CMS Revises Guidance Regarding the Use of Statistical Sampling for Overpayment Estimation

This sub-regulatory guidance, entitled “Guidance Regarding the Use of Statistical Sampling for Overpayment Estimation” applies to all Medicare review contractors that use statistical sampling, i.e., Unified Program Integrity Contractors (UPICs), Recovery Auditors (RACs), the Supplemental Medical Review Contractor (SMRC), and Medicare Administrative Contractors (MACs).²  The updates were intended to ensure “that a statistically representative sample of the claim universe is drawn that yields an unbiased estimate of overpayment.”³

A.    Background

HCFA Ruling 86-1⁴ established CMS’s formal policy on its contractors’ use of statistical sampling to project overpayments to Medicare providers and suppliers.  HCFA Ruling 86-1 “held that the use of statistical sampling to project an overpayment is consistent with the Government’s common law right to recover overpayments, the Medicare statute, and the Department’s regulations, and does not deny a provider or supplier due process.”⁵  Although HCFA Ruling 86-1 allows Medicare contractors to use statistical sampling to estimate overpayments, the Ruling clarifies that providers and suppliers are afforded due process rights to appeal the validity of a statistical sample and the resulting overpayment.⁶  Specifically, pursuant to HCFA Ruling 86-1:

Sampling does not deprive a provider of its rights to challenge the sample, nor of its rights to procedural due process.  Sampling only creates a presumption of validity as to the amount of an overpayment, which may be used as the basis for recoupment.  The burden then shifts to the provider to take the next step.⁷  The provider could attack the statistical validity of the sample, or it could challenge the correctness of the determination in specific cases identified by the sample (including waiver of liability where medical necessity or custodial care is at issue).  In either case, the provider is given a full opportunity to demonstrate that the overpayment determination is wrong.  If certain individual cases within the sample are determined to be decided erroneously, the amount of overpayment projected to the universe of claims can be modified.  If the statistical basis upon which the projection was based is successfully challenged, the overpayment determination can be corrected.⁸

Chapter 8, Section 8.4 of the MPIM provides instructions to Medicare contractors on their use of statistical sampling for overpayment estimation.⁹  Contractors always have been afforded significant flexibility to design statistical samples for the purpose of estimating overpayments.  However, regardless of the process of sample selection employed, CMS has required and continues to require that it result in a “probability sample.”  Pursuant to the MPIM, Chapter 8, Section 8.4.2:

For a procedure to be classified as probability sampling, the following two features must apply:

• It must be possible, in principle, to enumerate a set of distinct samples that the procedure is capable of selecting if applied to the target universe.  Although only one sample will be selected, each distinct sample of the set has a known probability of selection….
• Each sampling unit in each distinct possible sample must have a known probability of selection.  In the case of statistical sampling for overpayment estimation, one of the possible samples is selected by a random process according to which each sampling unit in the target population receives its appropriate chance of selection.  The selection probabilities do not have to be equal, but they should all be greater than zero….¹⁰

Further, “If a particular probability sample is properly executed, i.e., defining the universe, the frame, the sampling units, using proper randomization, accurately measuring the variables of interest, and using the correct formulas for estimation, then assertions that the same or that the resulting estimates are ‘not statistically valid’ cannot legitimately be made.  In other words, a probability sample and its results are always valid.”¹¹

Frustratingly for providers and suppliers, CMS does not require that its contractors comply with all aspects of the guidelines set forth in the MPIM.  As clarified by Change Request 10067 (upholding CMS’s longstanding policy), “Failure by a contractor to follow one or more of the requirements contained herein does not necessarily affect the validity of the statistical sampling that was conducted or the projection of the overpayment …. Failure by a contractor to follow one or more of the requirements contained herein may result in review by CMS of their performance, but should not be construed as necessarily affecting the validity of the statistical sampling and/or the projection of the overpayment.”¹²

B.     Updates to the MPIM

Change Request 10067, Transmittal 828 amended Chapter 8, Section 8.4 of the MPIM to provide increased specificity in CMS’s instructions to Medicare contractors regarding the use of statistical sampling for overpayment estimation.  In particular, clarifications were adopted and implemented concerning when Medicare contractors may use statistical sampling; how to define the universe, sampling unit and sampling frame; Medicare contractors’ documentation requirements; and recovery from providers and suppliers when the estimated overpayment exceeds $500,000 or is an amount greater than or equal to 25 percent of the provider’s/supplier’s Medicare revenue received over the preceding 12 months.

