Calculating the incalculable

We often hear from state program integrity units that the work they do goes unrecognized. Yet when quizzed on how they promote their efforts — which could result in millions of dollars in savings and recoveries over just one year — they often reveal a limited understanding of how to calculate these savings.

After all, it’s easy to tabulate recoveries. You see the check. But how do you calculate the cost of something that didn’t take place — expenses you avoided because you detected improprieties before payment went out. Or better yet — improprieties that resulted in rule changes preventing overpayments time and again?

Fortunately, calculating cost avoidance isn’t as hard as it sounds. Follow these rules:

  1. Identify a specific change your PI unit made, such as:
  • Changing the code for a procedure — such as anesthesia for vaginal delivery — from time based to fixed fee.
  • Changing a rule so that providers are no longer reimbursed for more than one appendectomy per patient.
  1. Examine the historical data for the procedure and compare the 24-month cost average before the change to the three-month cost average after the change.
  2. Add the savings for each change over the course of one year for a grand total.

Calculating cost avoidance from provider education, MMIS edits and other system changes can help you quantify — and get credit for — the full impact of your PI operations. For more information on how to do this, read “Expand your PI efforts and get credit for your work.

About the authors

Jeremy Hill


Jeremy Hill is program integrity director, at Optum.





Brian Fisher is Iowa Medicaid program integrity account manager, at Optum.


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