On Jan. 20, 2016, a federal district court in the Western District of Texas affirmed a decision of the Medical Appeals Council (Appeals Council) affirming a CMS contractor’s extrapolation methodology used to assess an overpayment of more than $773,000 from a home health provider, Maxmed. Three key takeaways from the Court’s decision that may help health care providers avoid a similar situation include:
- Providers should be keenly aware of the rules limiting CMS’s participation as a party to an appeal when devising their appeal strategies, and its subsequent ability to appeal the ALJ decision on its own. Similarly, they should be aware of the Medicare Appeals Council’s ability to review any ALJ decision or dismissal on its own motion, or with referral from CMS.
- When disputing a statistical sample and/or extrapolation, submit an expert’s opinion as soon in the appeals process as practicable, preferably at the redetermination stage. When a statistical extrapolation is disputed, the Qualified Independent Contractor relies on its own statistical expert (often times an outside accounting firm). If you can overturn the extrapolation in the first two levels of appeal, and you don’t seek ALJ review, CMS cannot overturn the determination.
- CMS’s rules for statistical extrapolation balance its competing interests in reaching an accurate estimate of the overpayment: limited resources vs. accuracy. CMS admits in its manuals that it does not require the most accurate estimate, and will compromise on reaching the most accurate estimate by accepting a lower bound estimation. Therefore, CMS will trade a more imprecise statistical extrapolation for a lower overpayment estimate. Knowing this can help you and your statistical expert craft a more effective argument to try and get the statistical sampling thrown out.
The case arose out of a post-pay investigation by the Zone Program Integrity Contractor (ZPIC) Health Integrity, which denied 39 of 40 sampled Maxmed claims in a post-payment audit. Health Integrity then used a statistical extrapolation to calculate an estimated overpayment of $773,967.00.
After the Medicare Administrative Contractor Palmetto GBA and Qualified Independent Contractor confirmed Health Integrity’s findings, Maxmed appealed to an Administrative Law Judge (ALJ). The ALJ found one denied claim in favor of Maxmed, and also concluded that Health Integrity’s extrapolation methodology was not valid because it did not conform to the Medicare Program Integrity Manual (MPIM). [More...]
In the appeal, Maxmed argued that Health Integrity’s sampling and extrapolation methodology was invalid because Health Integrity failed to record the random numbers it relied upon in forming the sample, its choice of sampling units based upon clusters of claim-lines resulted in a skewed distribution, and its precision level of 8 percent resulted in an unacceptably imprecise extrapolation. [More...]
The court agreed with the Appeals Council, and granted summary judgment to HHS, finding that, “substantial evidence supported the Appeals Council’s overall determination that the ALJ erred by invalidating the statistical sampling and overpayment extrapolation.” [More...]
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For questions regarding this e-blast, please contact the authors, a member of Polsinelli's Health Care practice, or your Polsinelli attorney.