United States District Court, D. Nebraska
MEMORANDUM AND ORDER
LAURIE SMITH CAMP, Chief District Judge.
This matter is before the Court on the Motions for Summary Judgment submitted by Plaintiff Schuldt Chiropractic Wellness Center ("Schuldt") (Filing No. 38), and Defendant Kathleen Sebelius, in her capacity as Secretary of the U.S. Department of Health and Human Services ("HHS") (Filing No. 36). For the reasons discussed below, Schuldt's motion will be denied, HHS's motion will be granted, and the decision of the Medicare Appeals Council (Filing No. 1-4) will be affirmed.
The parties' briefs (Filing Nos. 37, 39, 42, 43, 44, 45) and the HHS Administrative Record (Filing Nos. 17, 18, 19, 20, 21, 22, 32) reveal that there are no genuine issues as to any material facts for purposes of this Court's ruling on the parties' motions.
Schuldt is a health care provider that received reimbursement for chiropractic services it provided to Medicare beneficiaries. Wisconsin Physician Service ("WPS") is a Medicare Zone Program Integrity Contractor for HHS that conducted an expanded post-payment medical review of claims submitted by Schuldt for chiropractic services furnished to 75 beneficiaries, from January 2008 through March 2010, with payment dates from January 2008 through April 2010. The review was conducted by statistical sampling of 214 claims representing 445 services billed, out of a "universe" of 5, 098 services billed for 154 beneficiaries. The review caused WPS to conclude that payments to Schuldt by HHS in that time frame had a 99.55 percent error rate, equating to an actual overpayment of $11, 376.13 for the 445 service claims submitted. Using that data for guidance, WPS extrapolated a projected total overpayment to Schuldt for the universe of claims in the amount of $126, 041.31.
On February 7, 2011, WPS notified Schuldt of the alleged overpayment in the amount of $126, 041.31; and on March 2, 2011, Schuldt appealed. On May 4, 2011, on redetermination pursuant to 42 C.F.R. § 405.954, WPS affirmed its earlier decision, following a review by a different examiner, using the same statistical method, who determined that more of Schuldt's claims should be denied. Schuldt timely requested reconsideration by a qualified independent contractor ("QIC") under 42 C.F.R. § 405.974(a), and the QIC, C2C Solutions, Inc., affirmed the WPS decision.
On September 19, 2011, Schuldt requested a hearing before an Administrative Law Judge ("ALJ") pursuant to 42 C.F.R. § 405.1002. On April 26, 2012, ALJ William J. Cowan conducted a telephonic hearing to review the independent contractor's decision. The record before the ALJ included WPS's expanded post payment medical review and analysis of records of statistically selected beneficiaries, the WPS redetermination, and the QIC reconsideration. No representative, agent, or witness appeared on behalf of HHS.
Upon independent review of the 445 services billed, and considering issues of coverage, liability, and overpayment waiver, the ALJ found that 344 of the services billed were properly submitted and Schuldt should be paid for them. Considering the opinion of Schuldt's statistical expert, Dr. Bruce Kardon, Ph.D., and the ALJ's own statistical expert, Dr. John Adams, Ph.D., the ALJ concluded that WPS's "statistical sampling method and extrapolation and results were insufficiently reliable to be used for the purpose of estimating an overpayment to a larger universe than the sample itself." Schuldt Chiropractic Wellness Ctr., ALJ Appeal No. 1-828654453 (HHS June 8, 2012) ("ALJ Decision") (herein, Filing No. 1-1, at 22).
On August 6, 2012, the Center of Medicare and Medicaid Services ("CMS"), a division of HHS, filed a referral memorandum with the Medicare Appeals Counsel ("MAC"), asserting that the ALJ's decision contained an error of law material to the outcome of the claim. The MAC, on its own motion, conducted a de novo review of the ALJ's decision pursuant to 42 C.F.R. § 405.1100© on the single issue of whether Schuldt met its burden of proving that the statistical sampling methodology used by WPS was invalid and insufficiently reliable to be used for the purpose of estimating an overpayment to a larger universe of claims. The MAC issued its own decision on November 2, 2012, concluding that the ALJ erred in finding WPS's sampling methodology and overpayment extrapolation to be invalid. Schuldt Chiropractic Wellness Ctr., ALJ Appeal No.1-828654453, Docket No. M-12-2097, WL 10067325 (HHS Nov. 2, 2012) ("MAC Decision") (herein, Filing No. 1-4). The MAC reversed the ALJ's decision in that respect alone, not addressing or disturbing the ALJ's findings with respect to issues of coverage, liability, or overpayment waiver.
On January 4, 2013, Schuldt filed this action, requesting a review of the MAC decision. On January 31, 2013, WPS issued a "Recalculation of Projected Overpayment, " applying the ALJ's findings with respect to coverage, liability, or overpayment waiver to the sample of 445 services billed, and determined that the overpayment by HHS to Schuldt for the universe of claims was $37, 580.00. Schuldt has paid that amount to WPS.
STANDARD OF REVIEW
The Court's review is limited to determining whether HHS's action, reflected in the MAC Decision, is supported by substantial evidence in light of the record as a whole. 42 U.S.C. § 405(g) ("The findings of the Commissioner of Social Security as to any fact, if supported by substantial evidence, shall be conclusive....").
Statistical sampling, with extrapolation of results to the universe of all claims for recoupment purposes, may be used to determine overpayments to Medicare and Medicaid providers suspected of overbilling, "so long as the extrapolation is made from a representative sample and is statistically significant...." Chaves Cty. Home Health Serv., Inc. v. Sullivan, M.D., 931 F.2d 914, 922 (D.C. Cir. 1991). "[E]xtrapolation based on a review of a relatively small sample is a valid audit technique in cases arising under the Social Security Act." Illinois Physicians Union v. Miller, 675 F.2d 151, 155 (7th Cir. 1982) (addressing alleged Medicare overpayments). 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." Chaves, 931 F.2d at ...