Tag Archives: Sample Size

John Balko & Associates d/b/a Senior Healthcare Associates v. Kathleen Sebelius Secretary U.S. Department of Health and Human Services

John Balko & Associates operates Senior Healthcare Associates (SHA)and is located in Hermitage, Pennsylvania.    The company was audited and received a demand letter for approximately $680,000 dollars.  The case went through a number of appeals and eventually the Medicare Appeals Council (MAC) ruling was appealed for review by a Federal District Court.

This is a case filed April 30, 2012 in the United States District Court for the Western District of Pennsylvania.  (The PACER number is Case 2:12-cv-00572-AJS)  The case went through several stages prior to being appealed.  (See figure.)

BALKO_CHRONOLOGY.001

Source: Memorandum Opinion re: Parties’ Cross-Motions for Summary Judgment, files 12/28/2012, and Barraclough analysis.

A number of arguments were made that established clearly that the statistical work was faulty, and from a scientific point of view was completely invalid.

BALKO_ARGUMENTS_1.001BALKO_ARGUMENTS_2.001Arthur J. Schwab the United States District Judge wrote in his opinion “Balko is not entitled to the best possible statistical sample of claims that it submitted . . . Instead, Balko is only entitled to a statistically valid random sample.”  (Memorandum Opinion, p. 23.)

Question:  Is a “statistical valid random sample” one that is so poor that it lacks any scientific credibility?

What has happened in this case does not bode well for health care providers.   Here, statistical work that is demonstrably faulty and inferior and definitely not scientifically valid has been signed off on by the Medicare Appeals Council (MAC), and by the Federal Court that reviewed the case.

This type of sloppy scientific work never would be accepted in any other type of case before a Federal Court in which scientific evidence is evaluated in conformity with Rule 702 “Testimony by Expert Witnesses” of the Federal Rules of Evidence.   The question is why is this type of poor and inadequate scientific work OK for audits of health care providers but not OK anywhere else?

Barraclough NY LLC supplies experts for litigation support in Medicare and Medicaid appeals cases.

Documents reviewed:

John Balko & Associates d/b/a Senior Healthcare Associates, Plaintiff, v. Kathleen Sebelius Secretary U.S. Department of Health and Human Services, defendant. United States District Court for the Western District of Pennsylvania.  Case 2:12-cv-00572-AJS.

  1. Complaint (Filed 04/30/12)
  2. Answer to Complaint (Filed 08/20/2012)
  3. Brief in Support of Motion [for Summary Judgment] (Filed 11/15/2012)
  4. Brief in Opposition to Motion (Filed 12/04/12)
  5. Concise Statement of Material Facts (filed 11/16/12)
  6. Memorandum Opinion re: Parties’ Cross-Motions for Summary Judgment (Filed 12/28/2012)
  7. Judgment (Filed 04/08/14)
  8. Opinion of the Court (Filed 02/12/2014)

Note: There is another write-up of this ruling by Paige Fillingame at King & Spalding LLP with a free link to the ruling.

 

Appeal on Statistical Sampling for Medicare Audits – “Measuring the Variables of Interest” and “Proper Procedures”

It has been our experience at Barraclough that contractors almost always skip the step of taking a probe sample when calculating the required sample size.   Even though they do this, they frequently rely on RAT-STATS to make the sample size calculations. The inputs into RAT-STATS requires the variation in the variable being estimated, that is, RAT-STATS requires as one of its crucial inputs the variation (e.g., the mean and standard deviation) of the overpayments (which is the variable being estimated). Since the contractors skip taking a probe sample, they plug the wrong data into the RAT-STATS program, and then make their calculation of sample size by using the variation of the payments instead of the underpayments.   This almost always results in RAT-STATS claiming that a smaller sample size is adequate. In the MPIM, Chapter 3, Section 3.10.2, we see a sketch of what a “properly executed” sample design is.   In includes:

(1) defining the universe, (2) [defining] the frame, (3) [specifying] the sampling units, (4) using proper randomization, (5) accurately measuring the variables of interest, and (5) using the correct formulas for estimation

It can be argued that taking a probe sample so as to be able to plug the correct (and required) data into the RAT-STATS program falls under the fifth category “accurately measuring the variables of interest”. It follows that if the probe sample is not taken, then according to the MPIM, proper procedures have not been used. Note:  RAT-STATS is a free statistical software package that providers can download to assist in a claims review. The package, created by OIG in the late 1970s, is also the primary statistical tool for OIG‘s Office of Audit Services.

PROPER STATISTICAL METHODOLOGY IS NOT REQUIRED?

Barraclough has been working in the area of statistical sampling for more than ten years.   Over time, it has seen a deterioration in the standards for statistical sampling.   In essence, the current rules indicate that the contractor is not required to follow any specific statistical methodology or even follow many of the guidelines in the Medicare Program Integrity Manual  (MPIM).   In the MPIM, Chapter 3, Section 3.10.1.1 it states that:

“Failure by the [contractor]  to follow one or more of the requirements contained herein does not necessarily affect the validity of the statistical sampling that was conducted or the projection of the overpayment.

An appeal challenging the validity of the sampling methodology must be predicated on the actual statistical validity of the sample as drawn and conducted.

Failure by the [contractor] to follow one or more requirements . . .  should not be construed as
necessarily affecting the validity of the statistical
sampling and/or the projection of the overpayment.”

The language quoted from the MPIM seems to indicate that no appeal may be based on the sampling methodology.

No matter how the contractor arrives at their sample, it does not seem to be reviewable.

Note:  This was quoted In the Case of Maxxim Care, EMS (February 25, 2010)

Challenges to Statistical Sampling in Health Care Fraud Litigation

Statistical extrapolation in Medicare and Medicaid audits can be problematical.    They are not always done correctly, and it actually has been our experience that they frequently are not done correctly at all.

Steven E. Skwara identifies three challenges that can be made against statistical sampling in health care fraud cases:

  1. Reproducibility.  If the results can not be reproduced, then there is reasonable argument that the results are not scientific.  Documentation is crucial.
  2. Sample  Size.  Larger sample, more accurate results.   There is a great deal of leeway given by Medicare courts.
  3. Variability.  This is not often looked for, but a high degree of variability in the data may signal problems.  Ask your statistician.

SeeStatistical Sampling in Health Care Fraud Litigation“.