Department of Health and Human Services
OFFICE OF 
 
INSPECTOR GENERAL 
 
 
 
 
 
 
 
 
COL  LECTION STATUS OF 
 
M O
EDICARE  VERPAYMENTS 
 
 
I P
DENTIFIED BY  ROGRAM 
 
S   C  
AFEGUARD  ONTRACTORS 
 
 
 
 
Daniel R. Levinson  
Inspector General 
 
May 2010 
OEI-03-08-00030   
   
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 E X E C U T I V E   S U M M A R Y  
OBJECTIVE
 
To determine the collection status, as of June 2008, 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 Medicare Overpayments Identified by Program Safeguard 
Contractors, OEI-03-08-00031, respond 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.       
Claims processors make a final determination on the dollar amount to 
demand from the provider, which may differ from the overpayment 
amount referred by the PSCs.  Outcomes of law enforcement 
investigations or provider appeals may also change the amounts that 
providers must repay.   
Claims processors collect overpayments by withholding the providers 
future Medicare payments or by direct refund from the provider.  With a 
few exceptions, if claims processors cannot collect the overpayment 
within 6 months, they must refer the overpayment to the Department of 
the Treasurys (Treasury) cross-servicing program for collection.      
Claims processors are required to keep track of collection information on 
overpayments they seek to recover.  However, at the time of our review, 
CMS did not require or provide incentives to PSCs to keep track of the 
amount claims processors collected on PSC overpayment referrals.   
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 is also providing incentives to 
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claims processors to provide collection information to ZPICs. According 
to CMS staff, CMS also expects ZPICs in high-fraud regions to focus on 
quick response to fraud and administrative actions.     
For this report, we  requested information from PSCs to identify each 
overpayment that they referred to claims processors for collection in 
2007. We forwarded this information to the claims processors identified 
by PSCs and requested information about the collection status of each 
overpayment through June 2008. 
The percentages in the finding add up to 101 percent rather than     
100 percent because of rounding. 
FINDING 
Overpayments  that PSCs referred for collection did not result in 
significant recoveries to the Medicare program. PSCs referred   
4,239 overpayments totaling $835 million to claims processors in 2007, 
but very little had been collected by claims processors as of June 2008. 
Claims processors collected 7 percent, or $55 million. Of the $55 million 
collected, 27 percent was for Part A claims; 56 percent was for Part B 
claims excluding durable medical equipment, prosthetics, orthotics, and  
supplies (DMEPOS); and 17 percent was for Part B DMEPOS claims. 
Claims processors sent 53 percent, or $446 million of $835 million, in 
PSC overpayment referrals to Treasurys cross-servicing program. 
However, the cross-servicing program does not  have a high rate of 
return. For each year between fiscal years 2003 and 2007, the program 
never collected more than 2 percent of all debt referred to it.    
Claims processors reported that collection was not complete  for         
$40 million, or 5 percent, of the $835 million in overpayments that PSCs 
referred for collection. Regarding the $40 million, claims processors 
were still withholding money from the providers future payments 
($27 million), providers were on extended repayment plans ($4 million), 
the collection process had not begun as of June 2008 ($3 million), and 
claims processors had not completed collection but did not explain the 
reason why or reported that they could not provide the information 
($6 million). 
Of the $835 million in PSC overpayment referrals, $43 million, or 
5 percent, represents overpayments for providers that stopped billing, 
filed for bankruptcy, are out of business, or are deceased. When 
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providers stop billing, it is impossible for claims processors to withhold 
future payments. 
Claims processors reported that as of June 2008, $139 million, or 
17 percent,  of PSC overpayments was on hold because of ongoing 
investigations ($76 million) and provider appeals ($63 million). 
Six percent, or $48 million, of the $835 million in PSC overpayment 
referrals was no longer owed by providers as of June 2008 because of  
revisions claims processors made to overpayment collection amounts 
and appeal decisions that were favorable to providers. 
For 8 percent of the overpayment dollars referred by PSCs ($64 million 
of $835 million), claims processors could not provide data. They 
reported that they did not receive referrals of or that they could not 
provide any collection information for 1,060 of 4,239 overpayments. 
These 1,060 overpayments totaled $58 million. Claims processors also 
did not provide all of the necessary information for OIG to determine 
the collection status for another 44 overpayments, totaling $6 million. 
RECOMMENDATIONS 
PSCs were established to strengthen CMSs ability to detect and deter 
potential fraud and abuse in the Medicare program. To ensure that 
PSCs and ZPICs effectively safeguard the Medicare dollars at risk, it is  
important that CMS know the actual amount of overpayments that 
PSCs and ZPICs refer to claims processors and the collection status of 
these overpayments. Moreover, CMS needs to ensure that PSCs, ZPICs, 
and claims processors can identify all current and future overpayment 
referrals by PSCs and ZPICs. 
We recommend that CMS: 
Regularly  collect all necessary  information to determine the 
overpayments PSCs and ZPICs refer to claims processors for 
collection, the collection status of these overpayments, and the 
percentage  of overpayments in each category of collection status. 
Require that PSCs, ZPICs, and claims processors have controls in 
their tracking systems  to ensure  that all overpayment referrals  and 
data related to their collection status can be found. 
Determine what happened to the 1,060 overpayments that PSCs  
referred to claims processors in 2007 for which claims processors  
could not provide any  collection information.  
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E X E C U T I V E   S U M M A R Y  
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
CMS stated that it has begun implementing its strategy to align the 
existing PSCs geographically with claims processors, i.e., the Medicare 
Administrative Contractors (MAC), and that the premise of the new 
strategy is to have a more concentrated effort of identifying fraud and 
abuse across claim types in each zone.   
CMS concurred with our first recommendation and stated that to 
ensure that it can monitor how MACs respond to PSCs overpayment 
referrals, CMS added this requirement, in October 2009, to the CMS 
Analysis/Reporting/Tracking System (CMS ARTS) template for monthly 
reporting.  Additionally, in order for MACs to obtain a performance 
award fee, a criterion was added in fiscal year 2009 related to the 
tracking of overpayments received from PSCs and ZPICs. 
CMS concurred with our second recommendation and, in  
October 2009, added a data field to CMS ARTS for monthly reporting of 
the collection status of the overpayment referrals.  Submitting this 
information is now a requirement in the ZPIC Statement of Work. 
CMS concurred with our third recommendation and is working with 
claims processors to determine what happened to the 1,060 
overpayments, for which the claims processors could not provide 
collection information.  CMS will require the claims processors to 
recover the potential overpayments identified by OIG consistent with 
the agencys policies and procedures.  
Although CMS has implemented several monthly reporting 
requirements to improve the tracking and quality of overpayment 
collection information, OIG believes it is important that CMS also 
continually monitor and evaluate the effectiveness of its contractors 
overpayment collection efforts.   
 