1.      Determining When Statistical Sampling May be Used

Section 935 of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA)¹³ limits the situations in which a Medicare contractor may use statistical sampling and extrapolation as follows:

            (3) LIMITATION ON THE USE OF EXTRAPOLATION – A Medicare contractor may not use extrapolation to determine amounts to be recovered by recoupment, offset or otherwise, unless the Secretary determines that –

(A) There is a sustained or high level of payment error; or

(B)  Documented educational intervention failed to correct the payment error.

One key clarification set forth in revised Chapter 8 of the MPIM relates to when statistical sampling shall and may be used.  Pursuant to Section 8.4.1.4 of Chapter 8 of the MPIM, a contractor shall use statistical sampling when the criteria set forth in Section 935 of the MMA are satisfied, i.e., “when it has been determined that a sustained or high level of payment error exists.”  The prior version of the MPIM did not quantify what error rate would constitute a “sustained or high level of payment error.”  As revised, section 8.4.1.4 now specifies that a sustained or high level of payment error shall be determined to exist in a multitude of scenarios, including but not limited to the following:

• The contractor (or other medical review) identifies an error rate greater than or equal to 50 percent;
• The provider or supplier has a history of non-compliance for the same or similar issue;
• CMS may approve the use of statistical sampling in connection with a payment suspension;
• The contractor obtains information of payment errors via law enforcement investigations;
• Current or former employee(s) of the provider or supplier alleges that the provider or supplier has engaged in wrongdoing;
• The Department of Health and Human Services’ Office of Inspector General (OIG) identifies a sustained or high level of payment error during an audit or evaluation; and
• Data analysis.¹⁴

On the other hand, statistical sampling and extrapolation may be used “after documented educational intervention failed to correct the payment error,” i.e., if the provider or supplier does not demonstrate adequate improvement through the Targeted Probe and Educate (TPE) process.¹⁵

2.      Defining the Universe, the Sampling Unit, and the Sampling Frame

Revisions to Chapter 8 Section 8.4.3.2 of the MPIM also clarified the definitions of an audit’s universe, sampling unit and sampling frame.  “The universe includes all claim lines that meet the selection criteria.  The sampling frame is the listing of sample units, derived from the universe, from which the sample is selected.”  A universe may, under certain circumstances, include items excluded from the construction of the sample frame.  These circumstances include but are not limited to the following:  (1) where a claim or claim line has been subject to prior review; (2) where the sample unit as defined necessitates eliminating certain claims or claim lines; or (3) where a claim or claim line is attributed to sample units for which there is no payment.  The “sample unit” often is a claim.  However, other sampling units exist, e.g., “a cluster of claims, as, for example, the claims associated with a patient, the claims associated with a treatment ‘day,’ or any other sampling unit appropriate for the issue under review.”  CMS requires that Medicare contractors maintain information necessary to recreate the sample frame and sample with its case documentation.¹⁶

3.      Documentation

Chapter 8, Section 8.4.4.4 of the MPIM requires the Medicare contractor to maintain complete documentation of the sampling methodology followed.  Chapter 8, Section 8.4.4.5 of the MPIM requires that the Medicare contractor maintain all documentation to allow the overpayment calculation to be replicated and validated.¹⁷

4.      Recovery from the Provider or Supplier

Via Change Request 10067, Transmittal 828, MPIM Chapter 8, Section 8.4.7.1 was revised to include safeguards to protect the business of an audited provider or supplier.  Revisions to Section 8.4.7.1 include the following: 

The contractor shall obtain approval from CMS prior to issuing a findings letter to the provider/supplier when the estimated overpayment exceeds $500,000 or is an amount that is greater than 25% of the provider’s/supplier’s Medicare revenue received within the previous 12 months.  Accordingly, the contractor shall contact its BFL/COR prior to issuing the findings letter to the provider/supplier.  The contractor shall provide the BFL/COR a summary of the investigation (if applicable), any prior history (if applicable), the medical review results (including denial reasons), and the extrapolated overpayment amount in a format agreed upon by the BFL/COR.  Extrapolated overpayments meeting one of these criteria shall not be issued unless prior approval is supplied by the BFL/COR.¹⁸

Therefore, in those situations in which an estimated overpayment exceeds $500,000 or is equal to or greater than 25 percent of the provider’s or supplier’s Medicare revenues received over the preceding year, the MPIM requires that the contractor contact CMS via its BFL/COR representative to obtain approval to issue a findings letter.  Prior to issuance of Change Request 10067, Transmittal 828 no such protections existed.

