U.S. Department of Labor
Office of Inspector General

Audit Report


MEDICAL PROVIDERS OVERBILL FECA MILLIONS EACH YEAR

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Report Title:   Medical Providers Overbill FECA Millions Each Year

Report Number:  09-97-200-04-431

Issue Date:  September 29, 1997


The Department of Labor (DOL) can save millions of dollars each year by utilizing commercial systems to screen billings for medical provider code manipulation in the Federal Employees' Compensation Act (FECA) program. Our sample of Fiscal Year 1995 bills, reprocessed by a commercial vendor specializing in code manipulation detection, showed at least a $7 million loss because of improper or abusive medical provider billings. Although the percentage of FECA payment dollars lost to improper billings is small (about 3 percent), the volume of payment activity ($450 million for FY 1995) translates to significant dollar losses.

The audit identified 20 providers which warrant criminal investigations. Another 12 providers identified by the audit as submitting improper, abusive billings were already under investigation by the Office of Inspector General, Office of Investigations (OIG, OI). These 32 providers represent about one half of one percent of the medical providers we identified as improperly billing FECA.

We found no indication of widespread fraud. We cannot make projections as to what portion, if any, of the $7 million improperly billed amount was due to fraud. Conversely, a portion of the billings not identified as improper or abusive may, in fact, be fraudulent.

FECA program management have been supportive partners throughout the audit. At the conclusion of fieldwork, we provided them information on the types and amounts of identified improper billings. They have promised aggressive collection action against providers who improperly billed FECA.

We recommended that DFEC begin formally evaluating commercial code manipulation detection packages for potential procurement. We concluded that procurement and use of a commercially available code manipulation detection product are advisable because:


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