Tag Archives: Medicaid Audit

Corporate Integrity Agreements are on the Rise

Corporate Integrity Agreements

A Corporate Integrity Agreements (CIA) is a document that outlines the obligations a health care provider agrees to as part of a civil settlement.

The provider agrees to the CIA obligations in exchange for the Office of Inspector General (OIG) agreement that it won’t seek to exclude the provider from participation in Medicare, Medicaid or other Federal health care programs. The OIG is part of the Department of Health & Human Services.

CIAs are put in place at the discretion of the OIG, and are designed to get a provider back on the path of compliance.

As shown in the figure below, the number of CIAs has increased steadily.  In a 5 year period (2009 to 2014), the number of CIAs has increased more than 10 times.

Why Does a CIA Happen?

In a typical scenario, a provider has been audited and found to be afoul of various OIG regulations. The provider has then been forced to make a repayment of faulty claims and also possibly suffer a Civil Money Penalty (CMP).  CMPs can be a fine of up to $10,000 per claim.

What Relief Does a CIA Offer?

In many cases, adopting an integrity agreement has been the only way to stay in business.  The alternative is a suspension of the right to do business with the Federal Government.

If this happens, the provider is cut off of Medicare and also Medicaid.  Their name is placed on a “do not do business with” list, and for all practical purposes, this means the end of their medical business.

CIAs and the Health Care Provider Obligation

CIAs place a heavy burden on the health care provider, and failure to comply with the terms brings heavy penalties.

Among the more popular components of a CIA are:

  1. Mandatory hiring of a permanent compliance officer;
  2. Written standard operating procedures for all activities;
  3. Extensive training and education activities for all employees;
  4. Hiring an Independent Review Organization (IRO) to double-check filed claims;
  5. Detailed retention of records (liable to inspection);
  6. Systematic claims review and validation;
  7. Numerous mandatory disclosures that includes tracking of excluded service providers; and
  8. A number of annual reports and certifications.

What Barraclough Interviews Reveal about a CIA

Our interviews indicate that providers which need to set up a CIA face a number of hurdles.

  • The most significant complaint is the cost and complexity of putting everything into place and the inherent difficulty of designing the mandatory procedures that must be completely documented.
  • This is done with a combination of legal expertise, feedback from the IRO, and use of consultants. None are particularly cheap, but the provider has no choice.

There is no standard CIA.  Each one is customized to fit the particular circumstances of the provider.

Although there are a number of predictable complaints as the CIA is being put in place, our interviews reveal that after a time, the health care provider comes to appreciate its protection against further audits.

Please contact Barraclough Health (email to info@barracloughllc.com)  for further information on CIAs.

Number of CIA Agreements

Texas Medicaid Claims Extrapolation: In the News

Medicaid Extrapolation Reform

Texas:  $16,000,000 Extrapolation Reduced to $39,000 Because of Faulty Extrapolation – OIG Employee Fired – Investigation Reveals Massive Falsification of Data and Invalid Statistical Methodology

According to the Texas Dentists for Medicaid Reform (TDMR), “the new Health and Human Services Commission Inspector General Stuart Bowen, Jr. has been taking on and overhauling the agency’s use of statistical sampling and extrapolation. This is the most controversial tool that the agency had been using to demand multi-million dollar settlements from Medicaid providers under investigation.”

The Termination Letter

According to the termination letter [http://www.tdmr.org/wp-content/uploads/140728-Brad_Nelson_Termination_Letter.pdf] against the OIG employee:

  • The seed value in the statistical tool “actually did not generate the stratified sample embedded in that tool”.
  • Investigators found a hidden spreadsheet with embedded macros that would over-write any “incorrect sample”.
  • The OIG falsified a sheet that stated the sample was created by the software tool.

After a detailed investigation, the OIG employee “admitted . . . that [he] falsified the sample” and “had not reviewed the sample before sending it”.

Weeding out some bad apples in Medicaid Claims Extrapolation who have overcharged dentists for years, the Human Services Commission Inspector General  has instituted new extrapolation rules, and is settling older cases as well.

For more on the importance of extrapolation, and how dangerous the wrong extrapolation can be to Medicare and Medicaid claims, see New Inspector General Overhauling Agency Use of Statistical Extrapolation and Settling Cases.

We at Barraclough are sad to say that what happened in Texas is not as uncommon as you think.   Here the only difference is that it was exposed.

We often find serious methodological problems, including use of wrong formulas, and falsification of data.   You just need to know where to look.   Barraclough knows where to look.

Don’t Mess With Texas!

Avoiding RAC/MIC Appeal Extrapolation Mistakes

In previous blogs we have explained the importance of using Statistical Extrapolation  to win your RAC or MIC appeals.

Here are the top five things to avoid in order to overturn the statistical extrapolation.

DO NOT Base your extrapolation argument on a sample size that is too small

Although it is true that in most cases, the sample size used is too small, this argument alone generally will not prevail in the appeal.

  • What often happens is that the trier of fact will simply verify if the  evidence that the statistical methodology used was generally consistent with the Medicare Program Integrity Manual (MPIM).
  • There is an unfortunate passage in the MPIM which states that any sample size can be valid as long as the underlying methodology is sound.