C.    Successful Challenges to the Validity of Statistical Samples and Extrapolation

Increasingly, after an Administrative Law Judge (ALJ) has issued a decision ruling a statistical sample to be invalid, CMS has decided, on its “own motion,” to review the ALJ’s decision – alleging that it contained an error of law material to the outcome of the claims, and/or alleging that the decision is not supported by the preponderance of the evidence.¹⁹  Acknowledging the flexibility within the MPIM, Council decisions often overrule ALJ decisions that rule a statistical sample and corresponding projection to be invalid.²⁰

Relying on language within the MPIM that “Failure by a contractor to follow one or more of the requirements… should not be construed as necessarily affecting the validity of the statistical sampling and/or the projection of the overpayment,”²¹ the Council’s position seems to be that there are few, if any, errors or omissions that a contractor could make in performing a statistical sample and projection that would be significant enough to invalidate a contractor’s sample and projection to estimate an overpayment.  In other words, if the contractor produces enough information to describe the process followed by the contractor in conducting its sample and projection, the Council has demonstrated reluctance to find the process invalid, even when confronted by the opinions of experts in the field of statistics to the contrary.²²

Despite the high bar set by the Council for a provider or supplier to successfully challenge the validity of the sample and a corresponding projection to estimate an overpayment, attorneys representing providers and suppliers appealing an extrapolated overpayment determination should exercise their procedural due process rights to challenge the validity of the sample and corresponding projection. 

1.      Request Copies of the Entire Contractor Case File 

As noted above, the MPIM requires Medicare contractors to maintain documentation to allow another to recreate the sample frame and sample, including information regarding the sampling methodology followed.²³  The contractor also must maintain documentation to allow an overpayment calculation to be replicated and validated.²⁴  When the contractor provides such information to an appellant, the information is invaluable to the statistical expert retained to assist with the appeal.  If the contractor fails to provide such information or if there are discrepancies within it, the Council has used this failure to maintain and provide appropriate documentation to an appellant as a basis to not uphold a statistical projection.  For example:

• In the case of Podiatric Medical Associates, Docket Number M-10-230 (decided June 22, 2010), the Council found:

It is well-established that due process affords an appellant provider the right to examine audit results in order to mount a proper challenge in the appeals process. Not only was pertinent audit-related information withheld from the appellant, the inaccessibility of the CDs in the record forwarded to the Council by the ALJ leads to the conclusion that the record upon which the ALJ relied in upholding audit extrapolation was incomplete. An ALJ decision must be based on evidence offered at the hearing or otherwise admitted into the record. 42 C.F.R. § 405.1046(a). Absent supporting evidence, the appellant is deprived of its ability to review the extrapolation in question.

For these reasons, the Council reverses the extrapolation of the audit results at issue here.²⁵

• In the case of Global Home Care, Docket Number M-11-116 (decided January 11, 2011), the Council found:

The record in this case does not contain complete documentation to support the use of statistical sampling and extrapolation to calculate Medicare’s overpayment to the appellant. The sampling frame cannot be recreated from the documentation present. Without this basic documentation, a provider does not have the information and data necessary to mount a due process challenge to the statistical validity of the sample, as is its right under CMS Ruling 86-1.²⁶

• In the case of John Sanders, M.D., Docket Number M-11-869 (Decided May 12, 2011), the Council found:

