Printer Friendly, PDF & Email

Recent developments affecting strategies for challenging extrapolated contractor overpayments

Stephanie F. Johnson ( is a Partner and Lauren S. Gennett ( is a Senior Associate in the Atlanta offices of King & Spalding.

Healthcare providers and suppliers are subject to audits and reviews by numerous Medicare and Medicaid contractors, each with unique authority and audit scope. These myriad contractors include Recovery Audit Contractors (RACs), Quality Improvement Organizations (QIOs), Medicare Administrative Contractors (MACs), Supplemental Medicare Review Contractors (SMRCs), and Unified Program Integrity Contractors (UPICs).

In many cases, contractor audits are routine. However, in some instances, seemingly routine audits can be transformed into reviews with substantial financial implications. This is because certain contractors are authorized to review a statistically valid sample that can be extrapolated to a larger universe of claims in certain instances.

When employing statistical sampling and extrapolation, the contractor generally establishes a universe of claims at issue and then pursues statistical sampling to identify a sample of claims for review. The sample of claims is reviewed and an error rate is established. The error rate is then extrapolated, or applied, to the larger universe of claims. As such, the results of an actual review of a modest number of claims can be applied to a very large number of claims and materially increase the alleged overpayment.

Once a contractor has issued its findings, frequently the only recourse for the provider is to appeal the alleged overpayment. Appeals of extrapolated Medicare overpayments generally require providers and suppliers to navigate the backlogged Medicare appeals system. Historically, providers and suppliers have encountered challenges when appealing extrapolated overpayments, due in large part to the perceived broad authority provided by the Centers for Medicare & Medicaid Services (CMS) to contractors for sampling and extrapolation. However, CMS revised its Medicare Program Integrity Manual (MPIM) provisions on sampling and extrapolation, effective January 2019. CMS explains that the purpose of the MPIM update is to “help ensure that a statistically representative sample of the claim universe is drawn that yields an unbiased estimate of an overpayment.”[1] Although this article does not endeavor to address all sampling and extrapolation requirements, it will address key new MPIM requirements and discuss strategies that providers and suppliers may wish to implement in their appeals of extrapolated overpayments.

This document is only available to members. Please log in or become a member.