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Medicare Advantage Risk Adjustment Data Validation Will Be Keen Focus of Feds

Medicare Advantage Risk Adjustment Data Validation Will Be Keen Focus Of Feds

Just as Medicare Advantage (MA) plans have begun adjusting to the rigorous audit and compliance environment and value-based reimbursement of the Star program, the Centers for Medicare and Medicaid Services (CMS) have yet another priority that will challenge plans’ operational and financial capabilities. This key priority is the Risk Adjustment Data Validation (RADV) program, which is spawned by congressional acts passed in 2002 and again in 2010 meant to root out improper payments in government programs.

We know that fraud, waste and abuse (FWA) constitute as much as 10% of overall national healthcare expenditures and overpayments generally fit into the definition of FWA (although not all are fraudulent, as much as 90% are overpayments). After a rather slow start on RADV, CMS has now begun a yearly audit process that, when fully implemented, could recoup billions from MA plans. What’s more, similar programs are rolling out in state and national Exchange programs and soon in state Medicaid.

For 2015, CMS estimates that as much as 9.5% of payments to MA plans represent improper payments. That is an estimated $14.1 billion on payments of $148.6 billion. Further, the federal government estimates that Medicare Advantage is the fourth-largest program for overpayments, behind traditional Medicare (FFS), Medicaid, and the Earned Income Tax Credit (EITC). These four programs are the only ones in the $10 billion plus category.

In response to the congressional actions mandating a crackdown on improper payments, CMS began its RADV program with a pilot audit of 5 contracts for the 2007 payment year as well as a selection of 32 additional contracts for the 2007 payment year. As of the last update by CMS in late 2015, these audits found about $13.8M in overpayments on the audit sample and plans were still in the dispute and appeal process. The General Accountability Office (GAO), the auditing and investigations arm of the U.S. Congress, recently issued a report criticizing CMS’ approach to overpayments, indicating it has made little progress to prevent overpayments thus far and spent over $117 million on administration since 2010 while recouping just $14 million. It noted all but two of the plans audited had overpayments and overpayments were three to four times more likely than underpayments.

The criticism of the lack of progress is not entirely unfounded;, but in fairness, CMS has begun setting up an infrastructure and recently moved to perform at least 30 RADV audits of MA plan contracts each year (in addition to its national sampling annually). As of December 2015, the medical records for the 2011 payment year audit of 30 contracts have been submitted and is in progress. The 2012 list of plans has been published. In April 2016, CMS notified plans that they had to submit all their Risk Adjustment Processing System (RAPS or current encounter submission system) diagnosis deletions by May 5, 2016, in preparation for the 2013 audit.

Additionally, within the last year, CMS issued a request for private contractors to assist in MA RADV and potentially expand auditing. This would increase a plan’s chance of being audited beyond the current 5%, although a plan’s actual risk may be dictated in the future on whether it is an outlier in several areas, including its coding intensity against all plans and risk-score changes from year to year (GAO questions how accurately CMS is able to hone in on suspect contracts). Plans have raised concern that depending on how these outside contractors are compensated, perverse incentives could motivate the contractors during the audits.

RADV is also hampered by the complexity of the risk adjustment process. Encounter submission and payment reconciliation substantially lag the close of given payment years, hence the multi-year delay in RADV audits. CMS, as well, wanted to give plans sufficient time to build the infrastructure for the audit process before it ramped up efforts. It too, needs to hone its approach. Lastly, plans are going through a major conversion of the encounter process, from one reliant on a short and easy RAPS format to a more complicated 837 HIPAA encounter format known as Encounter Data Processing System (EDPS). For information on EDPS, please see our January blog post here, or view our webinar here. By 2020, plans will be wholly paid based on their 837 submissions.

