In a move that could affect all hospitals reimbursed by Medicare, the American Hospital Association (AHA) this week renewed strenuous objections to various aspects of ongoing hospital compliance reviews conducted by the Department of Health and Human Services (HHS) Office of Inspector General (OIG).

AHA’s most recent correspondence references the “numerous legal defects” it had previously identified in OIG’s hospital audits. These defects include claims that OIG audits (1) waste HHS resources and are unduly burdensome to hospitals, (2) use extrapolation in a manner that compounds OIG’s erroneous interpretations of Medicare rules and policies and (3) allow Medicare Administrative Contractors to collect overpayments in violation of the Medicare statute and agency rules. This blog post focuses on the AHA’s extrapolation-related objections, which form the bulk of its previous and recent correspondence concerning OIG hospital compliance reviews.

After the OIG Office of Audit Services determines that a submitted claim or claims were improperly high, it extrapolates the difference over all similarly situated claims to calculate the total amount overpaid by the government. According to the OIG, extrapolation allows it to police hospital overpayments without reviewing each claim, which it feels is both “economical and in the best interest of the provider and the Government.”

The AHA, however, is less enthusiastic about OIG’s usage of extrapolation and raises several objections. First, AHA argues that by refusing to pay for inpatient claims that were not supported with a “valid order signed by a physician,” OIG is improperly applying a post-October 2013 policy to pre-October 2013 claims. Second, AHA opines that OIG is attempting to recoup old overpayments despite its failure to overcome the no-fault presumption that attaches to claims paid under Part A more than 3 years ago. Third, the AHA takes issue with OIG’s attempt to recoup overpayments for inpatient admissions not “reasonable and necessary” (as required by the Social Security Act), arguing that hospitals are entitled to appellate review before overpayments are recouped on this basis. Finally, AHA disagrees with OIG’s failure to account for the Part B payments hospitals should have received even if they improperly received payment under Part A, arguing that these Part B payments should be offset when the Part A overpayments are recouped.

While OIG has responded to several concerns regarding extrapolation, AHA’s May 23rd letter makes clear that the matter is far from resolved, as the group indicates it remains “very troubled” by the practice. In fact, the AHA has asked to be present at a meeting between the OIG and Mount Sinai Hospital to discuss the audit process.   Hospitals facing OIG scrutiny should ensure that any recoupment efforts are conducted in a legally sound manner, since extrapolation can cost hospitals hundreds of thousands of dollars in improper recoupments.