An OIG Report Finds Inconsistency by MACs in Reviewing Medicare Extrapolated Overpayments

The U.S. Department of Health and Human Services Office of Inspector General (OIG) has recently issued a report regarding overpayment reviews by Medicare Administrative Contractors (MACs). The OIG’s report determined that MACs have been inconsistent in reviewing extrapolated overpayments during the provider appeals process. These inconsistencies have resulted in at least $42 million in extrapolated overpayments being overturned from 2017-2018.

By way of background, when a provider is deemed to have been overpaid by Medicare Part A or B, the provider has the right to contest the overpayment amount through the Medicare administrative appeals process. Note that an overpayment does not need to be specifically determined down to the dollar amount. Rather, a statistical estimate of an overpayment  (i.e., an extrapolated overpayment) can be calculated based on statistical sampling. Statistical sampling involves reviewing a subset of a provider’s claims from a larger population to form an estimate of any overpayment for the entire population. The Medicare Program Integrity Manual has specific requirements that the extrapolation process must adhere to, in order to ensure fairness.

The OIG conducted this report to determine whether CMS was ensuring that MACs and qualified independent contractors (QICs) were reviewing extrapolated overpayments consistently and in conformity with CMS requirements. The OIG found that while MACs did typically conform to CMS requirements for reviewing overpayments, they did not conduct their reviews consistently. The OIG found that there were numerous procedures that were not performed consistently amongst the MACs and QICs performing reviews. For example, the OIG found the following procedures were not performed consistently: determining whether construction of the sampling frame could be replicated, determining whether the statistician that approved the sampling methodology had sufficient experience, and reviewing the reason why the sampling was used.

Note that the OIG did not determine that the MACs and QICs were utilizing incorrect review procedures. Rather, the OIG found inconsistencies in the review process which has led to inconsistent results and ultimately overturned overpayment determinations.

As a result of their findings, the OIG made several recommendations to CMS to ensure consistency between MACs and QICs in future reviews. First, the OIG recommends CMS providing additional guidance to ensure reasonable consistency in which procedures the contractors should all be utilizing. Second, identify and resolve discrepancies in the contractors’ current procedures. Third, provide guidance regarding the types of extrapolation-related files that must be submitted in response to a provider appeal. Fourth, the Medicare Appeals System (MAS) must be updated to be more accurate and reliable.

For more information, please contact Jessica L. Gustafson, Esq. or Abby Pendleton, Esq. at (248) 996-8510 or (212) 734-0128.