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F.  4. c.       Extrapolation.


Follow the procedures found in PIM 3.10 and Exhibits 9-12, as well as MMA Section 935(a), regarding the use of extrapolation.


The permanent RACs will receive their full contingency fee for all claims determined through the extrapolation process to have been overpaid. Demonstration RACs also had the authority to use extrapolation, but did not do so.


What is Extrapolation?


Extrapolation is the use of statistical sampling to calculate and project (i.e., extrapolate) overpayment amounts to be recovered by recoupment, offset or otherwise. As stated in Program Integrity Manual (PIM) 3.10, RACS (and other Medicare/Medicaid review organizations) “shall use statistical sampling when it has been determined that a sustained or high level of payment error exists, or where documented educational intervention has failed to correct the payment error. A sustained or high level of payment error may be determined to exist through a variety of means, including, but not limited to:


  • error rate determinations by (Medicare Review) MR unit,
  • Program Safeguard Contractor (PSC), Zone Program
  • Integrity Contractors (ZPIC) or other areas
  • probe samples
  • data analysis
  • provider/supplier history
  • information from law enforcement investigations allegations of wrongdoing by a provider or supplier’s current or former employees audits or evaluations conducted by the OIG


Once a determination has been made that statistical sampling may be used, factors also to be considered for determining when to use statistical sampling for overpayment estimation over a claim-by-claim review include, but are not limited to:


  • the number of claims in the universe
  • the dollar values associated with those claims
  • available resources
  • the cost effectiveness of the expected sampling results”


How Does Extrapolation Work?

In order to determine sample size and selection methodology, a RAC must use the services of a qualified statistician. The sampling methods used must be well documented.


Once sample size and selection methodology are determined, selected records will be requested from the provider and reviewed by a RAC staff member. After the review, the RAC will calculate the average per-claim overpayment amount in the sample. This amount then will be multiplied by the number of claims in the review population to determine the total overpayment amount.


For example, if there were 1,000 claims of a particular type, the RAC might select a sample of 100 claims at random. The review of the claims and any associated documentation (e.g. medical records) might result in an overpayment finding of $200 per claim, on average. In this example, the RAC then would multiply $200 by the 1000 claims to determine that the provider received a total of $200,000 in overpayments. This finding would be reported to the provider in the form of a demand letter.


Will I know if Extrapolation is being used?

According to PIM 3.10 “the provider or supplier is not always notified before the start of the review.”


After the review is completed, the provider will receive a demand letter that will include information about the review, the amount of overpayment and the statistical sampling methodology that was used.


Can I appeal?


Yes. The provider may appeal the statistical methodology used to determine sample size as well as the sample selection. It also can appeal the rationale for the determination of the overpayment and even the application of the statistical finding to the entire population.


About the Author


Cheryl Servais has more than 25 years of experience in Health Information Management. In her position at Precyse Solutions, Ms. Servais’ responsibilities include planning, designing, implementing and maintaining corporate-wide compliance programs, policies and procedures, and updating them to accommodate changes in federal and other regulations. In addition, she oversees training and development programs related to ethics, compliance and patient privacy; develops and chairs compliance and privacy advisory committees at the Executive and Board levels; and takes an active role in professional organizations.


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