Whenever there is an extrapolated audit, we tend to attack it on two fronts. We hire an expert statistician to debunk the extrapolation, and a clinical expert will testify to the compliance clinically.
This two-fold attack has been successful throughout the years, mostly, I believe, because on the government side, their work is – how can I say it? Sloppy. I remember back in 2013, when I had one of many New Mexico clients. One of the clients was accused of owing over $12 million. The amount was extrapolated. On the stand during cross-examination, on behalf of the State of New Mexico, the assistant attorney general testified that he had conducted the extrapolation and that he was qualified, in his opinion, because he took a statistics course in college. We won.
Most extrapolations use the RAT-STATs model. I am no statistician. But I do know that most of the Centers for Medicare & Medicaid Services (CMS) provider extrapolations use RAT-STATs, which is a computer simulation that determines extrapolations. I actually assumed that RAT-STATs was a legally required simulation. I mean, if you are going to implement financial penalties against providers, shouldn’t the method be identical in all cases? These extrapolations declare a 90 or 95-percent confidence level, not 100 percent.
Two new extrapolation cases came in earlier this year. Both extrapolations used the Monte Carlo simulation, which I had not encountered previously. Obviously, I did some digging. A simple Google search will offer you a free two-week trial.
I turned to the regulations. It appears that no particular model is required for calculating overpayment extrapolations, but RAT-STATS is recommended by OIG.
Through my research, I discovered that our friend and frequent guest panelist of Monitor Mondays, Frank Cohen, had discussed the Monte Carlo simulation on RACmonitor back in 2021. He said that a small subset of Medicare Administrative Contractors (MACs) and Qualified Independent Contractors (QICs) were using the Monte Carlo simulation. But he also reported that $41.5 million of the $42 million involved in the Monte Carlo simulations were reversed due to its use. That tells me that the Monte Carlo method may not have a 90-percent confidence rate.
I phoned a friend – Sean Weiss, an expert in Medicare and Medicaid audit and extrapolations. He informed me that the Monte Carlo simulation method is basically a joke. Any auditor worth its salt would use RAT-STATs. So, why did these two recent audits of mine use Monte Carlo? I do not know yet, but will find out and report back.
As I said, OIG recommends RAT-STATs. If you visit OIG’s website, it says this of RAT-STATs:
“RAT-STATS is a free statistical software package that providers can download to assist in a claims review. The package created by OIG, in the late 1970s, is also the primary statistical tool for OIG’s Office of Audit Services.” (Did you know RAT-STATs was created by OIG? News to me!)
It goes on to note that among other tasks, the software “assists the user in selecting random samples and estimating improper payments. We have attempted to make RAT-STATS as user-friendly as possible, keeping in mind the program uses technical statistical terms. OIG does not provide technical support for RAT-STATS.”
Then, most importantly, it notes that although OIG does not require the use of RAT-STATS, many providers download the software in their efforts to fulfill the claims review requirements for corporate integrity agreements or provider self-disclosure protocols.
RAT-STATs versus Monte Carlo. I do not know the winner yet.
Programming note: Listen to healthcare attorney Knicole Emanuel’s “RAC Report” segment every Monday on Monitor Mondays with Chuck Buck.
EDITOR’S NOTE: The author of this article used AI-assisted tools in its composition, but all content, analysis, and conclusions were based on the author’s professional
Let me start with the two big news items. First, Nina Youngstrom, the editor of the Report on Medicare Compliance, actually got a response from
Please log in to your account to comment on this article.
Accurately determining the principal diagnosis is critical for compliant billing, appropriate reimbursement, and valid quality reporting — yet it remains one of the most subjective and error-prone areas in inpatient coding. In this expert-led session, Cheryl Ericson, RN, MS, CCDS, CDIP, demystifies the complexities of principal diagnosis assignment, bridging the gap between coding rules and clinical reality. Learn how to strengthen your organization’s coding accuracy, reduce denials, and ensure your documentation supports true medical necessity.
Denials continue to delay reimbursement, increase administrative burden, and threaten financial stability across healthcare organizations. This essential webcast tackles the root causes—rising payer scrutiny, fragmented workflows, inconsistent documentation, and underused analytics—and offers proven, data-driven strategies to prevent and overturn denials. Attendees will gain practical tools to strengthen documentation and coding accuracy, engage clinicians effectively, and leverage predictive analytics and AI to identify risks before they impact revenue. Through real-world case examples and actionable guidance, this session empowers coding, CDI, and revenue cycle professionals to shift from reactive appeals to proactive denial prevention and revenue protection.
Sepsis remains one of the most frequently denied and contested diagnoses, creating costly revenue loss and compliance risks. In this webcast, Angela Comfort, DBA, MBA, RHIA, CDIP, CCS, CCS-P, provides practical, real-world strategies to align documentation with coding guidelines, reconcile Sepsis-2 and Sepsis-3 definitions, and apply compliant queries. You’ll learn how to identify and address documentation gaps, strengthen provider engagement, and defend diagnoses against payer scrutiny—equipping you to protect reimbursement, improve SOI/ROM capture, and reduce audit vulnerability in this high-risk area.
Only ICD10monitor delivers what you need: updates on must-know changes associated with the FY26 IPPS, including new ICD-10-CM/PCS codes, CCs/MCCs, and MS-DRGs, plus insights, analysis and answers to your questions from two of the country’s most respected subject matter experts.
As AI reshapes healthcare compliance, the risk of biased outputs and opaque decision-making grows. This webcast, led by Frank Cohen, delivers a practical Four-Pillar Governance Framework—Transparency, Accountability, Fairness, and Explainability—to help you govern AI-driven claim auditing with confidence. Learn how to identify and mitigate bias, implement robust human oversight, and document defensible AI review processes that regulators and auditors will accept. Discover concrete remedies, from rotation protocols to uncertainty scoring, and actionable steps to evaluate vendors before contracts are signed. In a regulatory landscape that moves faster than ever, gain the tools to stay compliant, defend your processes, and reduce liability while maintaining operational effectiveness.
Get clear, practical answers to Medicare’s most confusing regulations. Join Dr. Ronald Hirsch as he breaks down real-world compliance challenges and shares guidance your team can apply right away.
Federal auditors are zeroing in on Inpatient Rehabilitation Facility (IRF) and hospital rehab unit services, with OIG and CERT audits leading to millions in penalties—often due to documentation and administrative errors, not quality of care. Join compliance expert Michael Calahan, PA, MBA, to learn the five clinical “pillars” of IRF-PPS admissions, key documentation requirements, and real-life case lessons to help protect your revenue.
During this essential RACmonitor webcast Michael Calahan, PA, MBA Certified Compliance Officer, will clarify the rules, dispel common misconceptions, and equip you with practical strategies to code, document, and bill high-risk split/shared, incident-to & critical care E/M services with confidence. Don’t let audit risks or revenue losses catch your organization off guard — learn exactly what federal auditors are looking for and how to ensure your documentation and reporting stand up to scrutiny.
Happy National Doctor’s Day! Learn how to get a complimentary webcast on ‘Decoding Social Admissions’ as a token of our heartfelt appreciation! Click here to learn more →
CYBER WEEK IS HERE! Don’t miss your chance to get 20% off now until Dec. 1 with code CYBER25
CYBER WEEK IS HERE! Don’t miss your chance to get 20% off now until Dec. 2 with code CYBER24