[T]here were two sampling issues raised by the appellant, which were neither sufficiently explained nor corrected by the [contractor], and which were the subject of testimony from the independent expert statistician.  These two errors are not addressed in or rebutted by the CMS memorandum.  The errors are: 1) the [contractor] provided the independent statistical expert with sample data which assigned some claims to the wrong stratum; and 2) the [contractor] provided the independent expert with a second CD containing an Excel set of sample data with significant discrepancies from the first set up data, and the [contractor] was unable to clarify the discrepancies, to identify which set of data was applicable, or to explain the significance of the second set of data.  The Council finds that these errors and inconsistencies in the original sampling preclude use of the sample to extrapolate an overpayment to the full universe of claims.²⁷

2.      Engage an Expert in Statistics

When a Medicare contractor chooses to use a statistical sample and projection to estimate an overpayment, MPIM Chapter 8, Section 8.1.4.5 requires the sampling methodology to be reviewed and approved by a statistician (or person with equivalent experience in probability sampling and estimation).  A contractor’s statistician must meet the following educational and professional qualifications:

• Have significant coursework in probability and estimation methodologies, and at least 10 years of experience applying methods of statistical sampling and interpreting the results.
• Possesses a Bachelor’s degree (e.g., B.A., B.S.) in statistics or in some related field (e.g., psychometrics, biostatistics, econometrics, mathematics) with significant coursework in probability and estimation methodologies, and at least 6 years of experience applying methods of statistical sampling and interpreting the results.
• Possesses a Master’s degree (e.g., M.A., M.S.) in statistics or in some related field with significant coursework in probability and estimation methodologies, and at least 4 years of experience applying methods of statistical sampling and interpreting the results.
  
• Possess a Doctoral degree in statistics or in some related field with significant coursework in probability and estimation methodologies, and at least 1 year of experience applying methods of statistical sampling and interpreting the results.²⁸
  

In challenging the validity of a statistical sample and projection to estimate an overpayment, it is essential to engage a qualified expert to review the contractor’s case file and opine regarding the validity of the statistical sample and projection.  The appellant’s expert statistician should satisfy the educational and professional qualifications required of the contractor’s statistician.  An adjudicator’s determination as to whether a statistical sample and projection is valid is based on a comparison of the experts’ testimonies.²⁹  The appellant’s expert statistician should prepare a written report analyzing the validity of the sample and projection, which should be submitted as soon as possible in the appeals process (as, at times, a statistical sample and projection may be found to be invalid at stages in the appeals process prior to the ALJ stage of appeal).  It is also important that the appellant’s expert statistician is able to explain to the ALJ, in lay terms, the rationale for his or her findings should the appeal proceed to the ALJ stage of appeal.

3.      Use Medicare Appeals Regulations

a.      Requests for ALJ Hearing

On January 17, 2017, the Department of Health and Human Services (HHS) issued a final rule entitled “Medicare Program: Changes to the Medicare Claims and Entitlement, Medicare Advantage Organization Determination, and Medicare Prescription Drug Coverage Determination Appeals Procedures” (Final Rule).³⁰  The Final Rule established new regulatory requirements for requests for ALJ hearing involving statistical sampling and projection, which are codified at 42 C.F.R. § 405.1014 (a) (3). 

Pursuant to 42 C.F.R. § 405.1014 (a) (3), an appellant’s request for ALJ hearing (involving statistical sampling and projection to estimate an overpayment) must: (1) include all of the identifying information for each beneficiary in the sample as set forth in paragraphs (a) (1) and (a) (2) of 42 C.F.R. § 405.1014;³¹ (2) be filed for all appealed claims within 60 calendar days from the date the party receives the last reconsideration for the sample claims (if the sampled claims were not addressed by a single reconsideration); and (3) set forth the reasons the appellant challenges the validity of the statistical sample and extrapolation.  The Final Rule contemplates that, if an appellant is unable to summarize his or her reasons for disagreement with the statistical sampling methodology and/or projection, the appellant may submit a position paper or other documentation to explain its rationale for the challenge.³²  This may be accomplished via the submission of the expert statistician’s report. 

b.      Contractors’ Participation in an ALJ Hearing

The Final Rule also placed limitations on the number of Medicare contractors permitted to serve as a participant or party in an ALJ proceeding, and it clarified the roles for ALJ hearing participants and parties.³³  The following chart sets forth the roles and responsibilities of a contractor if it chooses to participate in the ALJ proceedings as a non-party participant or as a party:

During an ALJ hearing, attorneys representing providers and suppliers must be mindful of these regulations and be prepared to object to contractor participation that is outside of the scope of the contractor’s permitted activities.  For example, if a Medicare contractor elects to participate in an ALJ hearing as a non-party participant, the contractor may not cross-examine the appellant (and vice-versa). 

