By Brian Flower, vice president of client solutions, Vatica Health
On January 30, 2023, the Centers for Medicare and Medicaid Services (CMS) released the final rule on Risk Adjustment Data Validation (Final Rule). The rule includes several changes. The most consequential is the new RADV audit methodology used by CMS to address overpayments to Medicare Advantage plans based on the submission of unsupported risk-adjusting diagnosis codes. The final rule authorizes CMS to extrapolate RADV audit findings beginning with payment year 2018 (not 2011-2017 as originally proposed). The industry views the use of extrapolation as especially punitive because in the Final Rule, CMS also rejected the application of the FFS Adjuster to account for an allowable threshold of errors related to provider medical record documentation.
The financial implications of the Final Rule are significant. Prior to the Final Rule, repayment obligations were limited to errors found in a sample of a few hundred records. Under the Final Rule, that error would be applied across a broader population of the Medicare Advantage Organization’s contract. Recently, the Office of Inspector General (OIG) audited diagnosis codes submitted by a health plan for approximately 200 members. The OIG found a high percentage of codes were not supported in the medical record. This resulted in $480,000 in overpayments, though the health plan disputes the findings. The new extrapolation methodology would not apply in this instance because the alleged overpayments occurred in 2015 and 2016. If extrapolation did apply – instead of approximately $480,000 – the overpayments would result in an exponentially higher repayment amount of approximately $27 million.
What can we tell about the extrapolation method if we consider these figures with membership data of the MAO contract in question? Straight-line math indicates that for each dollar of overpayment identified in the RADV sample, there’s an additional $55 of overpayment under extrapolation.
We should be careful applying these assumptions to other populations, especially considering the highly targeted nature of this audit in question. The OIG targeted HCCs representing $695,000 in payments. Based on their review, 69% of those dollars could not be supported by documentation. However, what seems to be apparent is that an extrapolation methodology has been determined and, when applied, material payment modifications can result.
The financial implications for RADV error rates will no longer be limited in materiality to small sample populations. Extrapolated penalties will be significant and potentially catastrophic to payers as well as at-risk providers. CMS estimates that from 2023 through 2032, the agency will recover an extra $4.7 billion from insurers via the new audit methodology. Given this, at-risk entities should evaluate their current risk adjustment programs and focus on solutions that produce accurate and compliant yield. Programs should include a robust quality improvement process to validate coding and documentation prior to submission. Legacy programs, such as retrospective chart reviews and in-home assessments, should be augmented with a provider-centric approach. Leading plans recognize PCPs as partners in coding accuracy and complete documentation to mitigate the risks associated with the Final Rule and the overall increased scrutiny on risk adjustment compliance.
How Vatica Health can help
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