CMS Issues Final Rule for MA Risk Adjustment Audits

Many hospice providers rely on Medicare Advantage (MA) reimbursement to support palliative care, PACE and social determinants programs, among others.

In a final rule issued today, the U.S. Centers for Medicare & Medicaid Services (CMS) laid out its policy for validating MA plans’ risk adjustment data, which the agency uses to calculate capitation rates. Through the MA Risk Adjustment Data Validation (RADV) program, CMS will be auditing beneficiary medical records to identify potential improper payments.

RADV is designed to ensure that a beneficiary’s diagnoses are supported by their medical documentation.

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“CMS is committed to protecting people with Medicare and being a responsible steward of taxpayer dollars,” said CMS Administrator Chiquita Brooks-LaSure. “By establishing our approach to RADV audits through this regulation, we are protecting access to Medicare both now and for future generations. We have considered significant stakeholder feedback and developed a balanced approach to ensure appropriate oversight of the Medicare Advantage program that aligns with our oversight of Traditional Medicare.”

Risk adjustment is a process through which health plans predict a beneficiary’s likely health care utilization and costs.

Initially, CMS will begin extrapolating findings for payment year 2018. The agency will continue to collect only non-extrapolated overpayments for 2011 through 2017. The term “extrapolate” in this context refers to the methodology auditors use to calculate overpayments.

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Through Medicare Advantage, CMS contracts with private insurance companies to provide coverage for Medicare beneficiaries. In 2023, the number of MA plans will swell to 3,998, up 6% from 2022. As of last year, these plans covered more than 28 million Americans, close to half of the entire Medicare population, according to the Kaiser Health Foundation.

Lawmakers and regulators have been taking aim at the program in recent months amid concerns about risk adjustment, as well as marketing, prior authorizations and other issues.

For 2020, risk scores for MA patients were about 9.5% higher than those for fee-for-service beneficiaries, leading to $12 billion in improper payments, the Medicare Payment Advisory Commission (MedPAC) estimated. Last year, the U.S. Senate Finance Committee also alleged that third-party companies have used deceptive practices to market MA plans.

In April 2022, the U.S. Department of Health & Human Services (HHS) Office of the Inspector General (OIG) reported that health plans’ prior authorization practices may be contributing to denials and delays of treatment.

The OIG report led to a hearing by the oversight and investigation subsection of the U.S. House of Representatives Energy and Commerce Committee.

“Improper claim denials and increased use of prior authorizations are preventing beneficiaries from receiving the care they need,” Energy and Commerce Chairman Frank Pallone, Jr. (D-N.J.) said during the hearing. “While there are many plans that appear to be acting responsibly, some are not, and these bad actors are costing taxpayers money and, more importantly, jeopardizing the health of seniors.”

CMS is currently testing coverage of hospice through Medicare Advantage.

The hospice component of the value-based insurance design (VBID) model entered its third year on Jan. 1. Often called the MA hospice carve-in, the voluntary demonstration is designed to assess payer and provider performance related to hospice within Medicare Advantage (MA).

Many hospice providers also rely on Medicare Advantage reimbursement for care that fee-for-service typically doesn’t cover, such as palliative care. Some also receive MA payments for home health care and other community-based services.

The number of plans offering home-based palliative care will rise to 157 next year from 147 in 2022, according to an analysis by ATI Advisory. This does not include plans that offer palliative care through separate programs like special supplemental benefits for the chronically ill (SSBCI) or the VBID demonstration, and the details of these benefits and what they include can vary among different health plans.

While Medicare Advantage has its flaws, stakeholders should consider deficiencies that exist within fee-for-service models while weighing the pros and cons, according to Dr. Sachin Jain, CEO of the nonprofit MAO SCAN Group and SCAN Health Plan. 

“I’m not a Medicare Advantage zealot in any way. All of these are important, serious considerations that we should be evaluating very closely and also reflect some of the reality of what it’s like to be a consumer over the age of 65, looking for a solution for one’s health care,” Jain recently told Hospice News. “At the same time, I think sometimes some of the conversations around Medicare Advantage are blind to some of the flaws of fee-for-service Medicare.”