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Overpayments and Statistical Sampling and Extrapolation in OIG Claims Audits

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Overpayments and Statistical Sampling and Extrapolation in OIG Claims Audits

In January 2019, CMS amended its subregulatory program integrity guidance to Medicare contractors with more specific instructions on when and how to use statistical sampling and extrapolation to report and return overpayments (“Transmittal 828”). A subsequent February 2019 Report in Brief from the U.S. Department of Health & Human Services, Office of Inspector General (“OIG”) offers insight into this guidance in the context of an audit of inpatient rehabilitation facility claims (“Report”). Notably, the Report suggests that audit findings later overturned in the rebuttal stage or on appeal can nonetheless be credible information of an overpayment requiring further investigation and can justify extrapolation based on a sustained or high level of payment error. See below for links to Transmittal 828 and the Report.

Overpayments and Statistical Sampling and Extrapolation in OIG Claims Audits

The OIG completed its review of inpatient rehabilitation facility (“IRF”) claims earlier this year. In its Report following the completion of its audit, the OIG estimated through statistical sampling and extrapolation that the hospital audit target received overpayments of $22 million for its IRF services and recommended the hospital refund that amount to its Medicare contractor. The OIG further recommended the hospital “exercise reasonable diligence to identify and return any additional similar overpayments received outside of our audit period, in accordance with the 60-day rule, and identify any returned overpayments as having been made in accordance with this recommendation.” 

The hospital objected to the OIG’s findings in part because the findings were not consistent with past audits by Medicare contractors, which audits demonstrated both improvement in compliance over time and a high level of compliance with IRF requirements. In particular, the hospital objected to the implication that audit results subsequently overturned during the rebuttal stage or on appeal can form the basis for extrapolation. The OIG did not respond to the hospital’s specific objections, stating that the OIG recommendations are merely that—recommendation to CMS and its contractors, not final payment determinations under the Medicare program—and noting that subregulatory guidance to Medicare contractors regarding statistical sampling and extrapolation is not binding on the OIG. 

Transmittal 828 provided more specific instructions on when and how to use statistical sampling and extrapolation to report and return overpayments. By statute, Medicare contractors may not use extrapolation unless there is a sustained or high level of payment error or educational efforts have failed to correct payment errors. 42 USC 1395ddd(f)(3)(A). CMS requires the use of statistical sampling and extrapolation when a sustained or high level of payment error exists and permits such methods after a documented educational intervention fails to correct payment errors. Nonetheless, the OIG has again asserted it is not constrained by statutory and subregulatory rules on Medicare contractors. Providers who rely on CMS’s program integrity guidance in audits remain at risk for overpayments, even when audits and audit programs are designed based upon such guidance. 

https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2018Downloads/R828PI.pdf 

https://oig.hhs.gov/oas/reports/region5/51700026.asp

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