Tag Archives: M.D.

The Famous HCFA Ruling 86-1 — Hospital Insurance and Supplementary Medical Insurance Benefits (Parts A and B) Use of Statistical Sampling to Project Overpayments to Providers and Suppliers

The HCFA Ruling 86-1 is one of the most frequently-quoted pieces of law.  For example, it is one of the key rulings in Chaves County Home Health Service, Inc., et al., v. Louis W. Sullivan, M.D. 931 F.2d 914 (April 26, 1991).

So we thought we would reproduce the ruling here, but with only the portions that deal specifically with statistical sampling and extrapolation.

HCFAR 86-1-1

MEDICARE PROGRAM

Hospital Insurance and Supplementary Medical Insurance Benefits (Parts A and B) Use of Statistical Sampling to Project Overpayments to Providers and Suppliers

HCFAR 86-1

Purpose: HCFA and its Medicare contractors may use statistical sampling to project overpayments to providers and suppliers when claims are voluminous and reflect a pattern of erroneous billing or overutilization and when a case-by-case review is not administratively feasible.

. . . As result of a subsequent audit of the provider’s Medicare claims, the intermediary discovered a large number of bills for medically unnecessary services. . . . The cost of identifying and calculating each individual overpayment itself would constitute a substantial portion of the amount the intermediary might reasonably be expected to recover. . . .

The intermediary notified the provider that, because of the volume of records and the costs of retrieving and reviewing all records for the period as discussed above, it intended to project the overpayment by reviewing a statistically valid sample of beneficiary records and that if it were determined that the provider had been overpaid for the sample cases, it would project the results (again using statistically valid methods) to the entire population of cases from which the sample had been drawn. This would result in a statistically accurate estimate of the total amount the provider had been overpaid for services to these beneficiaries.

[Next are the complaint items filed by the health care provider.]

The provider objected to the intermediary’s use of sampling to project the overpayment on the following grounds:

1. There is no legal authority in the Medicare statute or regulations for HCFA or its intermediaries to determine overpayments by projecting the findings of a sample of specific claims onto a universe of unspecified beneficiaries and claims.

2. Section 1879 of the Social Security Act, 42 U.S.C. 1395pp, contemplates that medical necessity and custodial care coverage determinations will be made only by means of a case-by-case review.

3. When sampling is used, providers are not able to bill individual beneficiaries not in the sample group for the services determined to be noncovered.

4. Use of a sampling procedure violates the rights of providers to appeal adverse determinations.

5. The use of sampling and extrapolation to determine overpayments deprives the provider of due process.

(The succeeding presentation of our decision and supporting facts is applicable also to the use of sampling to project overpayments to suppliers (including physicians) whose claims are processed by Medicare carriers when 100 percent readjudication would be excessively costly or impractical.)

The Supreme Court has long recognized that the Federal Government possesses an inherent right to recover monies illegally or erroneously paid out. . . . The Government’s common law right of recoupment, and its corollary power of recovery by offset, are based on strong considerations of public policy. . . . The common law right to recover Federal funds has been specifically recognized as being fully applicable to the Medicare program. . . . Congress has affirmed the Government’s right to recover Medicare Trust Funds by reasonable means from those who have no right to retain them. . . .

[Next, the ruling makes the “administrative burden” argument.]

Since HCFA’s contractors process vast numbers of Medicare claims . . . A case-by-case review could require a significant diversion of staff from the ongoing claims process, and the cost of determining the amount of an overpayment would be prohibitively high unless a sampling method were used. . . .

We also do not believe that the statutory provisions limiting provider or beneficiary liability preclude the use of sampling.. . .

The use of sampling to determine overpayments for medically unnecessary services or custodial care does not deprive a provider of its right to bill those beneficiaries who knew or should have known that they were receiving these services. . . .

[There are also “public policy” used to justify sampling.]

As between the provider and the Government, strong considerations of public policy favor recovery.. . .

[Next, the famous shifting of the burden of proof is explained.]

Sampling does not deprive a provider of its rights to challenge the sample, nor of its rights to procedural due process. Sampling only creates a presumption of validity as to the amount of an overpayment which may be used as the basis for recoupment. The burden then shifts to the provider to take the next step. The provider could attack the statistical validity of the sample, or it could challenge the correctness of the determination in specific cases identified by the sample (including waiver of liability where medical necessity or custodial care is at issue). . . . If certain individual cases within the sample are determined to be decided erroneously, the amount of overpayment projected to the universe of claims can be modified. If the statistical basis upon which the projection was based is successfully challenged, the overpayment determination can be corrected.

