Loyola University Chicago School of Law, JD 2017
Last month, the Center for Public Integrity obtained over three-dozen new Medicare Advantage (MA) audits through a lawsuit brought under the Freedom of Information Act. The audits indicate that overcharging is still a pervasive problem in the MA Program because Medicare Advantage Organizations (MAOs) are submitting billing for exaggerated medical conditions. Consequently, controversy surrounds the accuracy of billings, which are based on risk scores.
The Center for Public Integrity (CPI) has been criticizing the MA audits for years due to inaccuracy and lost taxpayer dollars. The Centers for Medicare and Medicaid Services (CMS) has slowly been releasing more information about audits, as required by a court order from 2014. According to the CPI, failure to recoup money from overcharges has cost taxpayers billions of dollars in recent years. Additionally, the CPI reported that, “[o]verpayments triggered by unsupported medical diagnoses at the 37 plans audited topped $10,000 per patient for more than 150 patients” and auditors had difficulty confirming the diagnoses for about forty percent of conditions that MAOs were paid to treat. The confirmation rates were significantly lower for certain conditions, such as diabetes, major depression, and some types of cancer.
The MA audits involve risk adjustment data validation (RADV), which helps CMS to ensure the accuracy and integrity of billing. Under MA, CMS contracts with private managed care organizations and provides prospective payments. CMS applies risk adjustment to plan biddings and payments, based on beneficiary characteristics. This allows CMS to pay plans for the risk of beneficiaries they enroll, rather than the average amount for Medicare beneficiaries. CMS pays higher rates for sicker patients to help compensate plans for expected higher spending on patients with certain conditions. RADV is the process of verifying that the diagnosis codes are supported by medical record documentation. MAOs are required by CMS to ensure integrity of claims data submitted and code diagnoses according to the International Classification of Diseases (ICD-9 for audits recently released to the Center for Public Integrity). Similarly, under the Affordable Care Act (ACA), the federal government will begin applying risk adjustments to plans on the exchanges. However, the CPI contends that the federal government has spent a lot more money on conducting these audits than the amount of improper payments it has recovered.
In April of 2016, the General Accountability Office (GAO) issued a report recommending that CMS make fundamental changes to recover substantial amounts of improper payments. The GAO criticized CMS for failing to audit MAOs that have a greater risk of making improper payments. It also suggested that CMS was not efficiently conducting the audits. CMS experienced substantial delays in conducting RADV. RADV is a very lengthy process and audits have been ongoing for years. Moreover, CMS has not incorporated measures to expedite the appeals process.
The GAO Report also suggested that the RADV methodology is flawed. CMS has been selecting samples based on coding intensity, but the GAO found that there was not a strong correlation between coding intensity scores and the percentage of unsupported diagnoses. The sample selection methodology did not always select samples based on evidence of potential improper payments. Moreover, the coding intensity calculation does not distinguish between physicians’ diagnosis codes and diagnoses that may have been revised by MAOs. Some MAOs have argued that they should not be held responsible for physicians’ failure to properly document and code for medical conditions. In October of 2015, CMS issued a memo proposing changes to RADV. The memo acknowledges that the current model typically under-predicts expenditures for “low-risk” beneficiaries. CMS has revised the model by creating separate community segments based on dual-eligibility and aged/disabled status. However, many insurers expressed concerns over the proposed changes.
CMS has also had difficulty recovering improper payments. This is partially because it is such a lengthy process and the payment methodology does not seem to be very accurate. A former official from CMS who helped to design the audit process, also said that the industry was not taking small penalties seriously because sometimes it cost more to retrieve medical records to support their billing than it did to pay off Civil Money Penalties from CMS.
The GAO further criticized CMS for failing to adopt the Recovery Audit Program to MA, as required under the ACA. The GAO’s report commented on CMS’s progress toward incorporating recovery audit contractors (RAC) into the MA audits. RACs are entities that conduct post payment reviews to identify and correct improper payments. CMS will begin contracting with the RACs to audit a greater amount of MA contracts, and CMS started planning for the incorporation of RACs earlier this year. MAOs are likely to benefit from compliance programs that help develop coding guidance based on RADV criteria, design internal audits, train physicians and coders, ensure that ICD-10 is properly implemented, and regularly review risk assessments. Providers can also decrease auditors’ incentives and reduce whistleblower risk by proactively planning for RAC audits of RADV reviews. Although CMS has been slow to adopt the Recovery Audit Program, it may not be long before RACs begin auditing now that CMS has proposed a plan. RACs have an incentive to find billing errors because their payment is contingent upon finding errors. In addition to the regular audits, RACs would conduct condition-specific RADV audits for conditions such as diabetes that have a higher risk of payment errors. They are also likely to have a greater role in developing guidance for reviews. Providers and insurers may be concerned not only about the expanded auditing program, but also the RACs’ involvement. The appeals process is already lengthy and there are five levels of Medicare appeals. Furthermore, the incentive to find errors for payment creates a conflict of interest. The Medicare appeals have been backlogged by over 500,000 cases and some people have suggested the need for RAC reforms. Hospitals have been working to persuade the federal appeals court to order HHS to work more quickly though the backlog of cases.
The MA audits revealed that many MAOs have been submitting false claims by upcoding for certain medical conditions, and now compliance programs will have to be proactive in preparing for more audits. Several whistleblower cases have recently brought under the False Claims Act, and lawyers predict that more cases will begin to surface. The federal government plans to expand MA audits and RADV reviews for 2017 and involve RACs to help perform more audits and recover more money. Compliance programs can help providers and MAOs by providing more training and conducting audits for conditions that have a higher risk of payment errors.