by editor | Jun 30, 2025 | Billing - General, Compliance and Regulatory - Directors, Patient Eligibility, Regulatory Compliance
Hospice agencies are under increasing scrutiny by government auditors. A particularly concerning and financially devastating aspect of government audits is the use of statistical extrapolation. Understanding the extrapolation process is essential for providers to safeguard the financial healthof their agencies and ensure compliance with all regulations.
What is Government Extrapolation in Hospice Audits?
Extrapolation is a statistical methodology used by auditors, particularly the Office of Inspector General (OIG). Extrapolation can significantly amplify the financial implications of audit findings. The process of extrapolation is governed by the Medicare Program Integrity Manual, Chapter 8. This chapter of the manual outlines the specific statistical methods and requirements for conducting extrapolation studies.
What is Extrapolation?
Extrapolation is a sampling technique used to project audit findings from a small sample of claims to an entire population of claims. Instead of reviewing every single claim that a hospice has submitted for payment, auditors select a statistically valid sample for review. They then use the error rate found in the sample to estimate overpayments across all similar claims in the population. This allows auditors to perform a detailed review of only a small sample of claims while estimating the total amount of improper claims across a large population.
Auditing every single claim in the population is impractical due to time and resource constraints. By examining a representative sample, auditors can make statistically valid projections about a much larger group of claims without having to review each one individually.
How Does the Extrapolation Process Work?
The extrapolation process typically follows the following key phases:
- Universe Definition:
- Auditors define the “universe” or population of claims to be examined. This may be all Medicare hospice claims submitted by your agency within a specific period (e.g., all claims billed between January 1, 2024, and December 31, 2024) or a subset of claims (e.g., all General Inpatient Care claims).
- Sample Selection:
- Using statistical sampling software, auditors select a statistically valid random sample from the universe. The term “statistically valid” is significant because it ensures that the sample accurately represents the entire population. This allows for reliable projections from the sample to the larger group. The industry standard software used to support sample creation is called RAT STATS (created by the OIG for the U.S. Department of Health and Human Services). Typically, samples consist of 100 claims, though this can vary.
- Medical Review:
- Each claim in the sample is rigorously reviewed by independent medical contractors who determine whether the services provided met Medicare requirements for hospice eligibility and documentation. The auditors review the documentation for compliance with Medicare regulations, including patient eligibility, physician certifications, medical necessity for services, and appropriate billing for levels of care. Any claim found to be out of compliance is identified as an “error,” and the precise dollar amount of the overpayment for that specific claim is calculated.
- Calculation of Error Rate:
- A monetary error rate is determined for the sample. This is calculated by dividing the total dollar amount of improper payments found in the sample by the total dollar amount of payments for all claims in the sample.
- Extrapolating to the Universe/Statistical Projection:
- The calculated monetary error rate from the sample is applied to the entire “universe” of claims. This projects the estimated total overpayment across all claims in the defined audit scope. The estimated total overpayment is calculated as the monetary error rate of the sample multiplied by the total dollar paid for the audit universe.
How Does Extrapolation Impact a Hospice Agency?
Extrapolation can have a significant financial impact on hospice agencies. Even a small number of denied claims or identified overpayments in a sample can result in a large demand for repayment. This can pose a severe financial challenge. Further, responding to an extrapolated audit can pose a significant administrative burden on hospice agencies, requiring considerable time and resources from administrative and compliance teams.
Additionally, OIG audit findings are often publicly released. This raises concerns about agency reputational risk and may jeopardize relationships with referral sources and the community. An adverse extrapolated audit outcome can also lead to increased scrutiny in future audits and potentially trigger further investigative actions.
Mitigating Extrapolation Risk
Given these potential significant negative impacts of extrapolation, hospice agencies should consider proactive actions that could help mitigate the likelihood of negative audit findings. The most effective actions include:
- Robust Compliance Program: Agencies should implement and strictly adhere to a comprehensive compliance program. This includes continuous staff education on Medicare regulations, thorough patient eligibility assessments, diligent documentation of physician certifications, and accurate coding for all levels of care.
- Internal Auditing: Conduct regular, proactive internal audits of claims and medical records. Focus on high-risk areas identified by Medicare (e.g., General Inpatient Care (GIP) stays, long lengths of stay, live discharges). Identifying and correcting deficiencies internally before an external audit is crucial.
Looking Ahead
Government extrapolation in hospice audits represents a significant financial risk for hospice agencies. Understanding the statistical methodologies, maintaining excellent documentation practices, and implementing robust compliance programs are essential for surviving in this challenging regulatory environment.
Where Can You Find Out More
by editor | Oct 18, 2022 | Billing, Billing - General, Compliance and Regulatory - Directors, Medical Records, Rules and Regulations - Nurses
What is a hospice election statement?