D. Conclusion

The reality for providers and suppliers appealing overpayment demands involving statistical sampling and extrapolation is that the presumption of validity is challenging to overcome.  Change Request 10067, Transmittal 828 does little to provide a path forward for appellants contesting the validity of statistical samples and extrapolations.  However, there is potential that contractor documentation deficiencies exist in connection with a statistical sample and extrapolation, which could increase the potential for a successful challenge.

1. Change Request 10067, Transmittal 828 (September 28, 2018), available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2018Downloads/R828PI.pdf.The MPIM, Chapter 8,  available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/pim83c08.pdf.
2.  Id. Note, although the Comprehensive Error Rate Testing (CERT) auditor utilizes statistical sampling across all fee-for-service claims to identify claims’ error rates, it does not use statistical sampling to estimate the amount of an overpayment at the provider level.  See generally, MPIM, Chapter 12, “The Comprehensive Error Rate Testing Program.”
3.  Change Request 10067, Transmittal 828 (September 28, 2018), available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2018Downloads/R828PI.pdf.The MPIM, Chapter 8,  available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/pim83c08.pdf.
4.  CMS was previously known as the Health Care Financing Administration, or HCFA.  “HCFA Rulings are decisions of the Administrator that serve as precedent final opinions and orders and statements of policy and interpretation….HCFA Rulings are binding on all HCFA components, HCFA contractors, the Provider Reimbursement Review Board, and Administrative Law Judges who hear Medicare appeals.”  See HCFA Ruling 86-1, available at https://www.cms.gov/Medicare/Appeals-and-Grievances/OrgMedFFSAppeals/Downloads/HCFAR861v508.pdf.  See also 42 C.F.R. § 405.1063.
5.  HCFA Ruling 86-1 at 14. 
6. Following a determination that a healthcare provider or supplier has been overpaid, the provider or supplier may contest such a finding via a five-stage Medicare Part A and Part B appeals process: Stage 1:  Following receipt of an initial determination, a dissatisfied party may file a request for “redetermination.”  A request for redetermination must be submitted in writing to the Medicare Administrative Contractor (MAC) that issued the initial determination.  See Section 1869 (a) (3) (C) of the Social Security Act (42 U.S.C. § 1395ff (a) (3) (C)), 42 C.F.R. §§ 405.942 and 405.950, and MCPM, Ch. 29, § 310, available at http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c29.pdf. Stage 2:  If a party is dissatisfied with a redetermination decision, it may file a request for “reconsideration.”  A request for reconsideration must be submitted in writing to the qualified independent contractor (QIC) identified in the redetermination decision.  See Sections 1869 (b) and (c) of the Social Security Act (42 U.S.C.  §§ 1395ff (b) and (c)), 42 C.F.R. § 405.970 and MCPM, Ch. 29, § 330.  Stage 3:  If a party is dissatisfied with a reconsideration decision, it may file a request for an OMHA ALJ hearing.  See Sections 1869 (b) (1) and (d) (1) of the Social Security Act (42 U.S.C. §§ 1395ff (b) (1) and (d) (1)), 42 C.F.R. §§ 405.1000-1016, and MCPM, Ch. 29, § 330. Stage 4:  If a party is dissatisfied with an ALJ’s decision, it may file a request for Medicare Appeals Council (Council) review.  See Sections 1869 (b) (1) of the Social Security Act (42 U.S.C. §§ 1395ff (b) (1)), 42 C.F.R. §§ 405.1100-1132, and MCPM, § 340.Stage 5:  If a party is dissatisfied with the Council decision, it may file a request for federal district court review.  See Section 1869 (b) (1) of the Social Security Act (42 U.S.C. § 1395ff (b) (1)), 42 C.F.R. § 405.1136 and MCPM, Ch. 29, § 345.
7. See In the case of Sans Bois Health Services, Inc., Docket Number:  M-14-2629 (October 30, 2014), available at https://www.hhs.gov/sites/default/files/static/dab/decisions/council-decisions/m-14-2629.pdfwhich states, “The burden is on the appellant to establish sample invalidity, not on the contractor to prove that a sample is valid.”
8. HCFA Ruling 86-1 at 11.
9.  ALJs and the Council are not bound by Local Coverage Determinations (LCDs) or CMS program guidance, including manual instructions.  However, if an ALJ or the Council declines to follow a policy in a particular case, the ALJ or Council decision must explain why the policy was not followed.  42 C.F.R. § 1062.
