STAT-201 Fall/ 2017 2) Medical billing errors and fraud are on the rise. Accordi

Question

STAT-201 Fall/ 2017 2) Medical billing errors and fraud are on the rise. According to the MBAA website, 8 out of 10 times, the medical bills that you get are not right. (Source: "Accurate Medical Billing," bit.ly/1lHKlu3, April 2, 2014.) If a sample of 10 medical bills is selected, what is the probability that a. 0 medical bills will contain errors? b. exactly 5 medical bills will contain errors? h more an s medical bils wll oation of the probability d. What are the mean and standard deviation of the probability distribution?

Explanation / Answer

Here, as mentioned in the answer, the Population mean is 8 incorrect bills out of 10 selected bills.

Applying the central limit theorem formula

Sample mean ( x ) = Sample standard deviation ( x ) = / n

we get the standard deviation as 3.16 for our sample of 10

and mean as 8.

A. So for a condition of all medical bills correct which is

     8 / 3.16 = 2.53 standard deviations away from the mean, we get the corresponding probability as 0.01 or 1 %

B. For 5 medical bills to be correct, the condition which is 3/3.16 = 0.9493 standard distributions away from mean, correcsponding probability is 32.88%

and so on..

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