January 27, 2016

Expanding the RAC Program to Medicare Advantage Plans

By Nicole Smith

The Centers for Medicare & Medicaid Services (CMS) recently released a request for information that will be used to collect feedback to design an expanded recovery audit contract program for Medicare Advantage plans. The soon-to-be-initiated audit program expansion is meant to give CMS the ability to monitor insurers that may try to sneak in higher payments. The expansion focuses on the identification and correction of over- and underpayments associated with diagnosis data submitted to CMS by the Medicare Advantage organizations. 

The Patient Protection and Affordable Care Act of 2010 included Medicare Advantage Recovery Auditor (RA) audits as part of the RA program that we are familiar with for Part A and Part B, which covers Medicare fee-for-service operations. There has been little movement to date on this part of the program, but this move appears to forecast that these audits are on the horizon.   

Although not without controversy, the current fee-for-service RA program, now a bit more than five years old, has been able to recover more than $5 billion from providers. CMS currently conducts risk adjustment data validation (RADV) audits to validate the accuracy of diagnosis data submitted to CMS for payment by Medicare Advantage organizations. These RADV audits focus on a sample of medical records to determine if the health plan’s diagnoses for risk scores are legitimate. CMS audits about 5 percent of Medicare Advantage organization contracts per payment year, and organizational leaders have said that they ultimately would like all Medicare Advantage contracts to be subject to a comprehensive or condition-specific RADV audit for each payment year.

This new RA will be responsible for conducting risk adjustment data validation reviews, and, as with the current RA program, CMS will pay a contingency fee to each contractor. Current Medicare RAs earn anywhere from 9 to 12.5 percent of recouped overpayments, on average. Medicare Advantage plans will have the ability to appeal a RA decision as providers do in the current RA program.

The mission of the current RA program is to identify and correct improper Medicare payments through the efficient detection and collection of overpayments made on claims of healthcare services provided to Medicare beneficiaries, and the identification of underpayments to providers, so CMS can implement actions that will prevent future improper payments in all 50 states.

There will be challenges as a Medicare Advantage RA program is implemented – the traditional RA focus on medical necessity will not translate well into a Medicare Advantage audit/review. With Medicare Advantage plans receiving more of a capitated-based payment service in which the plan is paid a flat monthly fee for each patient using a risk score that estimates the health issues an individual patient will face. Essentially, Medicare pays a flat monthly fee at a higher rate for patients that are sicker, as indicated by risk-adjusted scores.

Some have pointed out that health plans are “upcoding” their sick patients to make them appear sicker than they really are in order to inflate their risk scores, resulting in a higher reimbursement rate. The audits likely will scrutinize coding and may uncover fraud, but the increase in risk scores may also be a result of health plans’ efforts to more fully document diagnoses that exist. The final results likely will come down to how much fraud is identified versus how many potentially improper payments are merely a reflection of the efforts by the Medicare Advantage plan to fully document illnesses. 

The Center for Public Integrity estimates that there was $70 billion in improper payments made to health plans from 2008 to 2013 as a result of patient upcoding. The Office of Inspector General conducted audits of six health plans, completing them in 2012, and found that the companies couldn’t justify payments from the government for 40 percent or more of their patients.

As the Medicare Advantage audit program gets underway, it will serve as a source of education to RA auditors about coding issues. Any downcoding work of the Medicare Advantage plans will identify issues that RAs should look for in the existing Medicare fee-for-service audit activities.

Comments on the draft statement of work are due to CMS by Feb. 1. Once comments are reviewed, CMS will determine the next steps for procuring a Part C RAC.

About the Author

Nicole Smith is vice president of government relations at MEA|NEA|TWSG.

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