Always challenge the extrapolation.
It is my opinion that extrapolation is used too loosely in healthcare audits. What I mean is that sample sizes are usually too small to constitute a valid representation of the provider’s claims. Say a provider bills 10,000 claims. Is a sample of 50 adequate?
In a 2020 case, Palmetto audited 0.0051 percent of claims by Palm Valley Health Care of Edinburgh, Texas. Palm Valley challenged the Centers for Medicare & Medicaid Services (CMS) sample and extrapolation method (Palm Valley Health Care, Inc. v. Azar).
As an aside, I had two back-to-back extrapolation cases recently. The provider, however, did not hire me until the administrative law judge (ALJ) level – or the third level of Medicare provider appeals. Unfortunately, no one argued that the extrapolation was faulty at the first two levels. We had two different ALJs, but both ALJs ruled that the provider could not raise new arguments (i.e. that the extrapolation was erroneous) at the third level. They decided that all arguments should be raised from the beginning. This is just a reminder to a) raise all defenses immediately, and b) don’t try the first two levels without an attorney.
Going back to Palm Valley
The 5th Circuit Court of Appeals held that while the statistical sampling methodology may not be the most precise methodology available, the CMS selection methodology did represent a valid “complex balance of interests.” Principally, the court noted, quoting the Medicare Appeals Council, the CMS methodology was justified by the “real-world constraints imposed by conflicting demands on limited public funds,” and Congress had envisioned extrapolation being applied to calculate overpayments in instances like this.
I disagree with this result. I find it infuriating that auditors such as Palmetto can scrutinize providers’ claims yet circumvent similar accountability. They are being allowed to conduct a “hack” job at extrapolating, to the financial detriment of the provider.
Interestingly, the Palm Valley 5th Circuit decision was rendered in 2020. The dates of service of the claims Palmetto audited were July 2006-January 2009. It just shows how long the legal battle can be in Medicare audits. Also, Palm Valley’s error rate was 53.7 percent. Remember, in 2019, CMS revised the extrapolation rules to allow extrapolations in 50-percent-or-higher error rates. If you want to read the extrapolation rules, you can find them in Chapter 8 of the Medicare Program Integrity Manuel (MPIM).
During a recent Monitor Mondays broadcast, healthcare attorney David Glaser mentioned that there is a difference between arguments versus evidence. While you cannot admit new evidence at the ALJ level, you can make new arguments.
He and I agreed, however, even if you can dispute the extrapolation legally, a statistical report would not be allowed as new evidence – so these are important to submit.
Lastly, 42 CFR 405.1014(a)(3) requires the provider to assert the reasons the provider disagrees with the extrapolation in the request for an ALJ hearing.
Programming note: Listen to healthcare attorney Knicole Emanuel’s live RAC Report, Mondays on Monitor Mondays, 10 a.m. EST.
While attending the Florida Compliance and Privacy Consortium meeting, I was asked an excellent question. What if a patient who is ready for discharge from
External audit volume more than doubled in 2024 over 2023, while total at-risk dollars increased fivefold to $11.2 million, according to a report outlining a
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