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I Understood There Would Be No Math: Audits, Extrapolations, and a New Set of Rules



Audits that employ statistical extrapolation can turn a handful of claim denials into a liability of hundreds of thousands or millions of dollars. After years of relative quiet, the statisticians are back. The Centers for Medicare and Medicaid Services (CMS) also modified the rules relating to extrapolation in audits. In this episode, Husch Blackwell’s Meg Pekarske and Bryan Nowicki review the latest in extrapolation and how the new rules will affect audits going forward.

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This transcript was auto-generated using Adobe Premiere Pro.

00;00;05;01 - 00;00;26;18
Meg Pekarske
Hello and welcome to Hospice Insights, The Law and Beyond, where we connect you to what matters in the ever changing world of Hospice and Palliative Care. Hospice Audit Series: I Understood There Would Be No Math - Audits, Extrapolations, and a New Set of Rules. Bryan, my favorite topic: extrapolation.

00;00;26;23 - 00;00;32;26
Bryan Nowicki
I know you're a statistics buff, as are probably a lot of our listeners out there. Just can't get enough of statistics.

00;00;33;08 - 00;02;06;07
Meg Pekarske
Definitely, definitely Love Math is my strong suit, but this is really important what we're going to talk about because harkening back to what I think was one of our first podcast episodes, it's got to be close to five years ago now, or six, who knows? Well, we did our first podcast was on was a new change to the Medicare Program Integrity Manual. That said, define what a high payment error rate was, which is one of the reasons why you can extrapolate. And the assumption was released and they essentially said 50% was going to be considered high because prior in our extrapolations there was like you couldn't challenge what a high error rate was. And so, you know, if you had any error rate at all, could that then be extrapolated and harkening back to that time to there was up to the build up of the new and Pam extrapolations had gone down. I mean, we had won a bunch of extrapolations and then the sad Pam came out and then they started up again and then we dealt with some. And so I guess that is a drop backdrop. And so we are really cheering this definition and, and the and Pam about that, you really need to have a, you know, error rate of 50% or above for something to be considered high. But but Bryan now there is another new change that came out in February of this year. So 2023, What what does this say now, Bryan?

00;02;06;07 - 00;04;42;17
Bryan Nowicki
Right. It's kind of a step backwards for us. What we didn't like about the MTM of two iterations ago, as you said, Meg, was it didn't define what high or sustained was it could be 20%, it could be 80%. It was really up to the contractor to say and then we liked when they did set a threshold, 50% at least we had a number there. And now neither one of those you can challenge through the appeal process, but at least it provided rules of the road that the contractors are supposed to follow and pretty clear rules. And we found that they generally did follow that rule. So now we have the newest iteration here that became effective in February this year. They took out the 50% threshold and added back in. I guess in taking that out, they made it much more discretionary. They removed the guardrails. So it's back to essentially a high, high and sustained payment error rate can be whatever the contractor decides. It is a limitation. And I'm not sure that this is necessarily a limitation, but maybe a call it a caveat they put in there is it has to be high as defined by medical reviews for similar providers, similar provider types. So I take that to mean they're going to compare hospices to hospices, hospitals to hospitals. And if you are an outlier in your error rate as compared to other hospices, then you're more likely to fall within this threshold of being subject to an extrapolation. Now, I think a data point that we don't have that the government does is what are all the comparables. So what is the government see as the error rate for all the other hospices out there? It has that data. We'll have to rely on them to self-police themselves, that they're sticking to this threshold because we won't be able to tell. Is it over or under 50%? We don't know what all the comparables are. So we're kind of back to where we were a couple iterations ago when extrapolations were more much more frequent than they have been over the past five years. And I think it remains to be seen whether this is going to now open the gates again for contractors to do more extrapolations, which in the past year we've seen a couple we've seen a few additional extrapolations after a lull of about five years. And I think this might signal that they're going to do more extrapolations because they're kind of taking the the guardrails off what these contractors can do.

00;04;42;18 - 00;05;00;18
Meg Pekarske
So, Bryan, is there a bright spot here in the sand, Pam? I mean, we had talked about is there an additional layer protection? There's some requirement that the contractor consult with other folks. And why don't you explain how that might play into this?

00;05;00;26 - 00;06;17;17
Bryan Nowicki
So with these changes to the NPM, there were a number of changes in addition to just eliminating that 50% explicit payment error threshold. One of the new changes that may favor providers is that when a contractor wants to extrapolate based solely on data analysis, it has to confer with CMS before doing so. And again, we have to hope that CMS is going to police this opportunity to extrapolate and only allow extrapolations to proceed when the situation warrants it. But it is an additional step in the process that contractors have to follow another check on the contractors, this time by CMS. So I suppose that's good. It all depends on how how well CMS polices that. And again, unfortunately this is probably an area that we're not going to have much insight into those communications. Even if we sought information about this through a Freedom of Information Act request, because these often relate to ongoing investigations. CMS is lack of responsiveness generally to FOIA requests is now going to be compounded by exemptions to those requests for ongoing investigations. So a bright spot, but but not a very well defined one.