And the unfortunate result is that the widespread use of poor and inadequate samples in the extrapolation often leads to results not in your favor.

DO NOT Accept print-outs instead of real electronic spreadsheets

It’s common for contractors to send print-outs with tables of data to back up their statistical work.   Don’t accept them for the extrapolation.

  • Try to get the original electronic spreadsheet because this allows you to verify the statistical work, and to see the details of how it was done.
  • It also will allow you to run various tests to determine the quality of the work.

Always use the “best business record” rule to argue for the original sheets.

DO NOT Neglect to obtain the full universe file

Audit Contractors generally select a “frame” from the larger universe of all of your claims.  From this “frame”, they will select their sample for analysis.

  • Without the entire universe file containing all claims you have filed, it’s impossible for you to run several important statistical tests that will help uncover any flaws in the contractor’s statistical work.

DO NOT Accept the argument that poor precision works in your favor for the extrapolation

Poor precision in statistics  is a sign of bad work.   It is often argued that poor precision works in favor of the provider because the lower side of the confidence interval is chosen for the over payment demand number.

  • Using a confidence interval to adjust for poor precision is not good statistics practice.
  • Insist that the contractor meet the Federal precision standards that were published in the Federal Register.

DO NOT Ignore all aspects of the extrapolation’s statistical methodology

The statistical work is much more than simply the sample taking and calculation of the extrapolation.   ALL of it has to be checked.

  • In addition, there are a number of PIM rules that must be complied with.   Check what was done against each and every one of the PIM rules and that they were followed in every detail.

Breaking a single PIM rule is often is overlooked, but if there are a substantial number of violations, then it helps build the case that the statistical work is not to be trusted and the appeal will be decided in your favor.


Winning Medicaid Audit Appeals

Winning Medicaid audit appeals (or MIC audits), often depends on the statistical extrapolation which determines how much you will owe in claims.

Medicaid Audit Appeals are very similar to the process in Medicare, but with some important differences explained here.

As with a Medicare Appeal,  one of the most important parts of the review process is the Medicaid Audit Statistical Extrapolation, which based on the review of a small number of billing claims, is applied to all of your claims for a number of years.

It’s the extrapolation of the error rate of the claims that pushes the amounts so high.

Barraclough’s Litigation Strategy is to show that the extrapolation is incorrect. We disprove the validity of the statistics in your favor, so the amount you owe is either nothing or significantly less than originally asked for.

Please read our previous blog, Winning Medicare Audit Appeals for information on Medicare Appeals and the Barraclough Litigation process.

Medicaid vs. Medicare Audits

Here’s a  comparison between Medicare and Medicaid Audits. It’s important to note that since each State has different regulations, a health care provider may have a better chance of winning an appeal in the Medicaid area than in the Medicare process.

Medicaid and Medicare Audit Differences

Medicaid Chart-JFA Revised 2

The Barraclough Advantage for Winning Medicaid Appeals

Credentials matter in MIC audit appeals because rules apply to expert witnesses, and it is in Medicaid audits that  statistics can really make a difference. Barraclough’s expert team of statisticians is a significant asset in all appeals, but this is particularly true in MIC audit appeals.

Statistical examinations are different for the 50 States. Some States have very specific rules about how the statistics work. Barraclough will meet all of these State statistical requirements.

Local expertise is important since rules differ from State to State the rules regarding statistics and how the audits are done.  Barraclough has worked in many States and has the local knowledge, including the knowledge from previous cases

A strong discovery process is a key in winning a MIC audit appeal. With each State, discovery can be used as a tool to defeat the audit results.

Medicaid Audit Process Background

Medicaid Integrity Contract (MIC) audits are  conducted by private companies under contract to the Medicaid Integrity Group (MIG) of CMS.

MIC audits are contracted by CMS and paid under that contract. This is unlike Medicare RACs which are paid based on the amount of money in improper payments they identify.

Like the Medicare RACs, the  MIC audit utilize sampling and extrapolation. MIC audit sampling and extrapolation decisions take into account the circumstances of the particular audit and the laws and regulations of the State to which the provider submitted its Medicaid claims. Audit look backs are allowed for up to five years.

The MIC audit will use a variety of data during the audit process, including, but not limited to, Medicaid claims data, recipient medical records, and other provider records.

The States are responsible for collecting over payments from providers.

The MIC Audit Process

  • MIC auditors perform field audits and desk audits.
  • The MIC auditor prepares a draft audit report, which is first shared with the State and  then with the provider.
  • The State and the provider each have an opportunity to review and comment on the draft report’s findings. CMS will consider these comments and prepare a revised draft report.
  • CMS allows the State to review the revised draft report and make additional comments. CMS then finalizes the audit report, specifies any identifies overpayment, and sends the final report to the State.

The State will then pursue the collection of any overpayment in accordance with State law. Providers have full appeal rights under State law.

