Physicians may soon see some welcome relief when it comes to dealing with denied Medicare claims and overpayment demands involving statistical sampling, also known as extrapolation. The Office of the Inspector General (OIG) announced this month that is has added to its work plan a review of how the government is applying “statistical methods” during the Medicare fee-for-service administrative appeal process.
Medicare program integrity contractors are authorized to use statistical sampling to determine how much a provider had been overpaid.
Statistical sampling applies the rate of billing errors found in a sample of claims to a similar total group of claims. Medicare auditors use this methodology regularly.
However, providers often disagree with the calculated result and challenge these statistical estimates by using Medicare’s five step administrative appeals process. According to the OIG’s announcement, if an extrapolation estimate is overturned during this process, the provider is liable for any overpayment upheld in the sample, but not the full extrapolated total. The OIG acknowledges that the difference is “often substantial.”
The first two levels of appeal, conducted by Medicare Administrative Contractors (MACs) and Qualified Independent Contractors (QICs) “play a critical role in deciding which extrapolations will be upheld.” Evidently the OIG has determined that these contractors may be dropping the ball and has decided to review whether they are “reviewing statistical estimates in an appropriate and consistent manner.”
In other words, the OIG knows that mistakes can be made when applying extrapolation and wants to make sure that they’re being caught. The errors include:
- The underlying audit that the sampling is based on is wrong. For instance, the audit used the wrong codes or wrong error rate in determining whether there was any overpayment.
- The rules of extrapolation weren’t followed. For example, it’s only supposed to be used in certain situations, such as when there is a sustained or high level of payment errors.
- The sample wasn’t valid. For instance, the sample may have been too small.
- The government made a math error.
In addition, the government is supposed to give the provider a report of the extrapolation so that the provider can review it but that doesn’t always occur or is provided late, so that the provider must file an appeal before having had a chance to see if the calculations are correct.
The OIG probably has two objectives here. It not only wants to ensure that the appeals process is working correctly, but also to reduce the logjam of appeals currently choking the appeals process.
The OIG has previously reported that providers are more likely to have an adverse determination overturned only after getting to the third level of appeal, the administrative law judge (ALJ) level, which is the first stage independent of the Centers for Medicare and Medicaid Services and the first stage which allows hearings. The OIG found fully favorable results in just 20 percent of cases decided at the QIC level of appeal, compared to a fully favorable result 56 percent of the time at the ALJ level.
Why this review is important to physicians
This new review is good news for physicians and other providers, and could have a major impact. It may uncover inconsistencies and other issues with the way that MACs and QICs currently handle extrapolation appeals and could ultimately lead to improvements in not only the use of extrapolation but also the appeals process itself.
It may mean that fewer sampling mistakes will be made so fewer appeals will need to be filed, and if an appeal is filed, a mistake may be caught sooner on appeal.
It may also raise awareness among physicians that they should not take extrapolation calculations at face value but review them carefully and challenge them if necessary.