A recent decision by an administrative law judge (ALJ) for New York State’s Department of Health has dealt a setback to the Office of Medicaid Inspector General (OMIG) and its use of “extrapolation” of claims sampling in calculating Medicaid repayment demands. The decision has been widely circulated in the provider community, where it was received with considerable satisfaction. But the case is not so simple, and closer attention to its findings should instead provide a sobering warning to providers about the real financial perils of not complying with the Medicaid program’s detailed documentation requirements.

Background

OMIG is responsible, among many other things, for auditing providers’ Medicaid claims. When OMIG selects a provider for audit, it is generally not feasible to review each and every one of the provider’s claims, which may run into tens or even hundreds of thousands of patient records and accompanying Medicaid bills. Instead, OMIG selects a certain number of the provider’s patient and billing records for review. If it finds problems such as billing errors, or services that were billed and paid for by Medicaid but that were not properly documented in the patient’s record, OMIG will do a statistical sampling and then project it out to the universe of the provider’s Medicaid claims. In theory at least, OMIG’s process of extrapolation is supposed to result in a reasonable approximation of what the provider should have to repay the Medicaid program.

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