Department of Health and Human Services

OFFICE OF 

INSPECTOR GENERAL 

 

MEDICARE OVERPAYMENTS 

IDENTIFIED BY PROGRAM 

SAFEGUARD CONTRACTORS 

 

Daniel R. Levinson 

Inspector General 

May 2010 

OEI-03-08-00031 
 

 EXECUTIVE SUMMARY 

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 

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EXECUTIVE SUMMARY 

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 CMS’s 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 

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EXECUTIVE SUMMARY 

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 OIG’s 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 

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EXECUTIVE SUMMARY 

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, CMS’s 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. 
 TABLE OF CONTENTS 

EXECUTIVE SUMMARY .....................................i

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 

FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 

RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 

ACKNOWLEDGMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
 

 INTRODUCTION 

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 Commerce’s 

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, Medicare’s 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, Medicare’s 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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INTROD U C T I O N 

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 CMS’s 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. 
 

INTRODUCTION 

responsible for Part A, carriers for Part B, and Medicare administrative 

contractors for Parts A and/or B. 

Claims processors in a PSC’s jurisdiction are known as the PSC’s 

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 provider’s 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. 

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INTRODUCTION 

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 CMS’s 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 PSC’s 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 processor’s information as the overpayment amount. 

8 Of the 4,239 overpayments, only 1 was made to a beneficiary. 

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INTRODUCTION 

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 PSC’s 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 

PSC’s 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. 

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 FINDINGS 

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 18’s 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

PSC 

Number of 

Overpayment 

Referrals 

Dollar Amount of 

Overpayments 

Percentage of Total 

Overpayment Dollars 

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 

Source: OIG analysis of responses from PSCs and claims processors. 

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FINDINGS 

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: Comparison of PSC Overpayment Dollars Referred for Collection 

and PSC Oversight Responsibility in 2007 

PSC 

Dollar Amount of 

Overpayments 

Referred for 

Collection 

Oversight 

Responsibility 

Ranking From 

Largest to 

Smallest 

Dollar Amount of 

Oversight Responsibility 

(Medicare Payments) 

Dollar Amount of 

Overpayments Referred 

for Collection for Every 

 $1 Million in Oversight 

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. 

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FINDINGS 

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. 

Of the $835 million in PSC 

overpayments referred for 

collection in 2007, $747 million, or 

89 percent, was for Part B claims. 

The remaining $88 million, or 

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. 

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 

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. 

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FINDINGS 

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.) 

PSC Part A Overpayment 

Dollars 

Part A Oversight 

Responsibility 

(Medicare Payments) 

Part B Overpayment 

Dollars 

Part B Oversight 

Responsibility 

 (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. 

1

This 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 

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FINDINGS 

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. 

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 RECOMMENDATIONS 

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 CMS’s 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. 

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RECOMMENDATIONS 

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 OIG’s 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, CMS’s 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 CMS’s comments is provided in Appendix C. 

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RECOMMENDATIONS 

APPENDIX~A 

Table A-1: Benefit Integrity Task Orders in 2007 

Program Safeguard Contractors Number of Benefit 

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. 

 

 APPENDIX~B APPENDIX~A 

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 APPENDIX~B 

Table B-1: Parts A and B Overpayments That Program Safeguard 

Contractors Referred for Collection in 2007 by Provider Type

Provider Types 

Number of 

Overpayment 

Referrals 

Dollar Amount of 

Overpayments 

Percentage of 

Overpayment Amount1

Physician Services 1,375 $336,047,666 40% 

Durable Medical Equipment, Prosthetics, 

Orthotics, and Supplies Provider 1,859 $334,512,666 40% 

Ambulance Services 66 $38,101,173 5% 

Clinical Laboratory or Independent 

Diagnostic Testing Facility 191 $29,310,457 4% 

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 

Therapist 27 $5,132,068 1% 

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. 

1

The percentages in this column add up to more than 100 percent because of rounding. 

2

Includes six referrals for other provider types and one referral for which the PSC did not specify provider type.
A P PEN 0 x c 


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 


OEI·03·08·00031 MEDICARE OVERPAYMENTS IDENTIFIED BY PSCs 15 
 

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APPENDIX~C 
 

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APPENDIX~C 

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 ACKNOWLEDGMENTS 

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. 
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 OIG’s 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.