Calculating the Estimated Overpayment

8.4.5 - Calculating the Estimated Overpayment (Rev. 11962; Issued: 04-21-23; Effective: 05-22-23; Implementation: 05-22-23) The results of the sampling unit reviews are used to calculate an estimate of the overpayment amount. In most situations, the lower limit of a one-sided 90 percent confidence interval should be used as the amount of overpayment to be demanded for recovery from the provider/supplier. This conservative procedure incorporates the uncertainty inherent in the sampling design and works to the financial advantage of the provider/supplier. That is, it yields a demand amount for recovery that is very likely less than the true amount of overpayment, and it allows a reasonable recovery without requiring the tight precision that might be needed to support a demand for the point estimate. However, the contractor is not precluded from demanding the point estimate where high precision has been achieved, and when there are statistically sound reasons for the demand. Standard methods for calculating a one-sided 90 percent confidence interval, such as those based on the central limit theorem or others found in standard statistics texts and journals, are generally acceptable. It may not be feasible to guarantee 90 percent coverage in all circumstances (i.e., that the lower bound of the 90 percent confidence interval is below the true overpayment in 90 percent of audits) due to the use of theoretical assumptions underlying standard statistical methods. Nonetheless, application of these methods is generally appropriate. In some cases, the point estimate or the lower bound of the estimate for the total overpayment in the sampling frame may be greater than the total payment in the sampling frame. This is expected to occur frequently when the true error rate is high. Nonetheless, the use of the lower bound to calculate the demand amount continues to operate in accounting for uncertainty in the estimate and providing a methodology that is generally favorable toward the provider. If the point estimate of overpayment is greater than the total payment in the sampling frame, but the lower bound is less than total payment, then the lower bound may be demanded. If the lower bound of the estimated overpayment is greater than total payment, the demand amount shall be reduced from the lower bound to the total payment amount in the sampling frame to avoid demanding more than originally paid. The result of each sampling unit review shall be recorded, except that a sampling unit’s overpayment shall be set to zero if there is a limitation on liability determination made to waive provider/supplier liability for that sampling unit (per provisions found in section 1879 of the Social Security Act (the Act)) or there is a determination that the provider/supplier is without fault as to that sampling unit overpayment (per provisions found in section 1870 of the Act). Sampling units for which the requested records were not provided are to be treated as improper payments (i.e., as overpayments). Sampling units that are found to be underpayments, in whole or in part, are recorded as negative overpayments and shall be used in calculating the estimated overpayment.