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 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 
Overpayments that PSCs referred for collection did not result in 
significant recoveries to the Medicare program. . . . . . . . . . . . . . . . 9 
 
 
R E C O MMEN D A T ION S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 
  Agency Comments and Office of Inspector General Response . . . . 14 
 
 
APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 
  A:  Benefit Integrity Task Orders in 2007 . . . . . . . . . . . . . . . . . . . 16 
 
  B:  Program Safeguard Contractors and the Claims Processors 
        to Which They Referred Overpayments in 2007 . . . . . . . . . . . 17 
 
C:  Agency Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 
 
 
A C K NO WL E D G M E N T S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21   
   
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 I N T R O D U C T I O N  
OBJECTIVE 
To determine the collection status, as of June 2008, 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 Medicare Overpayments Identified by Program Safeguard 
Contractors, OEI-03-08-00031, 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 the collection status of 
PSC overpayment referrals to claims processors 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 identify 
overpayments, they are required to refer the overpayments to Medicare 
claims processors for collection.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.  
In 2007, CMS had 18 benefit integrity task orders with PSCs, which are 
 
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. 
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I N T R O D U C T I O N   
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 these 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 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. 
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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.  Appendix B contains a list of PSCs and the 
claims processors to which PSCs sent overpayment referrals in 2007.   
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 the 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 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.   
Demand letter.  Usually, after the claims processor makes a final 
determination of the overpayment, it sends a demand letter to the 
provider.7  This letter typically includes the overpayment amount that 
the provider must repay, methods for repayment, and the providers 
 