The provisions of the statutes and regulations provide a constitutionally sufficient means by which the provider may challenge an overpayment determination. In cases of denials made through sampling which are based on medical necessity or custodial care, section 1879 of the Act, 42 U.S.C. 1395pp, permits the provider to assert the same appeal rights that an individual has under the statute when the individual does not exercise his rights to appeal. Under Part A, these rights include an opportunity for reconsideration (42 CFR 405.710- 405.716), an oral evidentiary hearing by an administrative law judge (42 CFR 405.720-405.722), Appeals Council review (42 CFR 405.701(c) and 405.724), and finally judicial review if the amount in controversy is $1,000 or more (42 CFR 405.730; 42 U.S.C. 139 5ff (b)(2)). In cases that do not involve medical necessity or custodial care, 42 CFR 405.370, et seq. sets out the applicable procedures through which current payments may be suspended (offset) to recover an overpayment under the Medicare program. . . .

In summary, the use of sampling is a reasonable and cost effective method of projecting overpayments under Medicare. It is not unfair to a provider or supplier to hold it accountable for the receipt of Medicare funds to which it is not entitled under the statute. . . .

Ruling: Accordingly, it is held that the use of statistical sampling to project an overpayment is consistent with the Government’s common law right to recover overpayments, the Medicare statute, and the Department’s regulations, and does not deny a provider or supplier due process. Neither the statute nor regulations require that a case-by-case review be conducted in order to determine that a provider or supplier has been overpaid and to determine the amount of overpayment.

Effective date: This Ruling is effective February 20, 1986.

In Statistical Extrapolations, “Precision Not Required” by Medicare Appeals Council (MAC)

The case of Michael King, M.D. and Kinston Medical Specialists, P.A. before the Department of Health and Human Services, Departmental Appeals Board, Medicare Appeals Council (MAC), Docket M-10-321 offers one of the most distressing cases of acceptance of an unreliable statistical extrapolation.

MAC_King_Case.001

 Of particular note in this case is how the precision changed as the case moved from the original sampling through the Qualified Independent Contractor QIC reconsideration until after the Administrative Law Judge (ALJ) decision.

MAC_KING_PRECISION.001Another way to see this is to examine the range of precision allowed by the MPIM and that accepted in this case by the MAC.

MAC_KING_PRECISION_RANGE.001At Barraclough, we have been involved in a number of Medicare appeals, and unfortunately, we must report to you that this case is not atypical.

In our view, the type of statistical work routinely accepted by the Medicare Appeals Council (MAC) does not meet Federal Evidence Standards Rule 702Testimony by Expert Witnesses“.

A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if:

(a) the expert’s scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;

(b) the testimony is based on sufficient facts or data;

(c) the testimony is the product of reliable principles and methods; and

(d) the expert has reliably applied the principles and methods to the facts of the case.

So here is our question:  Is =/- 40% a case of “reliably applied”?

 

The Case of John Sanders, M.D. – Medicare Appeals Council (MAC) Throws Out Extrapolation

This is a case in which the extrapolation was thrown out.

Here, the Medicare Appeals Council agreed with the “determination that the sampling was sufficiently flawed to preclude calculation of an overpayment by extrapolation”.

Although the appellant had made a number of arguments attacking the statistical extrapolation, the MAC relied on two errors in throwing out the extrapolation:

“The errors are: 1) the PSC provided the independent statistical expert with sample data which assigned some claims to the wrong stratum; and 2) the PSC provided the independent expert with a second CD containing an Excel set of sample data with significant discrepancies from the first set of data, and the PSC was unable to clarify the discrepancies, to identify which set of data was applicable, or to explain the significance of the second set of data.”

This provides at least three check points when providing litigation support to a health care provider:

First, always have the statistical expert carefully check that all claims in any strata strictly fit the definition of the strata;

Second, look for any instance in which inconsistent records have been handed over by the contractor; and

Third, demand detailed explanations from the contractor for each and every inconsistency found in the data.

The case is: In the case of John Sanders, M.D. (May 12, 2011). Medicare Appeals Council (MAC).

Unfortunately, it has been our experience at Barraclough that these arguments do not always result in an extrapolation being thrown out.   Rulings are inconsistent with each other – sometimes this argument works, sometimes it does not.