New Inspector General Overhauling Agency Use of Statistical Extrapolation and Settling Cases

Inspector General Stuart Bowen Jr.
Inspector General Stuart Bowen Jr.

TDMR has learned that the new Health and Human Services Commission Inspector General Stuart Bowen, Jr. has been taking on and overhauling the agency’s use of statistical sampling and extrapolation. This is the most controversial tool that the agency had been using to demand multi-million dollar settlements from Medicaid providers under investigation.

Statistical extrapolation – a few things used to represent many

Extrapolation is the statistical method in which a small number out of a large body of cases is reviewed and the results are used to represent the whole.  Per theory, the accuracy of the results depends entirely on the small sample being chosen at “random” from the whole.   If the original sample is skewed or picked wrongly, the result is “wrong.”

Former IG and deputy claim hundreds of millions of dollars of fraud, waste and abuse

Under the reign of then-Inspector General Doug Wilson and his former deputy Jack Stick, large and small providers would be audited and it was common that the error rate found in less than 70 cases would be used.

This alleged error rate was then extrapolated onto all of the patients seen by the practice or business over a multi-year period of time—regardless of whether the patients were treated by the same health care professional or, if the business had multiple locations, at the same clinic location. So those 70 cases came to represent thousands.

The result was almost always the same.  The practice or business was tagged with millions of dollars of alleged overpayment and penalties.

Wilson and Stick used extrapolation claims to obtain increased OIG funding and size

Wilson and Stick’s extrapolations gained notoriety, and infamy.  Both testified before the Legislature that they had identified many hundreds of millions of dollars in overpayments to providers such as dentists. Their testimony in 2013 excited the Legislature and laid the groundwork for a massive expansion of the OIG, and the Texas Attorney General’s, Medicaid Fraud divisions.

Allegations of large-scale fraud unravel – $16 million claim settled for $39,000

However, the truth and accuracy of OIG’s sampling and extrapolation procedures began to unravel as hundreds of dentists began fighting OIG allegations that, once extrapolated, often resulted in claims that the dentists had been overpaid by millions of dollars.

As reported by TDMR in October 2014, OIG settled the case of Dr. Rachel Trueblood for some $39,000 after originally demanding a $16 million overpayment for her dental Medicaid billings.  The apparent reason for this massive about-face was that Trueblood’s attorneys had requested information about the extrapolation calculations used in coming up with the $16 million demand.

Criminal investigation into OIG conduct still ongoing

It then came to light that OIG senior actuary Brad Nelson had fabricated the “random sample” and the extrapolation data. It was bogus.  As a result, the OIG offered to settle the case based only on the charts it actually audited, and without and reliance on Nelson’s extrapolation work. Apparently, the Texas Rangers are still conducting a criminal investigation into Nelson and his conduct.

New IG promises to review and dismiss cases

When Inspector General Bowen replaced Wilson in January 2015, he assured providers that the controversial use of extrapolation would be fully reviewed, and unwarranted prosecutions would be dismissed.

New statistical system instituted

We have learned that on March 3, 2015, Bowen rejected the then-current OIG sampling and extrapolation process and replaced it with a system widely used by the United States government and by many other states.  As a result, OIG staff have been quietly reviewing hundreds of cases that have languished for years.

True to Bowen’s word, the OIG is working to quickly settle those cases where the prior administration’s flawed extrapolation process was used.

Reasonable settlements being made to end long outstanding cases

This has resulted in “Trueblood-like” settlement offers, where the agency rejects the prior administration’s multimillion dollar overpayment claims, and simply asks the provider to either repay the alleged amount of overpayment identified by the audit of the small patient sample, or risk a new audit under the new sampling and extrapolation process.

Often, these new settlement offers are less than 5% of the original extrapolated amount, with multimillion dollar claims being settled for tens of thousands of dollars.

Praise for new Inspector General

Sometimes it is fitting to thank our government agencies for doing their job properly. In the case of statistical extrapolation, the new Inspector General appears to be working to correct his predecessor’s deplorable and scandalous actions.

TDMR hopes General Bowen’s actions will benefit all providers who were unjustly targeted for millions of dollars, and not just those who were strong enough or lucky enough to fight until he arrived.

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