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. 
7 Ibid., ' 90.2. A demand letter is not sent to physicians and suppliers for overpayments 
that are less than $10.   
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appeal rights.8  The letter alerts the provider that it has 120 days to 
appeal the overpayment determination.9  However, if no payment or 
request for extended repayment plan is received within 30 days, the 
overpayment is delinquent and begins to accrue interest.10   
Investigations and appeals.  Claims processors may have to put the 
collection of PSC overpayment referrals on hold because of 
investigations.  If PSCs are aware of pending investigations, they are 
required to notify law enforcement of the intention to collect 
outstanding overpayments.  There may be situations in which law 
enforcement recommends that overpayment collection be postponed if 
collection of the overpayments will compromise law enforcement actions 
that are planned or underway.  The outcome of an investigation may 
change the overpayment amount. 
As with an investigation, the outcome of a provider appeal at any level 
may change or eliminate the overpayment amount.  There are five 
levels of appeal:  Redetermination, Reconsideration, Administrative 
Law Judge Hearing, Departmental Appeals Board Review, and Federal 
Court Review.11  In September 2009, CMS issued a final rule to prohibit 
overpayment collection during appeals at the Redetermination and 
Reconsideration levels.12 
Collection methods.  Claims processors may collect overpayments by 
withholding the providers future Medicare payments.13  However, this 
method is possible only if the provider continues billing Medicare.  
Claims processors may also collect overpayments through the providers 
direct repayment of the full overpayment amount or through the 
providers repayment of the overpayment under an extended repayment 
plan.14   
With a few exceptions, claims processors must refer debt that is  
180 days (6 months) delinquent to the Department of the Treasury 
(Treasury) for collection.15        
 
8 CMS, Medicare Financial Management Manual, '' 20.2 and 90.2. 
9 CMS, Medicare Claims Processing Manual, Pub. No. 100-04, ch. 29, ' 220. 
10 CMS, Medicare Financial Management Manual,  10, 70.4, and 80.2.  
11 CMS, Medicare Claims Processing Manual, ' 220. 
12 74 Fed. Reg. 4745847470 (Sept. 16, 2009).   
13 CMS, Medicare Financial Management Manual, ' 40.1. 
14 Ibid., ' 50. 
15 Ibid., '' 70.4, 70.5, 70.6, and 80.2. 
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Overpayments sent to Treasury.  According to the Debt Collection 
Improvement Act of 1996, all Federal agencies that have eligible debt, 
e.g., an overpayment, must refer it to Treasury for collection.16  With a 
few exceptions, claims processors send overpayments to Treasurys 
cross-servicing program.  The cross-servicing program receives referrals 
of nontax debt from all Federal agencies. 
Even after the claims processor refers an overpayment to Treasury for 
collection, the overpayment remains on the claims processors records 
and accrues interest.17  CMS receives reports from Treasury as to 
whether any money has been collected.18  CMS forwards these reports 
to the claims processor to update its records.19     
If Treasury carries an overpayment on its records for 10 years, the 
claims processor may recommend to CMS that the overpayment be 
written off.20  Claims processors cannot write off overpayments without 
CMS approval.   
METHODOLOGY 
Scope  
We reviewed all Medicare overpayments that PSCs referred to claims 
processors for collection in 2007.  We also reviewed collection information 
on these referrals through June 2008.  Because we collected information 
through June 2008, claims processors had 6 to 18 months to collect the 
overpayments depending on when they were referred in 2007.   
Data sources  
Between May and October 2008, we collected from PSCs the identifying 
information about each overpayment that they referred to claims 
processors in 2007.  Between June 2008 and January 2009, we collected 
from claims processors information regarding each overpayment that the 
PSCs told us that they referred to claims processors in 2007.   
 
 
 
