“Audit And Extrapolate” – The Unofficial Motto of the Office of the Inspector General

by John W. Kaveney

Recently the Office of Inspector General (“OIG”) issued a report on a compliance review conducted at the University of Cincinnati Medical Center (“UCMC”) for the years of 2010 and 2011. As a result of the audit, the OIG is seeking repayment of $9.8 million in alleged overpayments. The audit is the most recent example of the government’s use of the lawful, yet controversial, process of extrapolation.

UCMC is a 695 bed acute care teaching hospital with approximately $256 million in Medicare payments for 2010 and 2011 combined. The OIG’s audit targeted 2,742 claims identified by the OIG as high risk for possible billing errors accounting for $22.8 million of UCMC’s reimbursement for the two years. However, rather than review all of these possibly problematic claims, the OIG reviewed only a subset of 228 claims accounting for $3.2 million. The OIG found UCMC failed to comply with Medicare billing requirements for 127 of the claims amounting to an overpayment of $603,276. The OIG extrapolated this error rate over the entire amount in question to arrive at a repayment figure of $9.8 million.

The errors identified in the inpatient claims included:

  • Services incorrectly billed as inpatient;
  • Incorrectly billed DRG codes;
  • Credits not obtained;
  • Incorrect discharge status;
  • Incorrect source of admissions; and
  • Incorrect outlier payments

The errors identified in the outpatient claims included:

  • Insufficient documentation
  • Credits not reported
  • Incorrect E/M services
  • Incorrect HCPCS
  • Incorrect number of units

The OIG concluded its report by emphasizing its legal right to use statistical sampling and extrapolation. It also reiterated UCMC’s right to appeal individual determinations if it disagrees with the total amount owed.

UCMC, in response to the audit, identified several concerns it felt undercut the validity, accuracy and fairness of the OIG’s audit. UCMC highlighted the fact that the OIG did not allege any services were medically unnecessary or not rendered. Rather, the OIG raised Medicare billing requirement technicalities having nothing to do with the quality or appropriateness of care. UCMC also took issue with the fact that the OIG specifically identified claims believed to include overpayments while excluding any that might have resulted in underpayments. Thus, according to UCMC, an accurate determination of any under- or overpayment could not be determined based on the OIG’s audit work. Finally, UCMC took issue with the small sample sizes of claims for each of the potential overpayment issues being investigated claiming they did not constitute a sufficient statistical sample for such an audit and extrapolation. The OIG disagreed with UCMC’s position.

It is anticipated that UCMC will appeal the results of the audit. However, every indication suggests that the OIG will continue to implement these audit tactics and utilize extrapolation as a means of making up for its shortage in resources. The American Hospital Association recently also entered the debate. It penned a letter to Secretary Sebelius of the United States Department of Health and Human Services on June 2, 2014 expressing its concerns with this and other OIG audits of hospitals for the calendar years 2010 and 2011.

Hospitals must remain vigilant and proactive in their compliance efforts as these audits appear to be only increasing in frequency.