Ambulance Company in Tennessee Settles A $2 Million Overpayment Lawsuit

George F. Indest III, Board Certified by The Florida Bar in Health Law

By George F. Indest III, J.D., M.P.A., LL.M., Board Certified by The Florida Bar in Health Law and Dr. Thu Pham, O.D., Law Clerk, The Health Law Firm Attorney

A Tennessee ambulance company and the U.S. Department of Health and Human Services (DHHS) announced a settlement in a case over a post payment audit for more than two million dollars in May 2012. Back in March of 2010, the Nashville ambulance company sued the DHHS after being sent a $2.65 million overpayment demand, according to the Nashville Business Journal.

To see the Nashville Business Journal article on the lawsuit, click here.

Huge Fine Found Using Error Rate Extrapolation Formula.

According to the lawsuit, the ambulance company claimed that the fine was based on incorrect accounting by a Medicare Administrative Contractor (MAC) for the DHHS. The contractor reviewed “a small sample of claims and determined that many did not meet Medicare coverage criteria.”

The actual overpayment on those claims was $10,764, which was determined to be an error rate of fifty-one percent (51%). The error rate was then used to extrapolate and obtain the $2.65 million figure which was demanded from the ambulance company.

Ambulance Company Files Administrative Appeal.

Upon administrative appeal, the ambulance company said most of its claims were determined to be appropriate, yet the error rate was never recalculated and the company was still stuck with a large bill.

Disputes of payments included bills for transporting dialysis patients by ambulance. The DHHS said those trips were not valid because they were not emergencies. The ambulance company refuted this contending that the trips did not have to be emergencies because they were ordered by a doctor.

Click here to read the entire lawsuit.

What You Should Know About the Use of Statistical Sampling and Extrapolation Formulas.

In both state Medicaid audits and in Medicare audits, we have experienced increased reliance by the auditing agency on use of mathematical extrapolation formulas to estimate the amount that should be repaid. The formula used usually takes the overpayment that has actually been found and, based on several factors, multiplies it out to many times the actual overpayment amount, as is the example in this case. We have seen ratios of as high as 1 to 150 (or 150 times the actual disallowed claims amount) calculated.

Things you should know about this are as follows:

1.  Neither the Medicare program nor the state Medicaid programs should use an extrapolation formula, unless:

  a. There is a “high” error rate in the claims that have been submitted; or

  b. There have been prior educational efforts or prior audits of the provider, and the provider

has failed to correct the problems in claims submission previously found.

2.  The states each have different guidelines, rules or regulations on when they will apply the statistical formula. Some do not use it at all. Some use a higher percentage error rate to prompt use of the formula and some lower. For example, North Carolina uses one of the lowest percentage error rates we have encountered; an error rate of more than five percent (5%) will prompt its Medicaid agency to apply the statistical extrapolation to the recovery amount.

Two Parties Settle.

On May 25, 2012, the United State District Court announced the ambulance company and the DHHS had settled and compromised. The lawsuit was dismissed against the DHHS without prejudice for a period of ninety (90) days.

Click here to see the order of dismissal.

Don’t Wait Until It’s Too Late; Consult with a Health Law Attorney Experienced in Medicare and Medicaid Issues Now.
The attorneys of The Health Law Firm represent health care providers in Medicare audits, ZPIC audits and RAC audits throughout Florida and across the U.S. They also represent physicians, medical groups, nursing homes, home health agencies, pharmacies, hospitals and other healthcare providers and institutions in Medicare and Medicaid investigations, audits, recovery actions and termination from the Medicare or Medicaid Program.

For more information please visit our website at or call (407) 331-6620 or (850) 439-1001.


Nashville Business Journal. “Ambulance Company Sues Over $2.65M Bill.” Nashville Business Journal Online. (March 15, 2012). From:

First Call Ambulance Service, Inc., v. Department of Health and Human Services, Case Number 3:10-0247, Order of Dismissal, May 25, 2012 available at:

First Call Ambulance Service, Inc., v. Department of Health and Human Services, Case Number 3:10-cv-0247, First Call Ambulance Service, Inc., Sues Department of Health and Human Services Over $2.65 Million, March 20, 2010 available at:

About the Author: George F. Indest III, J.D., M.P.A., LL.M., is Board Certified by The Florida Bar in Health Law.  He is the President and Managing Partner of The Health Law Firm, which has a national practice.  Its main office is in the Orlando, Florida, area.  The Health Law Firm, 1101 Douglas Ave., Altamonte Springs, FL 32714, Phone:  (407) 331-6620.

“The Health Law Firm” is a registered fictitious business name of George F. Indest III, P.A. – The Health Law Firm, a Florida professional service corporation, since 1999.

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