Court Decision Overpayment Determination Statistical Sampling
Maxmed is a home health agency. In 2011, Medicare reviewed a sample of 40 claims involving 22 Medicare beneficiaries and determined that all but one were not medically necessary. The sample was extrapolated to their universe of claims, resulting in an overpayment of $773,967. The Administrative Law Judge invalidated the extrapolation methodology, but the Medicare Appeals Council reversed and Maxmed appealed to Federal District Court, where it lost. Maxmed then appealed claiming:
- the extrapolation was invalid because the contractor failed to document the random numbers used in the sample and how they were selected.
- a valid random sample must be for claims that are “defined correctly and independent” and here the same Medicare beneficiary had multiple claims in the sample.
On June 22, 2017, the U.S. Court of Appeals, Fifth Circuit, found the extrapolation and sampling methodology used was proper. The decision, Maxmed Healthcare Inc. v. Price, is just the latest in a recent line of decisions making it harder and harder to challenge statistical sampling and extrapolation of overpayments.
David Werfel is a partner at Werfel & Werfel, PLLC.