The Abomination of Extrapolation

The Abomination of Extrapolation

It usually starts with a telephone call from your friendly state Medicaid Fraud Control Unit (MFCU).  The voice on the other end of the phone tells you that they are going to come out and audit your Medicaid billing documents and want to find a convenient time to start the work.  There is no convenient time for a government audit my friends.  Government audits are inconvenient, disruptive and downright scary.  Medicaid Fraud Control Unit audits can be very costly as well, so it pays to be prepared for one before it happens.

If your agency is selected for an audit by your state MFCU, there is one word that you need to know: extrapolation.  Much of the time the correspondence you get from your MFCU before the audit begins will not mention the word.  The auditor that conducts your audit probably will not mention that the results of your audit will be extrapolated across all of the claims submitted during the audit period.  The first time you may find out that extrapolation was used by the auditor is when you receive the correspondence from the auditor disclosing the results of the audit.  The use of extrapolation in MFCU audits is exceedingly common.

Extrapolation is defined as:

the action of estimating or concluding something by assuming that existing trends will continue or a current method will remain applicable.  

Some synonyms for extrapolation are: hypothesize, assume, envision, guess and theorize.  Extrapolation is basically guessing about the characteristics of large number of items based upon looking at a few of them.  Although extrapolation involves a lot of assumptions and guesswork, it has been accepted by the courts of this country and is here to stay.

The reason that statistical sampling and extrapolation are used by auditors in auditing healthcare providers is that, “Sampling avoids the cost and practical challenge of examining a large number of claims.”  See Statistical Sampling: A Toolkit for MFCUs, published by the HHS OIG, September 2018.  A copy of the toolkit can be downloaded here.  MFCUs want to audit as many providers as possible with the limited resources that they have available.  If MFCU auditors had to examine every claim made in every audit, very few audits would be completed each year.

Owners of home care and home heath agencies that participate in their state’s Medicaid waiver programs need to be aware of the use and effect of extrapolation by their state MFCU.  Because of the use of extrapolation, every alleged error identified by an auditor is amplified.  For example, an auditor may determine that the documentation for five days of personal care services provided to a Medicaid recipient is inadequate.  The amount billed to Medicaid by the provider for those five days of services was $750, not a big deal on its own.  However, when the audit is complete and the theoretical error rate is calculated and then extrapolated across the entire universe of claims filed by the provider during the audit period, that $750 alleged error could cost the provider $7,500 or more when Medicaid seeks to recoup what they have categorized as improper payments.

The best way to be prepared for an MFCU audit is to make sure that your agency’s documentation of services provided to Medicaid recipients is compliant with both state and federal regulations.  In my article published on October 11, 2018, I explained what CMS and state Medicaid units look for in documentation.  Your agency should have policies and procedures that clearly define what Medicaid documentation must contain and how it is audited to ensure for compliance.  Those policies and procedures must then be followed, and regular audits must occur, in order to best maintain compliance.  You do not want to find out for the first time that your documentation is non-compliant from an MFCU auditor.

As an owner or member of management in a home care or home health agency that participates in Medicaid, it is your duty to be intimately familiar with your state’s Medicaid documentation requirements.  Ignorance of the regulations is not a defense.  In a Medicaid provider audit report published on June 22, 2017 by Pennsylvania’s Bureau of Financial Operations (BFO), the BFO recommended that a Medicaid waiver provider be forced to repay $3,362,946.00 for personal assistance services provided to Medicaid recipients during the period of July 1, 2014 to June 30, 2016.  The report states that the determination of the repayment amount was based upon the lack of sufficient detail in the provider’s time sheets that supported claims made to Medicaid.  The provider had documentation, it just did not contain the level of detail required in Pennsylvania’s Medicaid regulations.  This should scare any Medicaid provider and spur them to act to make sure that their documentation is compliant.

Take action now and review your state’s Medicaid regulations, paying close attention to the payment and documentation regulations.  Review your agency’s policies and procedures on billing and documentation and make sure they are in line with the requirements of the regulations.  Read over your agency’s quality management plan and make sure it includes provisions for documentation audits and monitoring.  Make sure your agency’s documentation is compliant before it is too late.  Don’t fall victim to the Abomination of Extrapolation.

If you need help with any of these issues, please contact us today