00;06;17;22 - 00;06;46;13
Meg Pekarske
So then getting into some real math here, statistics about and maybe we just spend a moment on this about when the government does statistics, you know, they have, you know, they say they're going to give you the lower bound 90% of the lower bound, I guess what flexibilities are or what does the NPM do to to speak to that aspect?

00;06;46;18 - 00;09;38;25
Bryan Nowicki
Yeah, And statistics I have learned over the years in learning about and then using statistics to advocate our position, there's a lot of counterintuitive elements to statistics where you think this can't possibly be an appropriate extrapolation because it's not representative or there's other flaws with it. You know, I've learned through statisticians, even the ones on our side, that, yeah, although counterintuitive, the statistics works out that way. And so one clarifying piece in the New revised Empower NPM kind of illustrates what seems very counterintuitive. And so when they do, these extrapolations make, as you mentioned, they'll provide a range of potential overpayments. So let's say the ranges between three and a half and five and a half million is what they estimate to be your extrapolated overpayment under their protocols. What they do is they go to the lower bound. That would be in this case, three and a half million and they say we're 90% confident that if you pay three and a half million, that's actually going to be less than what the quote unquote true overpayment is. And they kind of pat themselves on the back that they're given the provider the benefit of the doubt. They're not over recovering. But but in the new anthem, they illustrate that some time as through their statistical exercise that lower bound, the three and a half million in that case could exceed the total overpayments received by the hospice for every single claim in the universe. And so let's say the universe was a one year period of all your claims. You may have gotten paid 3.2 million, but the lower bound of the extrapolation says you owe 3.5 million. How that works out is a is for the statisticians to answer, but I think it can be kind of alarming to know that that's how the statistics can work out in the NPM says that doesn't mean there's a problem with with the statistics. I mean, that's how they operate. Their fix for that is to say we'll just reduce it down to the total overpayments you receive so they'll never recover more than you received. But the path they used to get to that point is counter-intuitive. It's a bit alarming, but in the end Pim, they're expressly saying this is how statistics work and it might turn out exactly this way. So a bit disheartening, but it's backed up by Adam Pym. That's not to say that we wouldn't challenge those kinds of results. We work with statisticians and develop some pretty good arguments to challenge these. That's not going to change based upon the new NPM. There's still allows us to make some of the most significant arguments that we typically make in these things.

00;09;38;29 - 00;11;09;18
Meg Pekarske
Well, of Leiber and Stoller listening after this riveting discussion of statistics. But I think we wanted to share this information on the podcast because I think hospice is one of the most highly audited provider sectors, and as a result of that, it's oftentimes subject to extrapolation as part of you pick audits most likely. And so this change is important. I guess it's sort of a coin toss as is this going to be good or bad? I mean, I was really disappointed to see that they eliminated that certainty around the 50% threshold because since you can't challenge what is high, at least it gave us some general agreement. And so I was very disappointed about that. But as you say, they do now, my guess is they always have to talk to CMS about if they going to extrapolate. I mean, and now they're just putting it in writing. Who knows? I know that that we have been involved in cases where contractors have asked for certain remedies, whether it be payment suspension or other things, and CMS has said no. So as you say, who knows if that's going to play in our favor or not. But I guess mixed news. But I guess if we if you you're going to bad Bryan, do you think we're going to see a rise in extrapolations as a result of this?

00;11;09;24 - 00;11;54;20
Bryan Nowicki
Well, I think this takes the gloves off a bit for contractors who are inclined to extrapolate. And so since they see fewer limits on their ability to do so, do so primarily this 50% threshold, why not go after it? So I would expect that this if if there's any incentive in this, it's to do more extrapolation. And we will see time will tell if that ends up being true in the long run. Yeah, well and Meg out Meg, I was considering doing a series of five hour podcasts about statistics. I didn't get a good reaction from from the sample. I posed that too. So we'll just keep with these hospice podcasts. I'm not going to branch out into a statistics one yet.

00;11;54;29 - 00;11;58;17
Meg Pekarske
Yeah, you might have two listeners for that.

00;11;58;26 - 00;12;00;04
Bryan Nowicki
My mom and my dad.

00;12;00;06 - 00;12;06;29
Meg Pekarske
Yeah, exactly. But anyway, well, important information and thanks for for the update Bryan.

00;12;07;05 - 00;12;11;23
Bryan Nowicki
Happy to do it, Mike. Thanks.

00;12;11;23 - 00;12;29;07
Meg Pekarske
Well, that's it for today's episode of Hospice Insights, The Law and Beyond. Thank you for joining the conversation. To subscribe to our podcast, visit our website at or sign up wherever you get your podcasts. Till next time, may the wind be at your back.