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Extrapolation

Extrapolation is commonly referred to as a statistical sampling for overpayment estimation / extrapolation. A contractor will use a supplier/provider claim history (paid and/or partially paid claims) as part of the post payment review. A sample of claims, a subset of the claim history, is pulled. The sample is a statistical sample which is different from a Probe sample. Once reviewed, the sample is used to calculate and extrapolate the sample error rate to the claims universe. The extrapolation calculations come up with an overpayment amount. See CMS Internet Only Manual (IOM), Publication 100-08, Medicare Program Integrity Program, Chapter 8 This link will take you to an external website. .

The methodology used in the statistical sampling must be done by a statistician as defined by the CMS IOM, Publication 100-08, Medicare Program Integrity Program.

Identify Extrapolation

The CMS contractor will send a provider/supplier a letter requesting money due based on a statistical sampling of an overpayment estimation or extrapolation. The initial post payment review letter will inform the provider/supplier that this is an extrapolation. The demand letters are tied to multiple claims and will typically include large dollar amounts.

Two Types of Overpayments

  1. Identified - One claim (or single claim) for one supplier/provider
  2. Extrapolation - Sample of claims used to estimate dollars paid in error for a universe of similar claims for a specific period of time

The demand and/or post payment review letter will identify the type of overpayment.

Extrapolation Terms and Definitions

  • Universe (population) - Universe consists of all claim detail that is of interest and is defined prior to the selection of a sample. It can include such information as the provider number, date range, and procedure codes to be selected, or any relevant criteria depending on the situation. 
  • Sample Unit - Sample unit is the level of detail at which randomization and selection of the sample take place. It can be claim line, claim, beneficiary, or any other sampling unit appropriate for the issue under review.
  • Sample Frame - Complete listing of sample units (items). If the sample unit is not the claim line, the sampling frame will be at the level at which the information is summarized. For example, if the sample unit is claim, it will contain totals for claims. If the sample unit is beneficiary, it will contain totals for beneficiaries. 
  • Random Sample (probability sample) – Random sample will consist of randomly selected sample units. The sample size is determined by the post payment review contractor. For the purposes of random sampling in this audit context, it must have the potential to be replicated and meet the requirements of probability outlined in the CMS IOM, Publication 100-08, Medicare Program Integrity Program.
  • Extrapolation - After the audit review, the sample data will be used to estimate the overpayment or underpayment for the entire sampling frame (and by extension, universe). It is the calculation of the overpayment estimate using statistical formulas. There are multiple ways to extrapolate error rates from sample to universe. Most of these methods account for the error associated with sampling, which is calculated to the provider's favor. The CMS IOM, Publication 100-08, Medicare Program Integrity Program recommends the lower bound of a 90% confidence level.

Contact

The contractor initiating the post-payment review will contact the provider/supplier. Any review related inquiries must go to that specific contractor. If there are questions on the methodology used to calculate the dollar amounts included, contact the original contractor.

If there are general extrapolation questions, contact the Noridian Provider Contact Center.

Appeal an Extrapolation

A provider/supplier who doesn't agree with the extrapolation may submit a Redetermination request, to Noridian, for all denied or partially denied claims in the sample. All such claims must be included in a single request. It is not acceptable to submit a separate request for each claim as the full sample is required to extrapolate the final amount. One claim can impact the final demand. Each claim is reviewed and a determination is made. The outcome for all appealed sample claims may positively or negatively impact the provider's/supplier's dollars.

All extrapolated appeals are reviewed by a statistician to assure the methodology is implemented properly and the calculations are correct.

Resources

Last Updated May 31, 2017