May 15 2017

Extrapolation: How The Government Turns One Alleged Bad Claim Into Thousands Of Violations


Ah, what a funny world we live in.

Government regulators at the SEC force those offering investment opportunities to issue disclaimers that past performance is not indicative of future results. Extrapolation is bad.

Yet a few miles away, other government regulators at the OIG alchemize a handful of discovered violations into thousands more. Extrapolation is good.

Perhaps it’s simply a matter of who’s doing the extrapolating.

Investors are amateurs with no real world experience and can’t be trusted to extrapolate. Bureaucrats are amateurs with no real world experience but can be trusted to extrapolate.

Hmm, that’s probably not how they’d put it.

But that’s exactly how you’ve got to take it. And, it’s the multi-zillion dollar reason why your medical group’s or healthcare business venture’s compliance efforts must constantly be tested, reviewed, and retuned.

Consider, for example, the OIG’s April 2017 report of its audit of NYC’s Mount Sinai Hospital. Looking at claims from 2012 though 2013, the OIG identified 110 claims out of the 261 it reviewed as improperly billed. Those claims resulted in approximately $1.4 million in alleged overpayment.

A princely sum, perhaps, but certainly not a kingly one. So, based on the 110 instances, the OIG extrapolated its findings. $1.4 million became $41.9 million in alleged overpayment.

Of course, Mount Sinai Hospital disagrees with the concept of extrapolation. In the hospital’s administration’s words: “We reject the notion that it’s appropriate for OIG auditors to substitute their judgments, made years after the fact without any patient interaction, for the thoughtful medical decisions of our highly skilled physicians. Moreover, the review process used by the OIG is deeply flawed. Not only are their determinations based on erroneous interpretations of the prevailing rules, but their refund demand is based on a review of a tiny sample of claims. In fact, 97 percent of the refund demand relates to claims OIG never even reviewed.”

Mount Sinai has the resources to fight an extrapolation. Do you?

Yes, structuring deals correctly, and reassessing them later as a part of a compliance review is expensive. Yes, conducting internal audits of your billing practices and refunding any overpayments is a hassle. Yes, using legal counsel to run a “red team” mimicking a government investigation costs real money.

Yes, you can rightly claim that “none of this is in our budget!”

But neither is the even greater cost of defending against an OIG or state counterpart claim of overbilling, with accompanying demands for penalties and interest and the inherent threat of criminal prosecution.

Comment or contact me if you’d like to discuss this post.

Mark F. Weiss


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