10.  See Section 8.4.2 – Probability Sampling, Change Request 10067, Transmittal 828 (September 28, 2018), available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2018Downloads/R828PI.pdf (italicized language revised pursuant to the Change Request).
11.  Id.
12.  See Section 8.4.1.4 – Determining When Statistical Sampling May be Used, Change Request 10067, Transmittal 828 (September 28, 2018), available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2018Downloads/R828PI.pdf (italicized language revised per the Change Request).
13.  42 U.S.C. § 1395ddd (f)(3).
14.  If a contractor identifies an overpayment solely based on data analysis, it must consult with its Contracting Officer’s Representative (COR) Business Function Lead (BFL) regarding the alleged overpayment.  It must also consult with its COR BFL on whether statistical sampling and extrapolation are necessary to identify the alleged overpayment.  See MPIM, Chapter 8, Section 8.4.1.4. Note that pursuant to Section 1893 (f) (3) of the Social Security Act, “there shall be no administrative or judicial review under section 1869, section 1878, or otherwise, or determinations by the Secretary of sustained or high levels of payment errors.”  See also In the case of John Shimko, DPM d/b/a Lakeside Foot Clinic (October 15, 2009), available at https://www.hhs.gov/sites/default/files/static/dab/decisions/council-decisions/lakeside_footclinic.pdf.  However, the statute does not preclude judicial or administrative review of a decision to use statistics when the requisite determination of a high level of payment error or lack of documented educational intervention has not occurred in the first instance.  In fact, in one Council case, the Council specifically addressed this issue and found that when CMS or a Medicare contractor fails to make the requisite determination with regard to a provider in the first instance, the ALJ is entitled to disregard the projection.  See In the case of Cabarrus Podiatry Clinic (December 14, 2007).
15.  The TPE process is as follows: (1) The MAC issues a letter to the provider or supplier chosen for audit; (2) the MAC reviews 20-40 claims and supporting medical records; (3) if claims are denied, a one-on-one education session occurs; (4) the provider and supplier is provided a 45-day period to implement changes and improve compliance; (5) the process may repeat two additional times.  If the provider or supplier is able to demonstrate compliance, it will not be reviewed again for at least one year on the selected topic.  However, if the provider or supplier is unable to come into compliance, it will be referred to CMS for evaluation of the next steps, which may include “100 percent prepay review, extrapolation, referral to a Recovery Auditor [RAC], or other action.”  https://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/Medical-Review/Targeted-Probe-and-EducateTPE.html
16.  See Section 8.4.3.2 – Defining the Universe, the Sampling Unit, and the Sampling Frame, Change Request 10067, Transmittal 828 (September 28, 2018), available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2018Downloads/R828PI.pdf
17.  See Section 8.4.4.4 – Documentation of Sampling Methodology and Section 8.4.4.5 – Maintenance of Documentation, Change Request 10067, Transmittal 828 (September 28, 2018), available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2018Downloads/R828PI.pdfThe prior version of 8.4.4.5 was entitled “Informational Copies to Primary GTL, Associate GTL, SME or CMS RO,” and required the following: The PSC [program safeguard contractor, which is now known as the Uniform Program Integrity Contractor (UPIC)] or ZPIC [zone program integrity contractor, which is now known as the Uniform Program Integrity Contractor (UPIC)] BI [benefit integrity] units or the contractor MR [medical review] units shall send information copies of the statistician-approved sampling methodology to their Primary GTL [government task leader], Associate GTL, SME, or CMS RO [Regional Office].  The Primary GTL, Associate GTL, SME or CMS RO will keep the methodology on file and will forward to CO [contracting officer] upon request.  If this sampling methodology is applied routinely and repeatedly, the PSC or ZPIC BI units or the contractor MR units shall not repeatedly send the methodology to the Primary GTL, Associate GTL, SME or CMS RO.