16  31 U.S.C. ' 3711(g).  This section defines the timeframe for referring debt to Treasury 
and the types of debt that are not eligible for referral.  
17 CMS, Medicare Financial Management Manual, '' 70.15.1 and 70.15.3. 
18 Ibid., '' 70.14.1 and 70.14.2. 
19 Ibid., ' 70.14.4. 
20 Ibid., ' 70.17. 
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Data Collection 
Program safeguard contractors.  We sent all 18 PSCs a data request that 
included a self-administered data collection instrument.  We asked 
PSCs to provide the following identifying information for each 
overpayment that they referred to claims processors:   
  PSC unique identifier for the overpayment, 
  date overpayment referred, 
  claims processor to which the referral was sent, 
  provider identifying information, 
  provider type (e.g., hospital), 
  claim type (e.g., Part A), 
  whether overpayment amount was actual or extrapolated, 
  dollar amount of overpayment in referral, 
  claims processors tracking number for this overpayment 
(e.g., accounts receivable number), 
  date of demand letter, and 
  dollar amount of overpayment in demand letter. 
We also asked PSCs for the contact information for the claims processor 
representatives to whom the PSCs sent overpayment referrals in 2007 
or the current person handling these overpayment referrals.  
All PSCs responded to the initial data request.  We requested clarifying 
information from all PSCs at least once, and in some cases, we made 
repeated attempts to get clarification.  After all these attempts, all PSCs 
except one provided the clarifications we requested.  This one PSC did 
not provide the provider type for one overpayment referral.   
Claims processors.  We sent a self-administered data collection 
instrument to the 31 claims processor representatives at 16 claims 
processors identified by the PSCs.  Claims processor representatives at 
the same claims processor were responsible for overpayment referrals 
based either on claim type or referring PSC.  Some of the claims 
processors that had more than one representative identified by the 
PSCs chose to have only one representative respond to our data request.  
As a result, the number of claims processor representatives that 
responded to our data request was 26.  We refer to these respondents as 
claims processors in this report.       
We sent the claims processors the overpayment information that PSCs 
provided to identify the overpayment referrals made in 2007.  For each 
PSC overpayment referral, we asked the claims processor to provide the 
following information: 
  date overpayment referral received, 
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  claims processors unique tracking number for this overpayment 
(e.g., accounts receivable number), 
  date of demand letter, 
  dollar amount in demand letter (i.e., overpayment amount sought 
for collection), 
  changes to overpayment amount sought for collection (other than 
as a result of an appeal), 
  whether overpayment determination was appealed, 
  changes to overpayment amount sought for collection as a result 
of an appeal, 
  overpayment principal collected and interest collected through 
June 2008, 
  method used to collect the overpayment, 
  whether collection was complete, and 
  reason why collection was not complete (e.g., overpayment sent to 
Treasury), if applicable. 
All claims processors responded to the initial data request.  In cases in 
which claims processors did not provide all the information we 
requested, we requested the information or clarification at least once 
and, in some cases, made repeated attempts to get the information or 
clarification.  After all attempts, some claims processors did not provide 
all the information we requested.  For example, some claims processors 
did not provide information on whether the overpayments were 
appealed. 
Analysis 
Overpayments provided by PSCs.  PSCs provided information on  
4,242 overpayments that they referred to claims processors for collection 
in 2007.  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 overpayments for this 
report.21 
After reviewing the collection information that claims processors 
provided, we summarized the collection status of the overpayment 
dollars associated with the 4,239 overpayments.  We also calculated the 
percentage of dollars in each status by Part A, Part B excluding 
DMEPOS, and Part B DMEPOS.      
 
   
 
21 Of the 4,239 overpayments, only 1 was made to a beneficiary. 
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Limitations 
We did not independently verify information provided by PSCs or claims 
processors.     
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. 
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 F I N D I N G  
 
PSCs referred 4,239 overpayments 
Overpayments that PSCs referred for collection 
totaling $835 million to claims 
did not result in significant recoveries to the 
processors during 2007, but very 
Medicare program   little had been collected as of  
June 2008.  Table 1 shows the collection status of these PSC 
overpayment referrals by claim type.   
Table 1:  Collection Status as of June 2008 for PSC Overpayments Referred in 2007 
Part B 
Part B 
Part A  Excluding 
Part B Dollars  Part B  DMEPOS  Percentage 
Status of  Percentage  DMEPOS 
Part A Dollars  Excluding  DMEPOS  Percentage  Total Dollars of Total 
Overpayments  of Total  DMEPOS Percentage  Dollars of Total  Dollars1
Dollars  of Total   
Dollars
Dollars
Collected   $14,998,460  27%  $30,623,350  56%  $9,331,567  17%  $54,953,377  7% 
Sent to 
Treasury2  $37,868,510  9%  $128,805,119  29%  279,326,567  63%  $446,000,196  53% 
Still Being 
Collected or 
$6,769,940  17%  $28,535,848  71%  $4,768,221  12%  $40,074,009  5% 
Collection Not 
Begun  
Not Likely To 
Be Collected 
$3,894,421  9%  $34,695,985  81%  $4,247,910  10%  $42,838,316  5% 
by Claims 
Processors  
On Hold for 
Investigation  $7,569,038  5%  $126,085,562  91%  $5,616,949  4%  $139,271,549  17% 
or Appeal  
No Longer 
Owed by   $3,940,844  8%  $25,046,129  52%  $19,153,664  40%  $48,140,637  6% 
Providers 
Claims 
Processor 
$12,932,525  20%  $38,777,544  61%  $12,067,788  19%  $63,777,857  8% 
Could Not 
Provide Data 
     Total  $87,973,738    $412,569,537    $334,512,666    $835,055,941   
Source: OIG analysis of responses from PSCs and claims processors.  
1Percentages in this column add up to 101 percent rather than 100 percent because of rounding. 
2Percentages in this row for Parts A, B, and Part B DMEPOS add up to 101 percent rather than 100 percent because of rounding. 
 
