Medicare Advantage (MA) health plans potentially face much stricter oversight from federal auditors under the risk adjustment data validation (RADV) audit rule that took effect on April 3, 2023. Although providers won’t be directly impacted by the new audit rules from the Centers for Medicare & Medicaid Services (CMS), the specter of federal audits likely will increase denials from MA plans to providers who care for those patients.
The final rule is the culmination of years of work by CMS and considerable pushback by Medicare Advantage health plans on the methodology used to audit claims. Fortunately for payers, CMS decided to start with claims dating back to 2018. Earlier, the agency looked at claims back to 2011.
In a news release publicizing the final rule, CMS noted that an audit review of the calendar year 2019 payment revealed more than $15 billion in overpayments for Medicare Part C, nearly 7% of all Part C payments. Over the next decade, the agency estimates being able to return $4.7 billion from MA plans to the federal government.
“For years, federal watchdogs and outside experts have identified the Medicare Advantage program as one of the top management and performance challenges facing HHS, and today we are taking long overdue steps to conduct audits and recoup funds,” says Xavier Becerra, secretary of the U.S. Department of Health and Human Services, in a press release announcing the overpayments. “These steps will make Medicare and the Medicare Advantage program stronger.”
Medicare Claims Comprise Most Denials
According to MDaudit research, Medicare claims comprise 82% of all denials, so payers and health plans already should have been focusing on these types of claims. The final rule does not change the premise that diagnosis codes should be supported by relevant data in a patient’s medical record. However, the increased audit activity clearly underscores the importance of the claim fully and accurately reflecting the intensity and duration of the patient visit.
Medicare Advantage health plans recently surpassed 50 million enrollees, a testament to the popularity of plans that often include benefits regular Medicare doesn’t, such as vision and dental insurance. However, MA plans have faced increasing scrutiny for perceived overcoding, indicating that patients are sicker than they appear to be to garner higher CMS reimbursements.
The Medicare Payment Advisory Commission (MedPAC) revealed in January that risk scores for patients in MA plans were nearly 5% higher than those in Medicare fee-for-service (FFS) in 2021. The higher risk factor resulted in $17.1 billion in overpayments to MA plans during that year. Based on those results, the agency expects a funding disparity of $43.6 billion for the 2022 and 2023 plan years. The agency attributed the difference between MA and FFS plans to discrepancies in coding.
“Ensuring the accuracy of claims should be a hallmark of every provider and every health plan,” says Ritesh Ramesh, CEO of MDaudit. “Proactive auditing and retrospective auditing work together to increase the accuracy of claims the first time, which can speed reimbursement to medical professionals and facilities while providing valuable peace of mind for health plans.”
Latest Skirmish Between Medicare Advantage Health Plans and CMS
Inclusive of medical review, federal audit programs have a return on investment of $8 for every $1 spent, so the final rule on the risk adjustment data validation audits is consistent with efforts to ensure the accuracy of claims. For fiscal year 2023, the federal Health Care Fraud and Abuse Control (HCFAC) Program and the Medicaid Integrity Program are receiving nearly $2.5 billion, an $80 million increase from 2022.
Friction has always been high between Medicare Advantage health plans and federal authorities, with nearly every major MA insurance provider either being accused of or settling fraud allegations. Because of their complexity, certain diagnoses face a higher risk of being miscoded, but the new risk adjustment audit rule is designed to identify upcoding, where patients appear sicker than they are on claims.
Although the medical record is always supposed to support the diagnosis codes on claims, the greater federal scrutiny will likely impact providers and their relationships with health plans, especially around how providers document a patient’s medical conditions and comorbidities in health records. Increased denials are likely, which will lead to reimbursement delays and considerable reworking of claims. Collaboration between payers and providers and robust auditing tools can increase confidence that claims accurately and fully describe the patient encounter or procedure.
Under the previous methodology, CMS audited a sample of claims during a plan year, comparing diagnoses to medical records as a check on accuracy. Using the RADV methodology, CMS will perform a similar audit but then extrapolate an error rate across the entire plan.
Providers, hospitals, and Medicare Advantage health plans should take steps now to ensure their claims will stand up under this increased audit scrutiny. See how in this recorded webinar.
