Northwestern Memorial Hospital owes Medicare $6.4 million in alleged overpayments caused by billing errors, according to an audit by HHS' Office of Inspector General.

The Chicago hospital, however, questions the methodology that yielded the figure, echoing concerns of other hospitals that have faced similar reviews.

“OIG's report in no way challenges the quality and medical necessity of the care provided,” Northwestern said in a statement Tuesday. “Rather, OIG concluded that most of these errors were because the claims should have been billed in an outpatient setting rather than an inpatient setting. Northwestern Memorial intends to appeal these findings, as it is our belief that OIG's claims review process and statistical methodologies are flawed, resulting in a grossly overstated repayment amount.”

Many of the OIG's findings “reflect the vague and ambiguous CMS standards for inpatient Part A reimbursement and then extrapolates such findings in a manner that creates the appearance of abuse, when this is not the case,” Northwestern Chief Integrity Executive Jennifer Wooten Ierardi wrote in a response to the OIG.

According to the audit, the 885-bed teaching hospital incorrectly billed Medicare Part A for patient stays that did not meet Medicare criteria for inpatient status and should have been bill instead as outpatient or outpatient with observation services, according to the OIG report. The hospital also incorrectly billed Medicare for observation hours that resulted in incorrect outlier payments, among other issues, according to the report.

The OIG audited 171 sample inpatient and outpatient claims with payments totaling nearly $1.5 million submitted in 2011 and 2012. The OIG found that the hospital did not fully comply with Medicare billing requirements for 85 of the claims resulting in overpayments to the hospital totaling $272,181. The agency then extrapolated those results to estimate that the hospital was overpaid by $6.4 million in 2011 and 2012.

The OIG attributed the errors to the hospital's lack of adequate controls to prevent them. The OIG is recommending the hospital refund the Medicare contractor $6.4 million and strengthen its controls to prevent future problems.

This is not the first time the OIG's method of determining overall errors by extrapolating data has spurred criticism. In 2013, University of Cincinnati Medical Center CEO Lee Ann Liska criticized how the government extrapolated results from a small sample size in her response to an OIG report saying that hospital owed $9.8 million.

The American Hospital Association sent a letter to HHS last year criticizing its hospital compliance reviews as redundant and burdensome and similarly criticizing the extrapolation process.

The OIG says it properly executed its sampling and extrapolation methods in the Northwestern audit.

(This story first appeared on the website of Crain's sister publication Modern Healthcare.)