Are PCG’s Extrapolated Medicaid Audits in Violation of State Statute?

Public Consulting Group (PCG) is one of the contracted entities conducting Medicaid post-payment audits in North Carolina. I’ve heard rumors that NC Department of Health and Human Services (DHHS) is not renewing PCG’s contract, although I have found no evidence to corroborate this rumor.

Regardless, right now, PCG is here and the Medicaid post-payment audits continue. And PCG continues to extrapolate.  For more information as to the extrapolations, see my blog: How Does $100 Become $100,000? Check for Clusters!

But is PCG legally allowed to extrapolate? Oh, of course it is allowed to legally extrapolate!! The contract between DHHS and PCG allows PCG to extrapolate, right? But…what if….the extrapolations are not being conducted legally?

N.C. Gen. Stat. 108C-5 states, in pertinent part:

“(i) Prior to extrapolating the results of any audits, the Department shall demonstrate and inform the provider that (i) the provider failed to substantially comply with the requirements of State or federal law or regulation or (ii) the Department has credible allegation of fraud concerning the provider.

Prior to extrapolating, the Department must demonstrate and inform…

Prior to…

Of all the Tentative Notices of Overpayment (TNO) that I have seen, the actual TNO states the extrapolated amount and states that the audit is extrapolated because “(1) the provider  failed to substantially comply with the requirements of State or federal law or regulation or (ii) the Department has credible allegation of fraud concerning the provider.”  There is no more detail.  The TNO literally regurgitates the statutory language into the TNO.  Does that constitute “demonstrating”?  Better yet, if a provider receives the information that “(1) the provider  failed to substantially comply with the requirements of State or federal law or regulation or (ii) the Department has credible allegation of fraud concerning the provider” CONCURRENTLY with receipt of the extrapolated amount, does that notice meet the statutory criteria of PRIOR TO?

Question #1: Does regurgitating the statutory language meet the requirement that the State demonstrate the noncompliance?

Question #2: Does the Department sending the reason for the extrapolation concurrently with the extrapolation meet the statutory requirement to inform the provider prior to extrapolating?

Let’s start with Question #1…

Last night I was checking my daughter’s homework.  She had to read an article on Abraham Lincoln.  Then she had to answer reading comprehension questions about the article.  One question was something like, “What is this article primarily about?”  The article discussed the Civil War, Lincoln, the Gettysburg Address, Lincoln’s top hat, Lincoln’s assassination and Lincoln’s gravesite.  My daughter answered “B: Abraham Lincoln’s presidency.”  (Which was wrong). 

What if I told her she was wrong, but never explained why?  I believe the conversation would go something like this: “You’re wrong.”  “Why?” “Because you’re wrong.”  “But WHY am I wrong.”  “Because you are wrong.”

In the above scenario, I informed my daughter that she was wrong.  But I failed to demonstrate how or why she was wrong.

Similarly, N.C. Gen. Stat. requires that the Department  demonstrate and inform the provider that the provider failed to substantially comply with the requirements of State or federal law or regulation or that the Department has credible allegation of fraud concerning the provider.

Inform + Demonstrate = Statutory compliance

So, does PCG demonstrate and inform the providers that the provider failed to substantially comply with the requirements of State or federal law or regulation or that the Department has credible allegation of fraud concerning the provider, simply by restating the identical language in the TNO?

“Why?” “Because you’re wrong.”

Ok, how about Question #2…?

How important is something to occur prior to versus concurrently? I mean, at least it is done, right? Who cares whether the action is done prior to or concurrently? 

Think of skydiving.  I tell you to be sure to put on your parachute prior to jumping.  Instead you hold your parachute, leap out of the plane, and attempt to put on your parachute contemporaneously as jumping.  With the amount of air resistance you encounter after you jump, you are unable to get the parachute secured and you die.

Let’s look at a less grotesque example…Think about eating…I tell you to open your mouth prior to inserting the piece of chocolate cake into your mouth.  Instead you insert the piece of chocolate cake into your mouth while you concurrently open your mouth.  Sure, you get some cake into your mouth, but the majority of the chocolate cake is smeared all over your face.

Can PCG send you one letter saying you are non-compliant while concurrently informing you of the extrapolated amount? Or is that a bit like squashing chocolate cake into your face?

Are PCG’s Extrapolated Medicaid Audits in Violation of State Statute?

About kemanuel

Medicare and Medicaid Regulatory Compliance Litigator

Posted on November 26, 2013, in Audits, Credible Allegations of Fraud, DHHS, Extrapolations, Health Care Providers and Services, Legal Analysis, Legal Remedies for Medicaid Providers, Legislation, Medicaid, Medicaid Audits, Medicaid Recoupment, Medicaid Reimbursements, NC, NCGS 108C-5, North Carolina, PCG, Post-Payment Reviews, Public Consulting Group, RAC, RAC Audits, Tentative Notices of Overpayment and tagged , , , , , , , , , , , , , , , , , , , . Bookmark the permalink. 4 Comments.

  1. Don’t understand why we need an outside source to conduct audits…the MCOs have more than enough staff to manage and audit their monies spent. That’s something that has always gripped me…what do all those people do at the MCOs??

  2. In this age, extrapolation of a manageable amount of data does not make any logical sense.

    Any person who deals with databases, software or any kind of statistical analysis will find that:

    The whole data set PCG could have audited fits in a regular of the shelf hard drive.

    A modern laptop can crunch all the data set in a very reasonable amount of time without the need of creating an extrapolating algorithm.

    It is easier and cheaper to analyze the whole data set rather create an algorithm to pick a subset of data and extrapolate the findings.

    If the whole data set is available and it’s feasible to analyze the whole universe of data, you wouldn’t create an artifact as an extrapolation algorithm unless you would like to mangle the results.

  1. Pingback: GO BIG OR GO HOME! The Extinction of Small Providers and Integration of Health Care | medicaidlaw-nc

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