Unstrapping Extrapolation

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You receive an overpayment letter; in bold letters, you see a huge number and likely a brief mention of extrapolation.  Stop!  It is critical to fully understand the overpayment or demand letter and all authorities the payer relied on to determine the alleged errors and application of extrapolation.

What to do if you receive an overpayment or demand letter?

It is always a good idea to reach out to your attorney or find an attorney that focuses on reimbursement.  This may not be necessary for every overpayment or demand letter; however, when you believe you have strong standing or the overpayment or demand is very high, seeking counsel is strongly advised.

What is extrapolation?

Extrapolation is a statistical sampling methodology used by the Centers for Medicare and Medicaid Services (“CMS”), the Department of Justice, and government contractors.  The extrapolation method takes a sample of claims to estimate an overpayment across a large universe of claims.

Extrapolation is performed routinely by CMS and their contractors.  Under the Medicare Program Integrity Manual, there is guidance that must be followed by CMS and their contractors when conducting statistical sampling for overpayments.  Statistical sampling for extrapolation applies to UPICs, RACs, SMRC, and MACs – these are CMS contractors.

Can a commercial plan extrapolate an overpayment?

It depends.  Several factors come into play.  First, look at the contract with the payer.  The contract may have language regarding overpayments and calculation of overpayments, or it may be silent.  Other considerations are the provider manual and policies, which may be referenced by way of incorporation into the contract, or they may not be.

The payer is following CMS guidance on extrapolation – can they do that?

While a commercial payer may follow CMS guidance on extrapolation, the question becomes does the payer have the authority to apply extrapolation to the claims in which they have identified an overpayment.

A procedure or a policy presented by a payer does not necessarily mean they can apply extrapolation.

What to do with an overpayment or demand letter?

Receiving an overpayment or demand letter is an unpleasant piece of mail.  Do not ignore the letter.  An overpayment or demand letter will have dates when the overpayment is due.  Also, there are likely appeal rights.  The appeal rights will vary from payer to payer.  Quickly understand the timeline because there is likely a short window to pull together everything needed for a comprehensive appeal.

The right person with the right background and knowledge must be handling the appeal.  Confirm the alleged findings.  This process is very involved including looking at the appropriate authoritative documents associated with the claims.

What types of errors can be in an overpayment?

There are numerous.  Here is a shortlist of areas where errors can occur:

  • The payer is operating outside the terms of the provider contract.
  • The look-back period in the audit sample exceeds policy or the contract.
  • The application of payment or medical policy was not effective for the dates of service of the claims.
  • The right regulation is referenced but applied incorrectly.
  • The application of billing codes is not correctly interpreted.

No two overpayments are alike.  Each overpayment or demand letter presents its own unique set of facts.  These cannot be handled in a vacuum.  Careful attention to every detail can be pivotal as to whether overturning an extrapolation or overpayment is successful.


If your practice is faced with an overpayment or extrapolation, contact Rivet Health Law, PLC for a free consultation.