Seven percent of the overpayment dollars referred by PSCs was collected as 
of June 2008  
Claims processors collected 7 percent, or $55 million, of the $835 million 
in overpayments that PSCs referred in 2007.  Of the overpayments 
collected, 27 percent was for Medicare Part A, 56 percent was for Part B 
excluding DMEPOS, and 17 percent was for Part B DMEPOS.    
  OEI-03-08-00030  COLLECTION STATUS OF MEDICARE OVERPAYMENTS IDENTIFIED BY PSCS  9   
   
 F I N D I N G  
Part A represented 27 percent of the dollars collected on PSC 
overpayment referrals and 11 percent of PSCs overpayment dollars 
referred for collection.  Part B, excluding DMEPOS, represented 56 
percent of dollars collected on PSCs overpayment referrals and 49 
percent of PSCs overpayment dollars referred for collection.  Part B 
DMEPOS represented 17 percent of dollars collected on PSCss 
overpayment referrals and 40 percent of PSCs dollars referred for 
collection.   
Fifty-three percent of the PSC overpayment dollars was sent to Treasury for 
collection 
As of June 2008, more than half (53 percent) of the overpayments that 
PSCs referred for collection in 2007 ($446 million of $835 million) was 
referred to Treasurys cross-servicing program for collection.  It is 
unlikely that the full amount of the PSC overpayments referred to 
Treasury will be collected in the future.  Treasury is the last avenue for 
collecting overpayments and other nontax debt from all Federal 
agencies.  However, the cross-servicing program does not have a high 
rate of return.  For each year between fiscal years 2003 and 2007, the 
program never collected more than 2 percent of all debt referred to it.22   
Of the $446 million in overpayments referred to Treasury, 63 percent 
was for Part B DMEPOS. 
For 5 percent of the overpayment dollars, collection was still underway or 
had not begun yet 
Claims processors reported that collection was not complete for  
$40 million.  Of this $40 million, $27 million was still being withheld 
from the providers future payments.  In addition, they were still 
collecting on $4 million because the providers were on extended 
repayment plans.  As long as these providers continue billing or making 
payments, this portion of the $40 million is expected to be collected in 
full.   
For $3 million in overpayment referrals, claims processors reported that 
the collection process had not yet begun as of June 2008.  Claims 
processors were either setting up the collection process or had requested 
more information from the PSCs about these overpayments.  For the 
remaining $6 million of $40 million, claims processors reported that 
 
22 Treasury, Fiscal Year 2007 Report to the Congress:  U.S. Government Receivables and 
Debt Collection Activities of Federal Agencies, May 2008, p. 13.  Accessed online at 
http://fms.treas.gov/news/reports/debt07.pdf on March 20, 2009. 
  OEI-03-08-00030  COLLECTION STATUS OF MEDICARE OVERPAYMENTS IDENTIFIED BY PSCS  10   
   
 F I N D I N G  
collection was not complete but did not explain the reason why or 
reported that they could not provide the information. 
Of the $40 million still being collected, 71 percent represented Part B, 
excluding DMEPOS. 
Five percent of the PSC overpayment dollars will not likely be collected by 
claims processors  
Five percent, or $43 million, will not likely be collected by claims 
processors.  This amount represents providers that stopped billing  
($31 million), filed for bankruptcy ($7 million), are out of business  
($4 million), or are deceased (less than $1 million).  Of the $43 million 
not likely to be collected by claims processors, 81 percent was for Part B 
claims, excluding DMEPOS. 
Collection was on hold as of June 2008 pending investigations or appeals 
for 17 percent of PSC overpayment dollars  
Claims processors reported that $139 million of the $835 million referred 
by PSCs (17 percent) was on hold as of June 2008.  Regarding the $139 
million, claims processors reported that ongoing investigations were the 
reason $76 million was currently not being collected and provider appeals 
were the reason $63 million was currently not being collected.  Depending 
on the outcome of the investigations and appeals, these overpayment 
amounts may be increased, reduced, or eliminated. 
Of the $139 million on hold because of investigations and provider appeals, 
91 percent represented Part B excluding DMEPOS. 
Six percent of the PSC overpayment dollars was no longer owed by 
providers  
Of the $835 million in overpayment referrals, 6 percent, or $48 million, 
will not be collected because the overpayment amounts were reduced by 
the claims processors.  The reasons for these reductions include 
revisions to the overpayment collection amounts made by claims 
processors and changes because of appeal decisions that were favorable 
to the providers.   
Of the $48 million that providers no longer owe, 52 percent ($25 million) 
was for Part B claims, excluding DMEPOS; 40 percent ($19 million) was 
for Part B DMEPOS claims; and 8 percent ($4 million) was for Part A 
claims. 
 
