Overpayment audits of physicians are commonplace and, indeed, should now be expected. When conducting such audits, Medicare auditors often include not only random sampling as an audit technique but have also extrapolated the results of that random sampling to arrive at overpayment claims that can be much larger. But is extrapolation a legitimate auditing technique? Even more important, is it legal?
In a Medicare audit, the answer is yes. For example, the Medicare Managed Care Manual not only requires that Medicare Advantage plans develop auditing systems, it specifically recognizes that auditors may extrapolate the sampling results of that audit.
But what about commercial payors? For those payors it is not that simple, nor is it necessarily a given that extrapolation is an authorized method that the payor may use to increase dramatically the dollar amount of an overpayment claim, sometimes by five to ten-fold. What is the deciding factor? At least one court, the Supreme Court of Rhode Island, used simple and straight forward contract law analysis to reach the conclusion that if the payor’s provider contract does not authorize extrapolation, then the payor may not extrapolate.
And, of course, the wording in the contract would be critical regardless of the jurisdiction.
Other state courts, however, might reach different conclusions. So the lesson to be learned is that providers should read the auditing language of their provider agreements with private payors papers carefully. If the agreement does authorize extrapolation then attempt to negotiate that provision out of the contract altogether or at least limit its application. But even if your provider agreement does not expressly authorize extrapolation of auditing samples, it might be prudent to negotiate language that would expressly prohibit extrapolation without the provider’s consent. And, if neither of these options are realistically available, providers should at least recognize that extrapolated random audit samples today may well result in unreliable and excessive overpayment claims by the payor tomorrow and prepare accordingly.