Statistical Analysis and Recovery Audit Defense/Prosecution (RAC) – One growing need faced by healthcare and insurance entities is defense or prosecution of RAC audits. ValueScopes’ healthcare experts are experienced in RAC audit defense and prosecution to ensure that a healthcare provider is not paid more or receiving less than necessary. Our healthcare experts provide a variety of statistical services tailored specifically for healthcare providers.

Types of RAC Audits involving Extrapolated Recovery Amounts and Provider Factors

Extrapolation used if:

  • Sustained or high level of payment error
  • Documented education efforts failed to correct the error

Error rates are applied to the entire universe of claims.

Determination of sustained or high-level payment error is not subject to administrative or judicial review.

Areas of concern include:

  • Medical necessity
    • One-day stays
    • Inappropriate setting, e.g., Inpatient Rehabilitation
  • Coding errors
    • Extensional Debridement
    • Complex DRGs, e.g., Septicemia, Respiratory Disorders, OR procedures

Basics of Statistical Sampling and Extrapolation

When may contractors use statistical sampling?

  • Threshold Determination: “High Level of Payment Error”
    • Error rate determinations by Medical Review (MR) unite, Program Safeguard Contractor (PSC), ZPIC
    • Probe samples
    • Data analysis
    • Provider/supplier history
    • Information from law enforcement investigations
    • Allegations of wrongdoing by provider/supplier employees
    • OIG audits or evaluations
  • Statistical Sampling vs. Claim-by-Claim Analysis
    • Number of claims in universe and claims’ dollar amounts
    • Resources available
    • Sampling’s cost effectiveness
  • Requirements for Contractors
    • Consult with statistical expert
      • Requirement unless sampling methodology routinely and repeatedly used
      • Use of other statistically valid audit sapling methodologies used by law enforcement permissible
    • Follow procedure resulting in probability sample
      • Probability sample and results are always “valid”; some may have higher precision level
    • Select provider or supplier
    • Select period for review, e.g., the time period – number of days, weeks, months, or years
    • Define universe – All relevant claims (e.g., all claims coded a specific MS-DRG)
    • Define sampling unit – May be individual claim or individual line claim or clusters of claims for a beneficiary
    • Define sampling frame – Listing of all possible sampling units covering completely the target universe
  • Sample Selection and Sampling Designs
    • Simple Random Sampling – Uses “random selection method to draw a fixed number of sampling units from the frame without duplication” (example: using deck of cards and dealing certain number of cards)
    • Systematic Sampling – Involves numbering sampling units, starting with a random unit and selecting units at a fixed interval (e.g., every 10th unit starting with “8”: 8, 18,28,38, etc. until the universe is exceeded)
    • Stratified Sampling – Classifying sampling units in non-overlapping groups such as where overpayment amounts in each strata are a similar as possible
    • Cluster Sampling – Involves random sample of clusters; all the claims for a beneficiary would be a “cluster” and, as a result, the precision of estimated overpayment may be reduced
    • Design combinations – Two or more of above methods
    • Random Number Selection – PSC, ZPIC, RAC contractor documents and you may use reputable software such as RAT-ST S TS
    • Sample Size – Important, but not only determinant of overpayment estimate’s precision
    • Documentation of Sampling Methodology – PSCs, ZPICs and other contractors must maintain documentation of the methodology used

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