Liles Parker PLLC
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Can a ZPIC Extrapolate the Alleged Damages in a Medicare Claims Audit?

Can a ZPIC Extrapolate the Alleged Damages in a Claims Audit?(July 12, 2010):  Can a ZPIC extrapolate the alleged damages in a case.  If the ZPIC’s statistical methodology is properly handled, the extrapolation of alleged damages can be a surefire way of destroying a provider’s practice.  We’ve known it for years and yet the government’s passion for statistical sampling only seems to be growing.  This makes it essential for providers to involve experienced counsel as soon as possible after the audit has been conducted.  Over the last decade, Liles Parker attorneys have noted a marked increase in the prevalence of extrapolated damages.  Rather than assume that the contractor’s calculations are correct, we have aggressively challenged their use of statistical sampling in Medicare overpayment audits.

“Extrapolation” is the process of using statistical sampling in a review to calculate and project (extrapolate) alleged overpayments made in connection with Medicare claims.  Basically, ZPICs seek out errors in an alleged “statistically relevant sample” of the provider’s Medicare claims and then calculate and apply the “error rate” to the entire universe of claims covering a given period of time.  This long-standing practice allows ZPICs to grossly inflate the monetary demands on their audit targets while avoiding actually reviewing each of the Medicare claims in the universe for which they are seeking recoupment or offset.

The practice dates back twenty years to a decision by the Secretary of Health and Human Services (HHS) to authorize the use of statistical sampling in lieu of engaging in onerous claim-by-claim reviews.   In Chaves County Home Health Services v. Sullivan, 931 F.2d 914 (D.C. Cir. 1991), the district court upheld extrapolation as being within the Secretary’s discretion.

In 2003, after years of protest, physicians groups and others succeeded in convincing Congress to place some limitations on the use of extrapolation.  Under Section 935 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), before an auditor can employ extrapolation, there must be either a determination of a sustained or high level of payment error, or documentation that educational intervention has failed to correct the payment error.  While this keeps the door to challenging an extrapolation open, ZPICs and PSCs now regularly participate in ALJ hearings in order to defend their use of statistical sampling.

Over the years, Liles Parker has worked with a number of the best statisticians in the country, challenging the extrapolation and having it invalidated at either the Qualified Independent Contractor (QIC) level or at hearing before an Administrative Law Judge (ALJ).  If your practice or clinic is audited by a ZPIC, PSC or RAC,we strongly recommend that you engage experienced legal counsel to represent your interests during this complex process.

Read more on the ZPIC process here.

Health Care AttorneyShould you have any questions regarding these issues, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.

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