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In August of 2020, the Office of Inspector General (OIG) issued a report related to overpayment reviews by Medicare Administrative Contractors (MACs). According to the OIG’s report, MACs have been inconsistent in their calculation methodology and statistically valid sample sizes for extrapolated overpayments during the provider appeals process. This resulted in approximately $42 million in extrapolated overpayments being overturned from 2017-2018.
This is something that Harmony Healthcare International (HHI) has seen firsthand and assisted many clients with avoiding overpayments to the Medicare Administrative Contractors (MACs).
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Per the OIG brief, “If CMS did not intend that the contractors use this procedure, these extrapolations should not have been overturned. Conversely, if CMS intended that contractors use this procedure, it is possible that other extrapolations should have been overturned but were not.”
Facilities have the right to appeal MAC findings for Medicare Part A and Medicare Part B overpayments, regardless of whether the audit determines actual overpayments or extrapolated overpayments. The administrative appeals process is outlined in section 1869 of the Social Security Act (the Act) and 42 CFR part 405, subpart I.
Providers can challenge overpayment assessments on appeal for several reasons, such as:
- Asserting incorrect coverage and medical necessity determinations.
- Improper statistical sampling.
- Improper overpayment estimation.
If statistical sampling and overpayment estimation methodologies are successfully challenged during the administrative appeals process, the provider may be liable for the actual overpayment identified in the sample but not the extrapolated amount.
Given the oftentimes large difference between an actual overpayment (limited to the sample) and an extrapolated overpayment (projected from the sample), it is critical that the process for reviewing extrapolations within the administrative appeals process be fair and reasonably consistent.
In the first and second levels of the appeals process, such extrapolated overpayments are reviewed by Medicare administrative contractors (MACs) and qualified independent contractors (QICs), respectively.
Sampling involves selecting and reviewing a subset of claims form a larger population to make a total overpayment determination for all claims in that population.
Chapter 8, section 126.96.36.199 (Rev. 377) of the Medicare Program Integrity Manual (PIM) contains specific requirements that program integrity contractors must follow when using sampling to determine overpayments. It states that the 6 major steps in conducting statistical sampling are:
- Selecting the provider or sampler;
- Selecting the period to be reviewed;
- Defining the universe, the sampling unit; and the sampling frame;
- Designing the sampling plan and selecting the sample;
- Reviewing each of the sampling units and determining whether there was an overpayment or an underpayment; and
- Estimating the overpayment, as applicable. (These steps were substantively unchanged by Transmittal 828/Change Request 10067.)
Transmittal 828/Change Request 10067 added the requirements that the program integrity contractor assess whether the sample size is appropriate for the method used and whether the selected statistical methodology is appropriate given the distribution of paid amounts in the sampling frame.
Per the OIG report, “When a program integrity contractor identified an overpayment through statistical sampling and extrapolation, the provider may challenge the application of Medicare requirements (e.g., coverage requirements), the statistical methodology that the program integrity contractor used to estimate the overpayment in the sampling frame, or both.
If an overpayment (a sample claim) is overturned during the administrative appeals process, then the extrapolated overpayment is recalculated given the updated sample results. The provider is liable for the revised extrapolated amount. In contrast, if the provider successfully challenges the statistical methodology, the provider is liable only for the overpayment amounts identified in the sample. For extrapolations calculated by program integrity contractors, the statistical methods are reviewed against the sampling criteria outlined in the version of the PIM in effect at the time the extrapolation was made.”
The OIG provided the following recommendations to CMS:
- Provide additional guidance to contractors to ensure reasonable consistency in procedures used to review extrapolated overpayments during the first two levels of the Medicare Parts A and B appeals process;
- Take steps to identify and resolve discrepancies in the procedures contractors use to review extrapolations during the appeals process;
- Provide guidance regarding the organization of extrapolation-related files that must be submitted in response to provider appeal;
- Improve system controls to reduce the risk of contractors incorrectly marking the extrapolation flag field in the Medicare Appeals System (MAS); and
- Update the information in the Medicare Appeals System (MAS) to accurately reflect extrapolation amounts challenged as part of an appeal, whether the extrapolation was reviewed by a contractor, and the outcome of any extrapolation review.
If your facility has been under a MAC review that resulted in incorrect payments to the government and you feel the extrapolation calculation methodology or sampling size was incorrect, please contact Harmony Healthcare International (HHI) to assist with the appeals process.