18.  See Section 8.4.7.1 – Recovery from Provider or Supplier, Change Request 10067, Transmittal 828 (September 28, 2018), available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2018Downloads/R828PI.pdf (italicized language revised per the Change Request).
19.  See 42 C.F.R. §§ 405.1110, which states: (a) General rule. The Council may decide on its own motion to review a decision or dismissal issued by an ALJ or attorney adjudicator. CMS or any of its contractors may refer a case to the Council for it to consider reviewing under this authority anytime within 60 calendar days after the date of an ALJ's or attorney adjudicator's decision or dismissal. (b) Referral of cases. (1) CMS or any of its contractors may refer a case to the Council if, in their view, the decision or dismissal contains an error of law material to the outcome of the claim or presents a broad policy or procedural issue that may affect the public interest. CMS may also request that the Council take own motion review of a case if -- (i) CMS or its contractor participated in the appeal at the OMHA level; and (ii) In CMS' view, the ALJ's or attorney adjudicator's decision or dismissal is not supported by the preponderance of evidence in the record or the ALJ or attorney adjudicator abused his or her discretion….
20.  See e.g., Overpayment Claims, available at  https://www.hhs.gov/about/agencies/dab/decisions/council-decisions/index.htmlSignificantly, Council decisions are binding only on the parties to a particular appeal, and they do not have precedential value, unless the Chair of the Department Appeals Board (DAB) designates a Council decision as precedential.  82 Fed. Reg. 4974 at 4978 (January 17, 2017), available at https://federalregister.gov/documents/2017/01/17/2016-32058/medicare-programchanges-to-the-medicare-claims-and-entitlementmedicare-advantage-organization. See also 42 C.F.R. § 401.109.  Notice of decisions designated as precedential will be made through the Federal Register and posted on a page of HHS’s website.  82 Fed. Reg. at 4978.  To date, no Council decisions have been designated as precedential; however, many ALJs effectively treat all Council decisions as precedential.  See https://www.hhs.gov/blog/2017/10/27/medicare-appeals-precedent-rule.html.The DAB was established in 1973. It has authority over disputes arising under many HHS programs and has experience issuing precedential determinations within areas of its jurisdiction (e.g., Medicare enrollment appeals arising under 42 C.F.R. part 498 and National Coverage Determination (NCD) and LCD appeals arising under 42 C.F.R. part 426). The Council has been housed within the DAB since 1995 and serves under the leadership of the DAB chair. 82 Fed. Reg. at 4877.
21.  See Section 8.4.1.4 – Determining When Statistical Sampling May be Used, Change Request 10067, Transmittal 828 (September 28, 2018), available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2018Downloads/R828PI.pdf (italicized language revised per the Change Request).
22.  See, e.g.: In the case of Sans Bois Health Services, Inc., Docket Number M-14-2629 (Decided October 30, 2014); In the case of Anthony Pagliarulo, M.D., Docket Number M-14-2132 (Decided September 26, 2014); and In the case of Robert D. Lesser, M.D. & Associates, Docket Number M-11-2354 (Decided December 7, 2011), all available at https://www.hhs.gov/about/agencies/dab/decisions/council-decisions/index.htmlNote that Change Request 10067, Transmittal 828 included revisions to specifically counter arguments that had proven successful when raised by Medicare appellants at the ALJ stage of appeal.  In particular, to address ALJ decisions that found statistical sampling and extrapolation to be invalid based on a non-normal distribution of overpayments, Section 8.4.1.3 Steps for Conducting Sampling was revised as follows: The major steps in conducting statistical sampling are – (1) Identifying the provider/supplier (2) Identifying the period to be reviewed; (3) Defining the universe (target population) and the sampling unit, and constructing the sampling frame; (4) Assessing the distribution of the paid amounts in the sample frame to determine the sample design; it is very likely that the distribution of the overpayments will not be normal.  However, there are many sampling methodologies (for example, use of the Central Limit Theorem) that may be used to accommodate non-normal distributions. The statistician should state the assumptions being made about the distribution and explain the sampling methodology selected as a result of that distribution.