Top Five Errors Identified During Medicare Secondary Payer (MSP) Hospital Audits

Published 12/30/2020

1. Failure to verify information provided on the questionnaire with Common Working File (CWF) prior to submission of claim to Medicare to avoid rejections.

Charges for Medicare patients should not be billed unless the provider can verify that:

  • The MSP questionnaire has been completed
  • The CWF has been checked for consistency
  • Any inconsistencies between the questionnaire and the CWF have been investigated and resolved prior to submitting the claim to Medicare (CMS Manual, Chapter 3, Section 20.1 (PDF))

2. Failure to submit MSP claim with the correct value code 44 amount causing claim to reject with reason code 33981.

When an electronic claim is submitted and the value code 44 amount (the amount the provider agreed to accept from primary payer when this amount is less than charges but higher than payment received) and the calculated Obligated to Accept Amount in Full (OTAF) are not equal, claim rejections occur for reason code 33981. Specifically, when the claim adjustment segment (CAS) and value code 44 amounts do not match (“Total Charges – Total Contractual Obligation (CO) group codes, listed on page 41, and the value code 44 amount should equal”). If the provider is obligated to accept or voluntarily accept an amount as payment in full from the primary payer, then the CO group code must be reported by the primary payer to identify the contractual adjustment amount. 

The providers are required to include CAS segment-related group codes, claim adjustment reason codes, and associated adjustment amounts on MSP 837 claims, when providers have a contractual arrangement with a primary payer, a contractual adjustment or discount is reported on the primary payer’s explanation of benefit (EOB) statement, when payment is due from Medicare and the primary payer paid less than the contractual arrangement by applying deductible and/or co-insurance, and when  providers are to report the contractual agreement dollar amount in the value code 44.

If the CARCs reported by the primary payer are missing, invalid or not balanced (i.e., off by $0.01), the provider should contact the primary payer for a corrected remittance advice to show the correct values and amounts.

3. Failure to submit the correct Claim Adjustment Reason Codes (CARC) and amounts.

Per the instruction in CR 8486, providers are required to include the Claim Adjustment Segment (CAS) codes and corresponding amounts from the primary payer(s) remittance advice (RA) report (835 electronic remittance advice (ERA) or paper remittance) on the 837I transaction, DDE, of the paper claims when sending claims to Medicare for secondary payment. The CAS codes and amounts on the claims submitted to Medicare should reflect the exact adjustment codes and amounts, as documented on the primary payer’s Explanation of Benefits (EOB) or RA. These adjustments are needed to process the MSP Part A claims and for Medicare to make a correct payment. This includes all adjustments made by the primary payer, which explains why the claim’s billed amount was not fully paid.

4. Failure to utilize condition code 77 when the obligated to accept as payment in full amount (OTAF) from the primary payer is received and no payment is expected from Medicare.

If full payment is made by the primary payer and it equals or exceeds the provider’s charge for those services, then the provider should utilize condition code 77 when it receives an amount that is obligated to accept from the primary payer as payment in full (CMS Manual, Chapter 3, Section 40.1.1 and 40.1.2 (PDF)) and no payment is expected from Medicare. The provider submits a "no pay" bill for determining the benefit period. A "no pay" bill is essential in notifying Medicare that primary payer payments can be applied or credited to the beneficiary’s deductible when it has not been met. When there is an indication that workers’ compensation (WC) may pay for services, the provider bills the WC carrier. If the WC pays for all of the services (whether at the provider’s customary charge rate or at a special WC rate) the provider submits a Medicare bill indicating the insurer paid in full. The beneficiary’s Medicare deductible will be credited; however, no payment will be made (Chapter 3, Section 30.2.2). This regulation applies to inpatient hospital bills (Part A), Skilled Nursing Facilities (SNF), outpatient bills (Part B Inpatient Services) and home health associations (HHA).

5. Incorrect use of Medicare Secondary Payer (MSP) related condition codes 09, 10, 11, 28 or 29.

When used correctly, MSP Related Condition Codes 09, 10, 11, 28 and 29 are data elements used to communicate information about employment and the retirement date.

  • Per CMS Manual, Chapter 3, Section 50 (PDF), Condition Code 09 is used to identify when neither the patient nor the spouse are employed and the MSP situation involves "Working Aged," "Disability" or "End Stage Renal Disease (ESRD)"
  • Condition code 10 identifies when the patient and/or spouse is employed, but no (group health plan) GHP is available
  • Condition code 11 identifies when the patient is a disabled beneficiary but no GHP exists
  • Condition code 28 is used to identify when the patient's and/or spouse's employer group health plan (EGHP) is secondary to Medicare. In response to the MSP questionnaire, the patient and/or spouse indicated that one or both are employed and that there is group health insurance from an EGHP or other employer-sponsored or provided health insurance that covers the patient but that either the EGHP is a single-employer plan and the employer has fewer than 20 full and part time employees, or the EGHP is a multiple-employer plan that elects to pay secondary to Medicare for employees and spouses aged 65 and older for those participating employers who have fewer than 20 employees.
  • Condition code 29 is used to identify when a disabled beneficiary and/or family member's large group health plan (LGHP) is secondary to Medicare. In response to the MSP questionnaire, the patient and/or family member(s) indicated that one or more are employed and there is group health insurance from an LGHP or other employer-sponsored or provided health insurance that covers the patient, but that either the LGHP is a single-employer plan and the employer has fewer than 100 full and part time employees, or the LGHP is a multiple-employer plan and that all employers participating in the plan have fewer than 100 full and part-time employees. Therefore, it is essential that the billing staff understand when these codes should be used to prevent improper billing.  

CMS Regulation References