Wednesday, September 12, 2012

A random sampling method for medical claim audit

Random sampling processes could become very sophisticated. One of such examples is a stratified random sampling method developed by the Department of Social and Health Services (DSHS) to audit hospital Medicaid claims. This method is described in a paper "Analysis of the Regression Estimator
and its Implementation by DSHS"(

Hospitals provide services for patients who are covered by Medicaid and then file claims to the states to get the payment. State governments want to perform post-payment reviews to make sure that they do not overpay hospitals. Because the size of claims from a hospital could be very large, only a randomly sampled claims will be audited.

The claims of highest 25 amounts are always reviewed. For the remaining claims, the process first divides them into many buckets, or strata, based on their claim amount. Random sampling will be performed for each stratum. The higher the variance in claim amount in a stratum, the more samples will be drawn from it. Please notice that the sample size is NOT proportional to the population size in the stratum.

The most common ways to implement the above methodology are probably using SAS or SQL. I have seen the SAS version of it. I also implemented two SQL versions. One SQL version strictly follows the steps in the SAS package. Another SQL version uses Oracle analytic functions heavily that results in 75% reduction in the volume of code. These analytic functions include row_number() over(), width_bucket () , sum() over(), count() over(), etc.

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