  OEI-03-08-00030  COLLECTION STATUS OF MEDICARE OVERPAYMENTS IDENTIFIED BY PSCS  11   
   
F I N D I N G  
Claims processors could not provide data for more than a quarter of the 
PSC overpayment referrals, which represent $64 million, or 8 percent, of the 
PSC overpayment dollars  
For 8 percent of the overpayment dollars referred by PSCs$64 million 
of $835 millionclaims processors could not provide data.  Claims 
processors could not provide information for 1,060 overpayments, or  
1 in 4 overpayments PSCs referred (1,060 of 4,239).  These  
1,060 overpayments represented $58 million of the $64 million.  Claims 
processors reported that they did not receive these referrals from the 
PSCs or that they could not provide any collection information about 
them.  Claims processors did not provide all of the necessary 
information for OIG to determine the collection status for another  
44 overpayments, totaling $6 million. 
 
 
    
  OEI-03-08-00030  COLLECTION STATUS OF MEDICARE OVERPAYMENTS IDENTIFIED BY PSCS  12   
   
 RR EE CC OO MM MM EE NN DD AA TT II OO NN SS   
 
 
This OIG report presents the collection status of overpayments, as of 
June 2008, that Medicares PSCs identified and referred to claims 
processors for collection in 2007.  A companion OIG report, entitled 
Medicare Overpayments Identified by Program Safeguard Contractors,  
OEI-03-08-00031, presents the number, dollar amount, and claim type 
of overpayments PSCs identified and referred to claims processors for 
collection in 2007.     
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 that cover high-fraud regions to focus on quick response 
to fraud and administrative activities.   
Because of the emphasis on administrative actions and the Medicare 
dollars at risk, it is important that CMS know the actual amount of Part 
A and Part B overpayments that PSCs and ZPICs refer to claims 
processors and the collection status of these overpayments.  We found 
that overpayments that PSCs referred to claims processors for collection 
did not result in significant recoveries to the Medicare program.  Of 
$835 million in overpayments that PSCs referred in 2007, only  
7 percent was collected by June 2008.  
CMS has the responsibility to ensure that PSCs and ZPICs perform 
effectively.  To help it do so, it needs to have complete and accurate 
information about PSCs overpayment referrals to claims processors and 
the collection status of these overpayments.  Moreover, CMS needs to 
ensure that PSCs, ZPICs, and claims processors can identify all current 
and future overpayment referrals by PSCs and ZPICs. 
We recommend that CMS: 
Regularly collect all necessary information to determine the overpayments 
PSCs and ZPICs refer to claims processors for collection, the collection 
status of these overpayments, and the percentage of overpayments in each 
category of collection status   
For example, for each overpayment referral, collect the overpayment 
amount referred, changes to overpayment amount and reason for the 
changes, method used to collect the overpayment, amount collected to 
  OEI-03-08-00030  COLLECTION STATUS OF MEDICARE OVERPAYMENTS IDENTIFIED BY PSCS  13   
   
