders in 2007 
  Number of Benefit 
Program Safeguard Contractors 
Integrity Task Orders 
 
AdvanceMed  3 
 
Cahaba Safeguard Administrators, LLC  2 
 
Computer Sciences Corporation  1 
 
IntegriGuard, LLC  1 
SafeGuard Services, LLC  6 
 
  TriCenturion  3 
          TrustSolutions, LLC  2 
       Total  18 
Source:  Centers for Medicare & Medicaid Services, Office of Financial Management, Program Integrity Group. 
 
  OEI-03-08-00031  MEDICARE OVERPAYMENTS IDENTIFIED BY PSCS  13   
   
    A P P E N D I X ~ B  
           
Table B-1:  Parts A and B Overpayments That Program Safeguard 
Contractors Referred for Collection in 2007 by Provider Type 
 
  Number of 
Dollar Amount of  Percentage of  
Provider Types  Overpayment  Overpayments    Overpayment Amount1 
  Referrals 
Physician Services  1,375  $336,047,666   40% 
 
Durable Medical Equipment, Prosthetics,  
1,859  $334,512,666   40% 
Orthotics, and Supplies Provider 
Ambulance Services  66  $38,101,173   5% 
Clinical Laboratory or Independent 
191  $29,310,457   4% 
Diagnostic Testing Facility 
Home Health Agency  52  $29,266,860   4% 
Hospital   331  $26,400,051   3% 
Outpatient Rehabilitation Facility  17  $18,581,818  2% 
Hospice  10  $12,906,242   2% 
Physical Therapist or Occupational 
27  $5,132,068   1% 
Therapist 
Skilled Nursing Facility  46  $3,301,257   Less than 1% 
Partial Hospital Program  2  $403,935   Less than 0.1% 
Rural Health Clinic  1  $335,685   Less than 0.1% 
Psychology Services  7  $256,973   Less than 0.1% 
Social Work Services  227  $238,852   Less than 0.1% 
End Stage Renal Disease Facility  2  $97,814   Less than 0.1% 
Radiology Services   15  $69,041   Less than 0.1% 
Ambulatory Surgical Center  3  $66,875   Less than 0.1% 
Beneficiary  1  $2,982   Less than 0.1% 
Other2  7  $23,526   Less than 0.1% 
     Total  4,239  $835,055,941   
Source:  Office of Inspector General analysis of responses from program safeguard contractors (PSC) and claims processors.  
1The percentages in this column add up to more than 100 percent because of rounding. 
2Includes six referrals for other provider types and one referral for which the PSC did not specify provider type. 
  OEI-03-08-00031  MEDICARE OVERPAYMENTS IDENTIFIED BY PSCS  14  x  c 

A  P  PEN  0 
Agency Comments 
DEPARTMENT OF HEALTH & HUMAN SERVICES  Centers for Medicare & Medicaid SeIVic6s 
Administrator 
Washing lon, DC 20201 
DATE:  FEB  0 22010 
TO:  . Daniel R. Levinson 

Inspector General 

FROM: 	 Charlene Frizzera 

Acting Administrator 

SUBJECT: 	 Office ofinspector General (OIG) Draft Report: "Medicare 

Overpayments Identified by Program Safeguard Contractors" 

(OEI-03-08-00031) 

Thank you for the opportunity to comment on the Office pf Inspector General's (OIG) draft  " 

report entitled, "Medicare Overpayments Identified by Program Safeguard Contractor." The 

Centers for Medicare & Medicaid Services (CMS) appreciates the time and resources the 

OIG has invested to research and report on this "issue.  . 

Pursuant to the authority set forth in section 1893 of the Social Security Act, CMS 

created the Program Safeguard Contractors (PSCs) in 1999 in order to provide a more 

focused effort for detecting and preventing fraud and abuse, and to act as liaisons for law 

enforcement activities. Under the PSC model, companies competing to become a PSC 

could choose the Medicare issues on which they wanted to bid.  For example, one PSC 

