Risk Adjustment Audits Are Here!!! Watch Out MAOs!
Risk adjustment is hugely important in Medicare Advantage (MA). Risk adjustment is intended to financially adjust taking into account the underlying severity of beneficiaries’ health conditions and appropriately compensate private insurers with vastly varying expectations for expenditures. In each year, plans receive higher payments in direct proportion to documented risk: A 5 percent increase in documented risk leads to a 5 percent increase in payment. Yet, because MAO have considerable control over the documentation, it is common for insurers to erroneously document patient risk and receive inflated payments from CMS, at least according to several CMS and OIG Reports.
Enter Risk Adjustment Data Validation (RADV) audits.
These are the main corrective action for overpayments made to Medicare Advantage organizations (MAO) when there is a lack of documentation in the medical record to support the diagnoses reported for risk adjustment
CMS has conducted contract-level RADV audits by selecting about 30 contracts for audit annually (roughly 5 percent of MA contracts). CMS then selects samples from each contract of up to 201 beneficiaries divided into three equal strata (low, average, and high risk). Auditors then comb through each beneficiary’s medical records to determine whether diagnoses that the MA plan submitted are supported by documentation in the medical record. From this process, auditors can calculate an error rate for the sample, which can then be extrapolated to the rest of the contract. For instance, if auditors determine that an insurer overcoded a sample’s risk by 5 percent, auditors could infer that plans under that contract were overpaid by 5 percent. Historically, however, CMS has only sought to collect the overpayments identified for the sample of audited beneficiaries. Not any more!
A CMS Final Rule, published February 1, 2023, addresses extrapolation, CMS’ decision to not apply a fee-for-service (FFS Adjuster) in RADV audits, and the payment years in which these policies will apply. Once it goes into effect on April 3, 2023, CMS estimates it will result in the recoupment of $4.7 billion in overpayments from MA insurers over the next decade.
As for extrapolations, CMS will not extrapolate RADV audit findings for PY 2011-2017 and will begin collection of extrapolated overpayment findings for any CMS and OIG audits conducted in PY 2018 and any subsequent payment year.
The improper payment measurements conducted each year by CMS that are included in the HHS Agency Financial Report, as well as audits conducted by the HHS-OIG, have demonstrated that the MA program is at high risk of improper payments. In fiscal year (FY) 2021 (based on calendar year 2019 payments), OIG calculated that CMS made over $15 billion in Part C overpayments, a figure representing nearly 7 percent of total Part C payments.
The HHS-OIG has also released several reports over the past few years that demonstrate a high risk of improper payments in the MA program.
Looking forward – Expect more MAO audits.
P.S. I will be presenting a webinar on Monday, March 20, 2023, via the Assent platform regarding:
FTC ELIMINATING NON-COMPETE AGREEMENTS HOW THAT WILL AFFECT HOSPITALS AND LTC
DATE : MARCH 20, 2023 | EST : 01:00 PM | PST : 10:00 AM | DURATION : 60 MINUTES
Feel free to sign up and listen!!
Auditing Medicare Advantage Organizations – About Time!
The American Hospital Association (“AHA”) is asking the Department of Justice (DOJ) to look into health insurance companies that routinely deny patients access to care and payments to providers. I’d like a task force as well. This is exactly the problem I have witnessed with managed care organizations or MCOs. In traditional Medicare and Medicaid, MCOs are prepaid and make profit by denying consumers medical care, terminating provider contracts, and not paying providers for care rendered. Congress created the same scenario with Medicare Advantage. Individuals can elect coverage through private insurance plans. While MA has been wildly successful and popular, the AHA is complaining that too many people are getting denied services.
An OIG report that was published in April cites MAOs as denying services for beneficiaries. We are always talking about providers getting audited, it is about time that the companies that are gateways for providers getting reimbursed and beneficiaries getting medically necessary services are likewise audited for denying services. It seems ironic that providers are audited for potentially billing for too many services and these gateway, third party reimbursement companies are audited for providing too few services – or denying too many prior authorizations. But if the MCO or MAO deny medical services, then the money that would have been paid to the provider stays in their pocket.
The OIG report found that many MAOs delay or deny services despite those services meeting Medicare prior authorization criteria, approximately 13-18%. Almost a 20% wrongful denial rate. When these MAOs get tax payer money for a Medicare beneficiary and deny services those tax dollars stay in the MAO’s pockets.
Supposedly MAOs approve the vast majority of requests for services and payment, they issue millions of denials each year, and OIG’s audit of MAOs has highlighted widespread and persistent problems related to inappropriate denials of services and payment. As enrollment in Medicare Advantage continues to grow, MAOs play an increasingly critical role in ensuring that Medicare beneficiaries have access to medically necessary covered services and that providers are reimbursed appropriately.
According to the OIG report, MAOs denied prior authorization and payment requests that met Medicare coverage rules by: (1) using MAO clinical criteria that are not contained in Medicare coverage rules; (2) requesting unnecessary documentation; and (3) making manual review errors and system errors.
Personally, I am fed up with these private, insurance companies denying services and keeping our tax dollars. It is about time the insurance companies are audited.