Medicare Contractors Inconsistent in Reviewing Extrapolated Overpayments

WASHINGTON, D.C. (September 18, 2020)—The Office of Inspector General (OIG) of the Department of Health and Human Services conducted an audit to determine whether the Centers for Medicare & Medicaid Services (CMS) ensured that MACs and QICs reviewed appealed extrapolated overpayments consistently and in a manner that conforms with existing CMS requirements.

The OIG concluded that the MACs and QICs were not consistent in reviews on appealed extrapolated overpayments. CMS did not always provide sufficient guidance and oversight to ensure that these reviews were performed in a consistent manner. The most significant inconsistency identified involved the use of a type of simulation testing that was performed only by a subset of contractors. The test was associated with at least $42 million in extrapolated overpayments that were overturned in fiscal years 2017 and 2018. If CMS did not intend that the appellate contractors use this procedure, these extrapolations should not have been overturned. Conversely, if CMS intended that appellate contractors use this procedure, it is possible that other extrapolations should have been overturned but were not.

In addition, CMS’s ability to provide oversight over the extrapolation review process was limited because of data reliability issues in the Medicare Appeals System (MAS). Of the 39 appeals cases reviewed that were listed in the MAS as involving extrapolation, 19 cases did not actually involve statistical sampling.

When a program integrity contractor identifies 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 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 recommended the following for which CMS agreed to take action.    

1. 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; 
2. Take steps to identify and resolve discrepancies in the procedures contractors use to review extrapolations during the appeals process; 
3. Provide guidance regarding the organization of extrapolation related files that must be submitted in response to a provider appeal; 
4. Improve system controls to reduce the risk of contractors incorrectly marking the extrapolation flag field in the MAS; and
5. Update the information in the 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.

—VIA NAHC