. could focus only on program integrity issues related to physician claims, while another 
PSC might focus solely on claims related to Durable MedIcal Equipment, Prosthetics, 
Orthotics and Supplies (DMEPOS), and a third PSC might focus on both physician and 
inpatient claims. This structure created an environment where CMS had 18 different PSC 
task orders with varying levels of focus resulting in a coordination of effort that was often 
times challenging. One ofthe limitations of the original PSC structure was that the PSCs 
were organized by specific payment type and geographiC area. There are geographic 
sections of the country where there is very little fraud and sections where there is a 
tremendous [).mount of fraudulent activity. The number of claims for which a PSC has 
oversight responsibility does not necessarily correlate to the amount of fr\lud that is 
found in a geographical location. As a result, there was not a strong correlation of the 
level of overpayments and the size ofa PSCs oversight responsibility. 
In an effort to improve CMS' ability to more effectively fight fraud. and abuse, CMS 

established the new Zone Program Integrity Contractor (ZPIC) contracting strategy. This 

change from the PSCs to the ZPICs represents a significant shift in CMS' approach to 

utilizing benefit integrity contractors. .One of the primary benefits ofthe ZPIC strategy is 

OEI030800031  MEDICARE OVERPAYMENTS IDENTIFIED BY PSCs  15   
   
A P P E N D I X ~ C  
 
  OEI-03-08-00031  MEDICARE OVERPAYMENTS IDENTIFIED BY PSCS  16    
     
AA PP PP EE NN DD II XX ~~ CC   
 
   OOEEII--0033--0088--0000003311   MMEEDDIICCAARREE  OOVVEERRPPAAYYMMEENNTTSS  IIDDEENNTTIIFFIIEEDD  BBYY  PPSSCCSS   1177    
   
 A C K N O W L E D G M E N T S  
 
This report was prepared under the direction of Robert A. Vito, Regional 
Inspector General for Evaluation and Inspections in the Philadelphia 
regional office, and Linda M. Ragone, Deputy Regional Inspector 
General.   
Isabelle Buonocore served as the team leader for this study.  Other 
principal Office of Evaluation and Inspections staff from the 
Philadelphia regional office who contributed to the report include 
Conswelia McCourt and Cynthia R. Hansford; other central office staff 
who contributed include Scott Manley.  
 
  OEI-03-08-00031  MEDICARE OVERPAYMENTS IDENTIFIED BY PSCS  18   
Office of Inspector General 
http://oig.hhs.gov 
 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 
amended, is to protect the integrity of the Department of Health and Human Services 
(HHS) programs, as well as the health and welfare of beneficiaries served by those 
programs.  This statutory mission is carried out through a nationwide network of audits, 
investigations, and inspections conducted by the following operating components: 
Office of Audit Services 
The Office of Audit Services (OAS) provides auditing services for HHS, either by conducting 
audits with its own audit resources or by overseeing audit work done by others.  Audits 
examine the performance of HHS programs and/or its grantees and contractors in carrying 
out their respective responsibilities and are intended to provide independent assessments of 
HHS programs and operations.  These assessments help reduce waste, abuse, and 
mismanagement and promote economy and efficiency throughout HHS. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 
HHS, Congress, and the public with timely, useful, and reliable information on significant 
issues.  These evaluations focus on preventing fraud, waste, or abuse and promoting 
economy, efficiency, and effectiveness of departmental programs.  To promote impact, OEI 
reports also present practical recommendations for improving program operations.  
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative investigations 
of fraud and misconduct related to HHS programs, operations, and beneficiaries.  With 
investigators working in all 50 States and the District of Columbia, OI utilizes its resources 
by actively coordinating with the Department of Justice and other Federal, State, and local 
law enforcement authorities.  The investigative efforts of OI often lead to criminal 
convictions, administrative sanctions, and/or civil monetary penalties. 
Office of Counsel to the Inspector General 
The Office of Counsel to the Inspector General (OCIG) provides general legal services to 
OIG, rendering advice and opinions on HHS programs and operations and providing all 
legal support for OIGs internal operations.  OCIG represents OIG in all civil and 
administrative fraud and abuse cases involving HHS programs, including False Claims Act, 
program exclusion, and civil monetary penalty cases.  In connection with these cases, OCIG 
also negotiates and monitors corporate integrity agreements.  OCIG renders advisory 
opinions, issues compliance program guidance, publishes fraud alerts, and provides other 
guidance to the health care industry concerning the anti-kickback statute and other OIG 
enforcement authorities.