When numbers are drawn out by healthcare auditors and red flags wave

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Elizabeth Leis Newman
Elizabeth Leis Newman

The takeaway in a story last week about extrapolation and Medicare overpayments is, natch, how meticulous providers should be when filing claims — and to understand how individual claim problems can grow.

But to understand why John Balko & Associates (also known as Senior Healthcare Associates) owes $641,437 back to the government requires spending some time with math.

Extrapolation is a statistical method where people look at patterns in a small sample of data and infer similar patterns in larger amounts of data. An example would be if we took 100 McKnight's readers and asked them to choose which types of articles they would like to read from a list of five choices. Then we could extrapolate the data to make assessments about our 43,000-plus readers, and decide what they were likely to read.

Balko's argument is that extrapolation can only be done by a Medicare contractor that first finds a high error rate. The company said SafeGuard, the contractor, violated this rule by using an 81-patient sample, and around 581 claims, for the dual purpose of calculating a high error rate and extrapolating the amount of overpayment. It would be along the lines of you saying to me, “How do I know if your 100 McKnight's readers were all CEOs? Why are you basing the magazine on what those people say?”

The problem in this case for Balko is that SafeGuard complied with all the rules, according to the courts. Balko bore “a heavy burden of showing that the sample was statistically invalid and not merely that ‘another statistician might construct a different or more precise sample,'” according to the U.S. Court of Appeals, Third Circuit. Ultimately it wrote it was “unpersuaded” by Balko's arguments, and was compelled to “conclude that there is substantial evidence supporting the Secretary's [Kathleen Sebelius] decision.”

We have no idea if Balko was ultimately right and the verdict is unjust. But as the court documents lay out, in early 2008, SafeGuard noticed Balko was “the highest-paid provider rendering services to residents at nursing homes in Pennsylvania, and appeared to be providing certain services on a scheduled, periodic basis not eligible for Medicare payment.”

The contractor was particularly concerned about services related to podiatry, audiology and optometry, which I suspect for many of you also would raise red flags. Auditors, and surveyors for that matter, are often looking for patterns, and it's up to you to determine if you're far outside the norm.

There are justifiable reasons providers dislike auditors and Medicare contractors, and absolutely there are cases where a long-term care provider should push back when told it owes repayments. In 2011, a physician combatting alleged overpayments was ultimately determined to be liable only for overpayments on individual claims because “due to errors and discrepancies in the conduct of the sampling and subsequent potential data errors, the [Medicare Appeals] Council invalidates the extrapolation.”

But overall, it's best to know that adequately performed extrapolation can be used to determine the high rate of provider claim error and the amount of overpayments that are due back. Use that to your advantage to make sure your documentation and claim filing is up to snuff.

Elizabeth Newman is the Senior Editor at McKnight's Long-Term Care News. Follow her @TigerELN.

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Daily Editors' Notes

McKnight's Daily Editor's Notes features commentary on the latest in long-term care news. Entries are written by Editorial Director John O'Connor on Monday and Friday; Staff Writer Tim Mullaney on Tuesday, Editor James M. Berklan on Wednesday and Senior Editor Elizabeth Newman on Thursday.

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