Overpayments: Extrapolate overpayments

Q. How deeply do I need to investigate potential problems?
Tuesday, June 21, 2016

A. My last column explained CMS’s final rule clarifying the 60-day rule, which allows a supplier up to six months to quantify an overpayment once it’s identified. Once the supplier quantifies the overpayment, it has 60 days to report and refund the overpayment. However, there is little, if any, guidance on how in-depth an investigation must be to quantify the scope of an overpayment.

Take the following hypothetical: A supplier has a sales representative in each of the five states it conducts business. The supplier’s billing department receives an anonymous tip that one of its reps has falsified a physician’s signature on at least one order. The supplier reviews the order referenced in the anonymous tip and determines that the physician’s signature was falsified. The rep admits falsifying the signature. The supplier terminates the rep, and reports and refunds the overpayment associated with the one falsified order.

This hypothetical exemplifies a situation where the supplier thought it acted properly. However, CMS would likely think otherwise.

It is insufficient for a supplier to report and refund the one claim identified by the anonymous tip.  The supplier is required to investigate the allegations in order to quantify the overpayment. The final rule requires suppliers to investigate and quantify the overpayment for the prior six years.  In this hypothetical, it is likely impossible to review all claims from the tainted rep for falsified signatures from the prior six years. In cases like this, CMS allows the supplier to use statistical sampling to extrapolate the overpayment. CMS considers an extrapolation proper if it is two-sided, with a 90% confidence level, and a +\- precision of 25%. hme

Josh Skora is an attorney with Brown & Fortunato. Reach him at jskora@bf-law.com.