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Recovery Audit Contractors (“RACs”) Authorized to Engage in Statistical Sampling

Recovery Audit Contractors (“RACs”), as other Medicare contractors, are authorized to audit only a small sample of a providers’ or suppliers’ records, and if the RACs find an overpayment, they will extrapolate the overpayment finding to the providers’ or suppliers’ patient population. If RACs engage in statistical sampling and extrapolation, RACs are entitled to keep their contingency fee based upon the extrapolation. Particularly since the RACs are limited in the amount of medical records they can audit per 45-day period, providers and suppliers must be aware of the risk for increasing use of statistical sampling and extrapolation.

Recently, the CMS website published a Frequently Asked Question related to this topic. Please click here to view the Frequently Asked Question, which states the following:

Feedback
Will the RACs receive a full contingency fee for claims in which they utilize the extrapolation procedure outlined in the SOW?

Answer
Yes RACs will receive their full contingency fee for extrapolated claims.

Significantly, Section 935 of the Medicare Prescription Drug Improvement and Modernization Act of 2003 (“MMA”) sets restrictions regarding when statistical extrapolation may be used, and the Medicare Program Integrity Manual (CMS Pub. 100-08) Chapter 3, §§ 3.10.1 through 3.10.11.2 establishes guidelines for CMS to follow when performing an audit based upon a statistical sample. If an extrapolation is flawed, it may be successfully challenged, bringing the total dollars at issue to the “actual” alleged overpayment, and not the extrapolated alleged overpayment.

For more information, please call Abby Pendleton, Esq. or Jessica L. Gustafson, Esq. at (248) 996-8510, visit The HLP website’s RAC, Medicare and Other Payor Audits page, or visit The HLP website.

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