RRRR EEEE CCCC OOOO MMMM MMMM EEEE NNNN DDDD AAAA TTTT IIII OOOO NNNN SSSS     
date, the collection status, and reasons why collection is not complete.  
This information would help CMS determine whether PSCs and ZPICs 
are performing effectively.     
Require that PSCs, ZPICs, and claims processors have controls in 
their tracking systems to ensure that all overpayment referrals and 
data related to their collection status can be found   
We found that PSCs and claims processors had different information 
about PSC overpayment referrals for 2007.  PSCs reported that they 
referred 4,239 overpayments to claims processors, but claims processors 
reported that they did not receive or could not provide information for 
1,060 of these 4,239 PSC overpayments referrals.  We also found that 
claims processors could not always provide collection status 
information, such as whether an overpayment was appealed.     
Determine what happened to the 1,060 overpayments that PSCs 
referred to claims processors in 2007 for which claims processors 
could not provide any collection information   
These 1,060 overpayments totaled $58 million and represented  
25 percent of the PSC overpayment referrals sent to claims processors 
in 2007.  It is important that the overpayments PSCs refer to claims 
processors be reviewed and collected.  We will provide CMS with the 
identifying information that PSCs sent us for these 1,060 overpayments.   
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
CMS stated that it has begun implementing its strategy to align the 
existing PSCs geographically with claims processors, i.e., the Medicare 
Administrative Contractors (MAC), and that the premise of the new 
strategy is to have a more concentrated effort of identifying fraud and 
abuse across claim types in each zone.  CMS stated it is concerned about 
the low level of collection and the missing information related to 
overpayments.  CMS also stated that since the date of OIGs review, 
CMS has established procedures to strengthen the monitoring and 
oversight of overpayment collection and ensure better contractor 
communication.  CMS added that the ZPIC Statement of Work (SOW) 
includes internal controls to ensure coordination of the overpayment 
activities.   
CMS concurred with our first recommendation and stated that to 
ensure that it can monitor how MACs respond to PSCs overpayment 
referrals, CMS added this requirement, in October 2009, to the CMS 
  OEI-03-08-00030  COLLECTION STATUS OF MEDICARE OVERPAYMENTS IDENTIFIED BY PSCS  14   
   
R E C O M M E N D A T I O N S  
Analysis/Reporting/Tracking System (CMS ARTS) template for monthly 
reporting.  Additionally, in order for a MAC to obtain an award fee, a 
criterion was added in fiscal year 2009 related to the tracking of 
overpayments identified by PSCs and ZPICs. 
CMS concurred with our second recommendation and, in  
October 2009, added a data field to CMS ARTS for monthly reporting of 
the collection status of the overpayment referrals.  Submitting this 
information is now a requirement in the ZPIC SOW. 
CMS concurred with our third recommendation and is working with 
claims processors to determine what happened to the  
1,060 overpayments that the PSCs referred to the claims processors in 
2007, for which the claims processors could not provide collection 
information.  CMS will require the claims processors to recover the 
potential overpayments identified by OIG consistent with the agencys 
policies and procedures. 
Although CMS has implemented several monthly reporting 
requirements to improve the tracking and quality of overpayment 
collection information, OIG believes it is important that CMS also 
continually monitor and evaluate the effectiveness of its contractors 
overpayment collection efforts.   
The full text of CMSs comments is provided in Appendix C.  
 
 
  OEI-03-08-00030  COLLECTION STATUS OF MEDICARE OVERPAYMENTS IDENTIFIED BY PSCS  15   
   
   A P P E N D I X ~ A  
   
 
Table A-1:  Benefit Integrity Task Orders in 2007 
Number of Benefit 
Company 
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-03-08-00030  COLLECTION STATUS OF MEDICARE OVERPAYMENTS IDENTIFIED BY PSCS  16   
   
 A P P E N D I X ~ B  
           
Table B-1:  Program Safeguard Contractors and the Claims Processors to 
Which They Referred Overpayments in 2007 
Program Safeguard Contractor Task Order  Claims Processor 
National Government Services, Inc. 
AdvanceMed  
Palmetto GBA, LLC 
CIGNA Government Services, LLC 
AdvanceMed  
Riverbend Government Benefits Administrator 
Pinnacle Business Solutions, Inc. 
AdvanceMed  
TriSpan Health Services 
Cahaba Safeguard Administrators, LLC   Palmetto GBA, LLC 
Cahaba Government Benefit Administrators, LLC (Part A) 
Cahaba Safeguard Administrators, LLC  
Cahaba Government Benefit Administrators, LLC (Part B) 
CIGNA Government Services, LLC 
Computer Sciences Corporation   Noridian Administrative Services, LLC (Part A) 
Noridian Administrative Services, LLC (Part B) 
IntegriGuard, LLC   Wisconsin Physicians Service Insurance Corp. 
First Coast Service Options, Inc. 
National Government Services, Inc. 
 
