Revenue Cycle

RAC extrapolation: Potential impact and how to prepare

Recovery Auditor Report, March 4, 2010

During the demonstration project, RACs chose not to apply the process of extrapolation, and while they have yet to use it during the permanent program, the fact remains that it is still a potential threat. Understanding how the extrapolation process works will prove to be valuable to providers in the end.

Extrapolation is the use of sampling a specific set of statistics to project an overall error rate to determine overpayment amounts made to a facility. For RACs to use extrapolation there must be a determination of sustained or high level of payment error, or documentation that past educational interventions have failed to correct the payment error, according to the Program Integrity Manual. A RAC must then use a trained statistician, or someone with statistical expertise, to choose a valid random sample in the same manner that CMS carriers, FIs and MACs are instructed to do. The new issue review board must then approve the methodology for the extrapolation process to begin. 

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