Maximizing Restitution for Erroneous Medical Payments When Auditing Samples

In auditing of paid Medicaid claims, estimates of payments erroneously paid to providers are frequently based on statistical samples. When such procedures are used, hearing officers are often inclined to use the lower end of an interval estimate to determine restitution by a provider. In this paper, the advantages of estimating from large samples are weighed against the larger costs involved. A procedure for choosing a sample size that would maximize net recovery is proposed.