CMS uses the Hierarchical Condition Categories (HCC) risk adjustment system that relies on a number of factors to determine payment. Diagnosis reporting can drive these scores and plans have invested millions in this process. CMS has long been concerned that MA plan risk scores are demonstrably higher than those in Medicare FFS and has taken a number of steps to address what it views as “over-scoring,” including adjusting the MA rates downward via a coding modification in the rate-setting process. The RADV process is meant to address these inequities on a plan-by-plan basis. Plans have argued that they do not inflate scores but, unlike a FFS provider, have an incentive to accurately code members. Yet at the same time, as noted above, plans have challenges substantiating this. CMS, too, continually adjusts the HCC models and has recently made adjustments in diagnosis clusters and severity in part as a result of over-scoring concerns (e.g., diabetes).

For a RADV audit, CMS chooses up to 201 records evenly split between low, medium, and high risk scores. Plans then must gather medical record documentation in a short period of time from providers or incur penalties. For the 2007 audits, penalties were made on just the sample. For payment years 2011 onward, CMS will extrapolate penalties across the entire membership base. Now, exactly how far and how quickly CMS will take this is unknown. CMS announced the estimated recoveries for 2011 are about $370M. Taken across all plans it still does not hit $14 billion, or 10%. It would be about 3% based on 2011 payments.

The RADV overpayments result from the fact that plans are unable to substantiate the diagnoses submitted to the federal government. This is due to the fact that:

  • Providers may submit encounters and claims to plans without adequately documenting pertinent disease states or conditions on medical records. In the 2007 audits, only about 60% of diagnoses could be confirmed on audit. CMS says about three quarters of over payments are tied to insufficient medical documentation.
  • Plans are unable to track down medical records from providers for submitted diagnoses.

Laggard plans need to begin taking seriously the threat that RADV may seriously impact plan revenue and financial stability. A multi-faceted approach will need to be taken, including:

  • Establishing a dedicated RADV team with membership across key departments.
  • Aggressive training of staff in all departments, but principally in finance, medical affairs, compliance, and provider relations, as to the significance of RADV and the audit process.
  • Train providers on the significance of RADV, impact on the plan, and eventually impact to provider reimbursement. The training should include all the published information on invalidity of submissions due to lack of adequate documentation.
  • Conduct mock audits and pro-actively gather medical records from providers each year. This includes an internal process and one with your providers, especially high volume ones.
  • Ensure that claims submission and RADV is part of your delegated oversight process. The plan will be in jeopardy if your vendors and their providers underperform. Smart plans will place delegated subcontractors at some risk for any RADV penalties found on audit.
  • Even as the RAPS process continues, perfect the approach to 837 encounter submission and tie it to RADV. Ensure that:
    • Your providers and subcontractors regularly submit all encounters and claims.
    • The plan can consistently submit 837 and RAPS encounters to CMS and remediate errors.
    • Reconcile payments and analyze both RAPS and EDPS submissions.
    • Analyze encounter data to ascertain falloffs and opportunities.
    • Be able to mine the data for RADV mock audits.

So, compliance and audit, Star performance, and now RADV will determine Medicare Advantage plan success. What more could CMS demand in the future?

Marc Ryan

Marc S. Ryan serves as MedHOK’s Chief Strategy and Compliance Officer. During his career, Marc has served a number of health plans in executive-level regulatory, compliance, business development, and operations roles. He has launched and operated plans with Medicare, Medicaid, Commercial and Exchange lines of business. Marc was the Secretary of Policy and Management and State Budget Director of Connecticut, where he oversaw all aspects of state budgeting and management. In this role, Marc created the state’s Medicaid and SCHIP managed care programs and oversaw its state employee and retiree health plans. He also created the state’s long-term care continuum program. Marc was nominated by then HHS Secretary Tommy Thompson to serve on a panel of state program experts to advise CMS on aspects of Medicare Part D implementation. He also was nominated by Florida’s Medicaid Secretary to serve on the state’s Medicaid Reform advisory panel.

Marc graduated cum laude from the Edmund A. Walsh School of Foreign Service at Georgetown University with a Bachelor of Science in Foreign Service. He received a Master of Public Administration, specializing in local government management and managed healthcare, from the University of New Haven. He was inducted into Sigma Beta Delta, a national honor society for business, management, and administration.

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