By Mathew J. Levy, Esq. & Stacey Lipitz Marder, Esq.
In today’s healthcare climate, many providers have been subject to an audit by Centers for Medicare & Medicaid Services (CMS) whereby CMS (through one of its contractors) requests a sample of records and subsequently determines that the documentation does not substantiate the codes billed. Accordingly, CMS requests that money be “repaid” in connection with the services previously provided and paid. In some instances, CMS limits the overpayment request to those documents it has actually reviewed, while in other instances CMS takes the amount involved and corresponding error rate and “extrapolates” that amount to extend over a larger universe of claims spanning several years, resulting in a significantly increased overpayment demand which can be millions of dollars.
While extrapolation certainly does not seem fair as there is an assumption that the random sample reflects all of a provider’s billings, regardless of whether the provider changed its billing practices, extrapolation has been deemed to be valid provided contractors use a “statistically valid random sample” and “statistically valid methods”. Effective January 2, 2019, CMS has provided more details in the Medicare Program Integrity Manual (MPIM) as to when extrapolation is permissible in the calculation of overpayment demands and how its contractors should perform statistical sampling.
CMS historically provided limited guidance with respect to the proper method for extrapolation. As per the MPIM, contractors only had to meet the following 6 conjunctive requirements: (1) Selecting the provider or supplier; (2) Selecting the period to be reviewed; (3) Defining the universe, the sampling unit, and the sampling frame; (4) Designing the sampling plan and selecting the sample; (5) Reviewing each of the sampling units and determining if there was an overpayment or an underpayment; and, as applicable, (6) Estimating the overpayment.
As per the new guidance, CMS has advised that a contractor shall use statistical sampling when it has been determined that a sustained or high level of payment error exists (greater than 50% or a provider has a history of noncompliance for the same or similar billing issues, or a historical pattern of noncompliant billing practice), as well as after documented educational intervention has failed to correct the payment error (i.e. through the Targeted Probe and Educate (TPE) program where CMS reviews claims prior to payment).
CMS has also provided additional guidance involving defining the universe, as the MPIM now states that “the sampling frame is the listing of sample units, derived from the universe, from which the sample is selected.” The MPIM has further noted that the universe may include items that are not utilized in the construction of the sample frame.
The revised MPIM also requires the contractor to include a list of all sample units, all universe elements incorporated in the sample units, and the elements of the universe such that the sample units may be reassembled during the replication process.
Contractors are also now required to “maintain all documentation pertinent to the calculation of an estimated overpayment including but not limited to the statistician-approved sampling methodology, universe, sample frame and formal worksheets.”
Under the revised MPIM, contractors must now also seek additional approval from CMS prior to issuing a findings letter when the extrapolated overpayment exceeds $500,000 or an amount that is greater than 25% of the provider’s Medicare revenue received within the previous 12 months. In seeking approval, the contractor must provide to CMS for its review a summary of its investigation, prior history, medical review results, and the extrapolated overpayment amount.
Moreover, if during the administrative appeals process claims are reversed from the initial claim determination, contractors are now required to adjust the estimation of the overpayment which should prevent providers from continuing to be penalized for contractor mistakes that have been previously overturned.
While the new guidance from CMS will hopefully prevent contractors from abusing extrapolation in connection with audits performed on providers, many providers will still be subject to extrapolation. It is in the best interest of those providers to have the extrapolation methodology reviewed by healthcare counsel and a statistician with experience dealing with CMS overpayments in order to determine if the extrapolation methodology utilized by the contractor is compliant with the new MPIM guidelines and ultimately valid. Although the new guidance from CMS provides more potential arguments for statisticians to utilize in challenging the use of extrapolation by contractors, a contractor’s failure to comply strictly with these guidelines may not always yield a successful challenge to the extrapolation as per the MPIM. Providers subject to an extrapolated overpayment demand with CMS should still raise these issues in the appeals process, as a successful argument can potentially throw out an extrapolation resulting in an overpayment demand being significantly reduced.
Should you have any questions regarding audits or the use of extrapolation by CMS please contact Mathew Levy at 516-926-3320 or MLevy@weisszarett.com
About the Authors:
Mathew J. Levy, Esq. is a Principal of Weiss Zarett Brofman Sonnenklar & Levy, PC. Mr. Levy is nationally recognized as having extensive experience representing healthcare clients in transactional and regulatory matters. Mr. Levy has particular expertise in advising health care clients with respect to contract issues, business transactions, practice formation, regulatory compliance, mergers & acquisitions, professional discipline, criminal law, healthcare fraud & billing fraud, insurance carrier audits, litigation & arbitration, and asset protection-estate planning. You can reach Mathew Levy at 516-627-7000 or firstname.lastname@example.org.
Stacey Lipitz Marder is senior counsel at Weiss Zarett Brofman Sonnenklar & Levy, PC with experience representing healthcare providers in connection with transactional and regulatory matters including the formation and structure of business entities, negotiating and drafting contracts and commercial real estate leases, stock and asset acquisitions and general corporate counseling. Ms. Marder also has experience advising healthcare clients on a wide range of regulatory issues including Stark, the Anti-Kickback Statute, fraud and abuse regulations, HIPAA, reimbursement and licensing matters.
Weiss Zarett Brofman Sonnenklar & Levy, P.C. is a Long Island law firm providing a wide array of legal services to the members of the health care industry, including corporate and transactional matters, civil and administrative litigation, healthcare regulatory issues, bankruptcy and creditors’ rights, and commercial real estate transactions.
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