SafeGuard Services, LLC 
NHIC, Corp. 
Pinnacle Business Solutions, Inc. 
SafeGuard Services, LLC    NHIC, Corp. 
Group Health Incorporated 
HealthNow New York, Inc. 
SafeGuard Services, LLC   
National Government Services, Inc. 
Riverbend Government Benefits Administrator 
Highmark Medicare Services, Inc. (Part A) 
SafeGuard Services, LLC  
Highmark Medicare Services, Inc. (Part B) 
First Coast Service Options, Inc. 
SafeGuard Services, LLC  
Triple-S Salud, Inc. 
SafeGuard Services, LLC   Noridian Administrative Services, LLC 
TriCenturion   Trailblazer Health Enterprises, LLC 
TriCenturion   Palmetto GBA, LLC 
National Government Services, Inc. 
TriCenturion  
NHIC, Corp. 
National Government Services, Inc. 
TrustSolutions, LLC  
Wisconsin Physicians Service Insurance Corp. 
TrustSolutions, LLC   CIGNA Government Services, LLC 
Source:  Office of Inspector General review of responses from program safeguard contractors. 
  OEI-03-08-00030  COLLECTION STATUS OF MEDICARE OVERPAYMENTS IDENTIFIED BY PSCS  17  x  c 
A  P  PEN  0 
Agency Comments 
('l
DEPARTMENT OF HEALTH & HUMAN SERVIm;  Cenlers for Medicare & Medicaid Services 
Administrator 
Washington. DC 20201 
DATE:  FEB  0 2 2010 
TO: 	 Daniel R. Levinson' 

Inspector General 

FROM: 	 Charlene Prizzera 

Acting Administrator 

SUBJECT: 	 Office of Inspe,ctor General (OIG) Draft Report: "Collection Status of Medicare 
Overpayments Identifit;<! by Program Safeguard Contractors" (OEI-03-08-00030) 
Thank you for the opportunity to review and comment On the above referenced Office of 
Inspector General (OIG) Draft Report. 
The OIG conducted this audit to determine"the collection status, as of June 2008, of Medicare 
overpayments that the Program Safeguard Contractors (PSCs) identified and referred to claims 
processing contractors for collection in 2007. The Centers for Medicare & Medicaid Services 
(CMS) has begun implementing its strategy to align the existing PSCs geographically with the 
Medicare Administrative Contractors (MACs). The premise of the new strategy is to have a 
more concentrated effort of identifying fraud and abuse across claim types in each zone. Under 
this new strategy, CMS will divide the nation into seven zones, each of which contains one or 
more entire MAC jurisdictions. Each zone wilIhave a Zone Program Integrity Contractor 
(ZPIC) that performs benefit integrity functions.  With this approach, CMS has brought together 
responsibility for all Medicare program integrity efforts for Parts A, B, home health and hospice, 
and Durable Medical Equipment (DME). The agency is now in the process oftransitioning 
PSCs to ZPICs. Currently, we have two ZPICs fully operational. 
The PSCs are required to detect and deter fraud and abuse In their jurisdictions, a role the ZPICs 
will assume as they become operational. The PSCs conduct investigations, refer cases to !(IW 
enforcement, and take administrative actions, such as referring overpayments to claims 
processing contractors fOr collection. The .claims processing contractor makes the final 
determination of the dollar amount to demand from a provider, and this amount may differ from 
the overpayment amount referred by the PSC. 
The OIG found that during 2007, PSCs referred 4,239 overpayments totaling $835 million to 
claims processing contractors. As of June 2008, claims processing contractOrs collected only-7 
percent, or $55 million. For 8 percent of the overpayment dollars referred by the PSCs ($64 
million of $835 milfion), claims processing contractors could not provide any data on these 
referrals. The contractors reported that they did not receive or could nOt provide any collection 
information for 1,060 of 4,239 overpayments. 
OEI03-0a00030  COLLECTION STATUS OF MEDICARE OVERPAYMENTS IDENTIFIED BY PSCs  18   
   
A P P E N D I X ~ C  
 
  OEI-03-08-00030  COLLECTION STATUS OF MEDICARE OVERPAYMENTS IDENTIFIED BY PSCS  19   
   
A P P E N D I X ~ C  
 
  OEI-03-08-00030  COLLECTION STATUS OF MEDICARE OVERPAYMENTS IDENTIFIED BY PSCS  20   
   
 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-03-08-00030  COLLECTION STATUS OF MEDICARE OVERPAYMENTS IDENTIFIED BY PSCS  21   
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.