MIC auditors can examine:

  • Provider financial records
  • Client medical records
  • Employee records
  • Provider appointment books
  • Any other applicable records related to services billed to the Department

MIC audits may review claims looking back up to 5 years.

For More Information

Which States Use Extrapolation for Medicaid

A survey by the National Conference of State Legislatures (NCSL) identifies which states use statistical extrapolation for Medicaid Audits.   Here is some of the detail:

States Using Statistical Extrapolation with Medicaid Audits

  1. Connecticut;
  2. Iowa;
  3. Massachusetts;
  4. Nebraska;
  5. New Jersey;
  6. New York;
  7. North Carolina;
  8. Oklahoma;
  9. Oregon;
  10. Washington
  11. Rhode Island may be using extrapolation in the future.

States NOT Using Statistical Extrapolation with Medicaid Audits:

  1. Delaware;
  2. Maryland;
  3. New Hampshire;
  4. Pennsylvania;
  5. Vermont;
  6. West Virginia;
  7. Wisconsin

Under the Affordable Care Act (*) states contract with Recovery Audit Contractors (RACs) to identify under and over-payments and recoup the over-payments.

For Medicaid audits sponsored by the Centers for Medicare and Medicaid Services (CMS), a Medicaid Integrity Contractor (MIC) is used.

Medicaid Integrity Contractors (MMICs) work out of five jurisdictions:

  • New York (CMS Regions I & II)
  • Atlanta (CMS Regions III & IV)
  • Chicago (CMS Regions V & VII
  • Dallas (CMS Regions VI & VIII)
  • San Francisco (CMS Regions IX & X)


(*) Affordable Care Act was passed by Congress and signed into law 23 March 2010.  It was reviewed by the Supreme Court and was upheld.  See USSC, National Federation of Independent Business et al. v. Sebelius, Secretary of Health and Human Services, et al. Syllabus, October, 2011.

New York State Medicaid Audits

The New York State office of the Medicaid Inspector General has an active program of auditing health care providers.   After all of the auditing and consideration process has concluded, then a “final determination” is issued.   Final determinations are defined in Title 18 of the New York Code Rules & Regulations Sec. 519.3(b): “Final determination is a final audit report or notice of agency action sanctioning a person, or requiring the repayment of overpayments or restitution.”BHA_NY_MEDICAID_AUDITS.001Source:  Barraclough NY LLC Analysis.


The graph above shows the number of final determinations for Medicaid audits in New York State from August 2010 until July of 2014.   During this time, there are reports of 3,626 audits.  There is an astonishing range in the number of audits for each sector.   The greatest attention is on Long Term Care, Managed Care, and Hospitals account for 49% of all audits.

Out of the 3,626 audits, only a single Nurse, a single Clinical Psychologist, and single Podiatrist received an audit.

What is the rate of auditing?  That is an auditing rate of around 77 audits per month, or 4 audits per working day in Albany.




Federal Precision Standards for Medicare and Medicaid Statistical Sampling and Extrapolations

As we have seen from other entries to this blog, Recovery Audit Contractors (RACs) operating under the Centers for Medicare & Medicaid ServicesRecovery Audit Program who are involved in conducting Medicare and Medicaid audits of health care providers have been granted an incredible bit of leeway in acceptable standards for their work.   It is not uncommon to see precision that is far more than +/- 20%, and even when the precision is as poor as +/- 49%, the Medicare Appeals Council (MAC) as well as Federal Courts will not throw out the extrapolation.

So the question that arises is this:  Are contractors free to employ any accuracy they wish in their work, or are there standards that have been suggested or published by the Federal Government?

As it turns out, there appears to be some guidance from two sources.

Source One:

In the May 5, 2010, report by the Acting Administrator and Chief Operating Officer of the Centers for Medicare & Medicaid Services (CMS)  On page 3 of that report, the section titled “Precision-level requirements” states:

“[Office of Management and BudgetOMB Circular A-123, Appendix C, states that Federal agencies must produce a statistically valid error estimate that meets precision levels of plus or minus 2.5 percentage points with a 90-percent confidence interval or plus or minus 3 percentage points with a 95-percent confidence interval.”

There is a note in the document: Under these assumptions, the minimum sample size needed to meet the precision requirements can be approximated by the following formula, which is used in the examples:

BLOG_ACCURACY_FORMULA.001Where n is the required minimum sample size and P is the estimated percentage of improper payments (Note: This sample size formula is derived from Sampling of Populations: Methods and Applications (3rd edition); Levy, P. S. & Lemeshow, S. (1999); New York: John Wiley & Sons; at page 74. The constant 2.706 is 1.645 squared.

Source Two:

In the CMS-issued Federal Register, 72 Fed. Reg. 50490, 50495 (Aug. 31, 2007), the error estimate should meet precision levels of plus or minus 2.5 percentage points with a 90-percent confidence interval, and the State error estimates should meet precision levels of plus or minus 3 percentage points with a 95-percent confidence interval.”

So it appears that these standards, which are fairly good, have been twice promulgated by the Federal Government.

The question is:  Why are they routinely ignored by Administrative Law Judges (ALJs), and the Medicare Appeals Council (MAC)?