(5) Performing the appropriate assessment(s) to determine whether the sample size is appropriate for the statistical analyses used, and identifying, relative to the sample size used, the corresponding confidence interval; (6) Designing the sampling plan and selecting the sample from the sampling frame; (7) Examining each of the sampling units and determining if there was an overpayment or an underpayment; an (8) Estimating the overpayment. When an overpayment has been determined to exist, the contractor shall follow applicable instructions for notification and collection of the overpayment, unless otherwise directed by CMS. For each step, the contractor shall provide complete and clear documentation sufficient to explain the action(s) taken in the step and to replicate, if needed, the statistical sampling.  Section 8.4.1.3 – Steps for Conducting Statistical Sampling, Change Request 10067, Transmittal 828 (September 28, 2018), available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2018Downloads/R828PI.pdf (italicized language revised pursuant to the Change Request). See e.g., In the case of Anthony Pagliarulo, M.D., Docket Number M-14-2132 (Decided September 26, 2014), available at https://www.hhs.gov/sites/default/files/static/dab/decisions/council-decisions/m-14-2132.pdf. In Maxmed Healthcare Inc. v. Burwell, 152 F.Supp.3d 639 (W.D. Tex. 2016), the federal district court for the Western District of Texas upheld the Council’s analysis finding a statistical sample and projection to be valid after the ALJ found it to be invalid, and the Council reversed.  In Maxmed, the court noted that it must give “substantial deference to the [Council’s] interpretation.”  Maxmed Healthcare Inc. v. Burwell, 152 F.Supp.3d 619 at 625 (WD Tex. 2016) (citing Girling Health Care v. Shalala, 85 F.3d 211 at 215 (5^th Cir. 1996)).
23.  MPIM, Chapter 8, § 8.4.3.2 and § 8.4.4.4.
24.  MPIM, Chapter 8, § 8.4.4.5.
25.  In the case of Podiatric Medical Associates, Docket Number M-10-230 (decided June 22, 2010), available at https://www.hhs.gov/sites/default/files/static/dab/decisions/council-decisions/case_podiatric_medical.pdf
26.  In the case of Global Home Care, Docket Number M-11-116 (decided January 11, 2011), available at https://www.hhs.gov/sites/default/files/static/dab/decisions/council-decisions/global_home_care_case.pdf
27.  In the case of John Sanders, M.D., Docket Number M-11-869 (Decided May 12, 2011), available at https://www.hhs.gov/sites/default/files/static/dab/decisions/council-decisions/m-11-869.pdf.But see also, In the case of Anthony Pagliarulo, M.D., Docket Number M-14-2132, (Decided September 26, 2014), finding that, even where multiple universe files were supplied, the statistical sample and projection were valid.  https://www.hhs.gov/sites/default/files/static/dab/decisions/council-decisions/m-14-2132.pdf
28.  See Section 8.4.1.5 – Consultation with a Statistical Expert, Change Request 10067, Transmittal 828 (September 28, 2018), available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2018Downloads/R828PI.pdf (italicized language revised pursuant to the Change Request).
29.  See e.g., Maxmed Healthcare Inc. 152 F.Supp.3d 639, which found that the appellant’s expert witness conclusion that the sampling units were not independent was not supported because “only one of the three expert witnesses opined that the sampling units are, in fact, dependent.”
30.  82 Fed. Reg. 4974.
31.  Pursuant to 42 C.F.R. § 405.1014: (a) Content of the request. (1) The request for an ALJ hearing or a review of a QIC dismissal must be made in writing. The request must include all of the following— (i) The name, address, and Medicare health insurance claim number of the beneficiary whose claim is being appealed, and the beneficiary's telephone number if the beneficiary is the appealing party and not represented. (ii) The name, address, and telephone number, of the appellant, when the appellant is not the beneficiary. (iii) The name, address, and telephone number, of the designated representative, if any. (iv) The Medicare appeal number or document control number, if any, assigned to the QIC reconsideration or dismissal notice being appealed. (v) The dates of service of the claim(s) being appealed, if applicable. (vi) The reasons the appellant disagrees with the QIC's reconsideration or other determination being appealed. (2) The appellant must submit a statement of any additional evidence to be submitted and the date it will be submitted.
32.  82 Fed. Reg. at 5112-5113.
33.  42 C.F.R. §§ 405.1010 and 405.1012.