A hospice election statement is a condition of payment under Medicare. For a patient to be eligible to receive hospice services under the Medicare benefit, the patient or the patient’s authorized representative must elect hospice care by signing a hospice election statement. While Medicare provides a model of this form, each hospice agency is free to design their own hospice election form. However, there are some required elements, as specified by Medicare. To find out more details about the hospice election statement, read more at our blog post here: What is the Hospice Election Statement requirement?
Why is the hospice election statement important?
An invalid hospice election statement can impact payment for the entire patient hospice stay. There has been a recent rise in denials related to the election form. As such, it is important for hospice agencies to ensure that all required elements are present on the form and that the forms are completed accurately.
What are are tips for avoiding common hospice election form denials?
- Tip 1: Use the model election form provided by CMS or stick to something very close to it. This will ensure that no critical elements are missed. CMS has provided a model hospice election form. Hospice agencies are not required to use this model form; they may design their own election form.
- Tip 2: Focus on the purpose of the document and stick with the required elements, Over the years, hospices have had a tendency to add to their election forms so that it has been moving away from its original legal intent. While it is good to provide patients with additional information, the election form may not be the appropriate place to provide this information. By adding information to the election statement, there is a risk that upon audit contractors may find fault with aspects of the document that are not part of Medicare’s required elements of the election statement. In other situations, contractors missed the election statement since it was buried in a such a long document.
- Tip 3: build in redundancy in the elements of the elements of the hospice election statement. Use the admission material to build in redundancy of the required elements of the hospice election statement. That is, the required elements can be included in the election statement but some of the election statements which, for example, are acknowledgement statements, can be included in other admission material that is provided to the patient on admission. This could be helpful to defend potential claim denials or invalid denials in case of audit.
- Tip 4: Reduce the possibility of errors in completing the forms, by stressing the importance of the forms, creating standardized processes, and leveraging technology. Reduce human error by ensuring that the individuals responsible for completing the documents understand their importance. Human error is the biggest problem with properly completing the hospice election statement form. Create processes to double check the forms – in real time. Leverage technology, where possible, to eliminate the possibility of errors or to detect errors.
Where can you find more information?
by editor | Oct 18, 2022 | Billing, Billing - General, Compliance and Regulatory - Directors, Hospice 101 - Aides, Hospice 101 - Chaplain, Hospice 101 - Office Team, Hospice 101 - Social Workers, Rules and Regulations - Chaplains, Rules and Regulations - Nurses, Rules and Regulations - Social Workers
To receive hospice services under the Medicare benefit, a patient or his authorized representative must elect hospice care.
If the patient or authorized representative elects to receive hospice care, the patient must file an election statement with a specific hospice agency. The election statement serves to indicate that the patient is choosing hospice care.
The election statement and the election statement addendum are conditions for payment.
What is the structure of a hospice election form?
Every hospice agency can design and create their own hospice election statement form although Medicare has published a model form that can be used by hospice agencies Model Hospice Election Statement. The election statement must include all of the following elements:
- Name of hospice agency that will be providing the services
- Acknowledge that nature of hospice services have been explained to the patient including, in particular, the palliative rather than curative nature of care
- Acknowledge patient understands that by electing hospice care, some Medicare services are waived
- For hospice elections beginning on or after October 1, 2020, a statement that although it would be rare, there could be some necessary items, drugs, or services that may not be covered by hospice because these items are deemed to be unrelated to the terminal illness or related conditions
- The effective date of the election. This may be the first day of hospice care of a later day. But it cannot be a date that precedes the date that the election statement was signed by the patient or their authorized representative.
- The individual who is serving as the patient’s attending physician, if any.
- Acknowledgement that the identified attending physician was the choice of the patient or authorized representative
- Signature of patient or authorized representative
There are some additional requirements for the election statements for elections beginning dated October 1, 2020 or later. These election statements must also include :
- Information on patient cost sharing for hospice services
- Notification of the patient or authorized representative right to receive an addendum to the election statement. The addendum is only required to be furnished to beneficiaries, their authorized representatives, non-hospice providers, or Medicare contractors who request this information. This addendum includes a list and rationale for the items, drugs, or services that are not covered by hospice services because the hospice has deemed these to be unrelated to the terminal illness and related conditions.
- Information on the Beneficiary and Family Centered Care Quality Improvement Organization (Beneficiary and Family Centered Care (BFCC) ), including that immediate advocacy is available through this organization if the patient disagrees with the hospice’s determination regarding non-covered services
Right to Request Patient Notification of Non-Covered Items, Services, And Drugs
At any time, a patient may request, in writing, the Patient Notification of Hospice Non-Covered Items, Services, and Drugs. addendum to the election statement.
The hospice agency must provide the notification within five days, if this request is made on the start of care date.
If the request is made during the course of hospice care, the hospice agency must provide the requested notification within 72 hours.
