Department of Health and Human Services

OFFICE OF 

INSPECTOR GENERAL 

 

COLLECTION STATUS OF 

MEDICARE OVERPAYMENTS 

IDENTIFIED BY PROGRAM 

SAFEGUARD CONTRACTORS 

 

Daniel R. Levinson 

Inspector General 

May 2010 

OEI-03-08-00030 
 

EXECUTIVE SUMMARY EXECUTIVE SUMMA RY 

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 provider’s 

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 Treasury’s (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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E X E C U T I V E S C U T I V E S U M M A R M M A R Y 

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 Treasury’s 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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E X E E X E C U T I V E S CUTIVE S C U T I V E S U M M A R M M A R Y

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 CMS’s 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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EXECUTIVE SUMMARY 

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 agency’s 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. 
 TABLE OF CONTENTS 

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

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

FINDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 

Overpayments that PSCs referred for collection did not result in 

significant recoveries to the Medicare program. . . . . . . . . . . . . . . . 9 

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

ACKNOWLEDGMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
 

INTRODUCTION INTRODUCTION 

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 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 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, 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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INTRODUCTION 

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 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. 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 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 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 provider’s 

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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INTRODUCTION 

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 provider’s future Medicare payments.13 However, this 

method is possible only if the provider continues billing Medicare. 

Claims processors may also collect overpayments through the provider’s 

direct repayment of the full overpayment amount or through the 

provider’s 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. 47458–47470 (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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INTRODUCTION 

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 Treasury’s 

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 processor’s 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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INTRODUCTION 

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 processor’s 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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INTRODUCTION 

 claims processor’s 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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INTRODUCTION 

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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 FINDING 

Overpayments that PSCs referred for collection 

did not result in significant recoveries to the 

PSCs referred 4,239 overpayments 

totaling $835 million to claims 

processors during 2007, but very 

little had been collected as of 

June 2008. Table 1 shows the collection status of these PSC 

overpayment referrals by claim type. 

Medicare program 

Table 1: Collection Status as of June 2008 for PSC Overpayments Referred in 2007

Status of 

Overpayments Part A Dollars 

Part A 

Percentage 

of Total 

Dollars 

Part B Dollars 

Excluding 

DMEPOS

Part B 

Excluding 

DMEPOS 

Percentage 

of Total 

Dollars

Part B 

DMEPOS 

Dollars

Part B 

DMEPOS 

Percentage 

of Total 

Dollars

Total Dollars

Percentage 

of Total 

Dollars1

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 

Collection Not 

Begun 

$6,769,940 17% $28,535,848 71% $4,768,221 12% $40,074,009 5% 

Not Likely To 

Be Collected 

by Claims 

Processors 

$3,894,421 9% $34,695,985 81% $4,247,910 10% $42,838,316 5% 

On Hold for 

Investigation 

or Appeal 

$7,569,038 5% $126,085,562 91% $5,616,949 4% $139,271,549 17% 

No Longer 

Owed by 

Providers 

$3,940,844 8% $25,046,129 52% $19,153,664 40% $48,140,637 6% 

Claims 

Processor 

Could Not 

Provide Data 

$12,932,525 20% $38,777,544 61% $12,067,788 19% $63,777,857 8% 

 Total $87,973,738 $412,569,537 $334,512,666 $835,055,941 

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

1

Percentages in this column add up to 101 percent rather than 100 percent because of rounding. 

2

Percentages 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. 

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FINDING 

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 PSCs’s 

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 Treasury’s 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. 

10 

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. 

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FINDING 

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. 

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FINDING 

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 million—claims 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. 

 

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 RECOMMENDATIONS 

This OIG report presents the collection status of overpayments, as of 

June 2008, that Medicare’s 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 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 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 

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RECOMMENDATIONS 

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 OIG’s 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 

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RECOMMENDATIONS 

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 agency’s 

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 CMS’s comments is provided in Appendix C. 

 

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Table A-1: Benefit Integrity Task Orders in 2007 

Company 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~A 

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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. 

NHIC, Corp. 

SafeGuard Services, LLC 

Pinnacle Business Solutions, Inc. 

SafeGuard Services, LLC NHIC, Corp. 

Group Health Incorporated 

HealthNow New York, Inc. 

National Government Services, Inc. 

SafeGuard Services, LLC 

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. 

 APPENDIX~B 
A P PEN 0 x c 

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. 

OEI·03-0a·00030 COLLECTION STATUS OF MEDICARE OVERPAYMENTS IDENTIFIED BY PSCs 18 
 

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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.