Question
Your company is running a Medicare audit on Sleaze Hospital. Because Sleaze has a history of overbilling, the focus of your audit is on checking
Your company is running a Medicare audit on Sleaze Hospital. Because Sleaze has a history of overbilling, the focus of your audit is on checking whether the billing amounts are correct. Assume that each invoice is for too high an amount with probability 0.06 and for too low an amount with probability 0.01 (so that the probability of a correct billing is 0.93). Also, assume that the outcome for any invoice is probabilistically independent of the outcomes for other invoices.
What percentage of all invoices are at least 10% more than the legal billing amount?
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