If the patient (or authorized representative) requests the addendum at the start of care but dies with five days, the hospice is deemed to have met its requirement and is not required to provide the addendum.
When would a hospice update the addendum?
The addendum lists the patient’s diagnoses and conditions that are present upon hospice admission and the items, services, and drugs that are not covered by the hospice because they are deemed to be unrelated to the terminal illness and related conditions.
During the course of hospice care, the addendum may require update, for example, if the patient’s plan of care is updated.
Changes to the addendum will need to be signed by the patient or his authorized representative and stored in the patient’s medical record with the hospice agency.
Where can you find more information on the election statement
by editor | Sep 29, 2022 | Billing, Billing - General, Compliance and Regulatory - Directors, Financials, Rules and Regulations - Office Team
What is Medicare credit balance?
A Medicare credit balance represents a Medicare overpayment to a provider due to patient billing error or claims processing error that must be refunded to Medicare. The report is referred to as a Credit Balance Report because when a provider receives excess payment for a claim that was submitted, this is typically reflected in the provider’s accounting records (i.e., in the patient account receivable) as a “credit.”
What instances may give rise to a credit balance?
Different situations may give rise to a Medicare overpayment. For example:
- Paid twice by Medicare or may be paid by Medicare and by another insurer for the same service
- Incorrect calculation of patient deductible or patient coinsurance amount
- Paid for non-covered services
- Billed at incorrect daily rate
Which hospice agencies must file a Credit Balance Report?
If a hospice provider has more than one provider number, a separate report must be submitted for each provider number. Providers who have a low utilization (i.e., determined by the intermediary that they should file a low utilization Medicare cost report) or who file less than 25 Medicare claims per year are not required to file a Medicare Credit Balance Report.
What does a credit Balance Report Consist of?
The Credit Balance Report consists of two pages. The first page is a Detail Page, where the hospice provider enters information about each credit balance, on a claim by claim basis. Once a claim has been reported on one Credit Balance Report it should not be reported again on a subsequent Credit Balance report. The second page is a Certification Page. All providers must complete the Certification Page. The Detail Page is only required if the provider has credit balances to report.
The Detail Page
On this page, the provider must include detailed information about each Medicare claim with a credit balance, explanation why the credit balance arose, and indicate whether the credit balance is being repaid with the filing of the report.
The Certification Page
The second page of the Credit Balance Report is a certification page. Facilities that do not have any credit balances in a quarter are only required to submit the signed certification page. There are key areas of this page.
- The first area serves as a reminder that there is a requirement to file a Credit Balance Report and failure to file this report will result in suspension of Medicare payments. Further, any misrepresentations may lead to fines and further penalties
- The second area requires an officer or administrator of the hospice agency to sign a certification that that Credit Balance Report is true and accurate
- The third area requires a selection from one of three choices: (i) provider qualifies as Low Utilization Provider (ii) Detail Page included with Report (iii) no credit balances to report
When is the report due?
A hospice provider must assess any Medicare credit balances on a quarterly basis and must report any identified Medicare credit balances within 30 days of the end of each calendar quarter. The Medicare Credit Balance Report due dates are as follows:
| Quarter Ending |
Due Date |
| March 31 |
April 30 |
| June 30 |
July 30 |
| September 30 |
October 30 |
| December 31 |
January 30 |
What happens if a provider fails to submit a Credit Balance Report?
Failure to submit a Credit Balance Report by the 15th calendar day after the report due date will result in a Suspension Warning letter. If the completed report is not received within 15 calendar days from issuance of the letter, Medicare payments to the provider are suspended under a completed letter is received, accepted, and processed.
Where can you find a Credit Balance Report form?
The Credit Balance Report that must be completed and submitted is Form CMS-838, which can be found here: Medicare Credit Balance Form (pdf)
by editor | Sep 20, 2022 | Billing, Billing - General, Compliance and Regulatory - Directors, Financials, Intake, Notice of Election, Rules and Regulations - Nurses, Rules and Regulations - Office Team
by editor | Sep 15, 2022 | Accounts Payable, Billing, Billing - General, Compliance and Regulatory - Directors, Documentation - Nurses, Hospice 101 - Aides, Hospice 101 - Chaplain, Hospice 101 - Nurses, Hospice 101 - Office Team, Hospice 101 - Social Workers, Human Resources, Intake, Medical Records, Metrics and KPIs, Office Setup, Payroll, Rules and Regulations - Chaplains, Rules and Regulations - Nurses, Rules and Regulations - Social Workers, Rules and Regulations - Volunteers
Are you confused by the Acronym Alphabet Soup?
Does the never ending list of acronyms used in the hospice and healthcare industry leave you confused?
Are you worried that you may confuse CMN with CMP?
To help sort out the confusion, we add here links to lists of acronyms:
Use these acronym listings to help clarify things when you inevitably are faced with acronym confusion!
