Friday, December 31, 2004

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with Kelly Pickens

Q. The DMERC recently performed an audit for services that my company performed over two years ago. May the DMERC use extrapolation to collect an overpayment that exceeds the amount of reimbursements that my company received for the audit sample?

A. Historically, the DMERCs were supposed to use a statistically valid random sample to determine the number of claims reimbursed during a specific time period that do not satisfy Medicare’s payment criteria. The DMERC was then supposed to use mathematically-precise extrapolation to project the amount of total overpayments made to the provider during the specific time period. Unfortunately, a small amount of errors often led to a large overpayment determination as a result of the extrapolation process. A few providers had even been requested to pay overpayments in amounts greater than their Medicare reimbursements during the specific time period in question.

There is good news for providers. The Medicare Modernization Act (MMA) no longer permits the DMERCs to overzealously apply extrapolation. For statistically valid random samples initiated after Dec. 8, 2003, the DMERCs may only apply extrapolation when CMS has determined that there is a sustained or high level of payment error; or has documented that education intervention has failed to correct the payment error. While it remains to be seen how CMS will determine the existence of a “sustained” or “high level” of payment error, this new law will prevent the DMERCs from the random and inappropriate use of extrapolation to determine overpayment amounts. Therefore, suppliers should no longer accept overpayment requests using extrapolation without a fight.

Kelly Pickens is an attorney with the Health Law Center. Contact her at