Articles Posted in Compliance

Under the Medicare Advantage (MA) program, the Centers for Medicare & Medicaid Services (CMS) makes monthly payments to Medicare Advantage Organizations (MAOs), typically private insurance companies, according to a system of risk adjustment that depends on the health status of each enrollee. Accordingly, MAOs are paid more for providing benefits to enrollees with more severe diagnoses associated with more intensive uses of healthcare resources than to healthier enrollees who would be expected to require fewer resources. To determine the health status of enrollees, CMS relies on MAOs to collect diagnosis codes from their providers and submit these codes to CMS. While the MA plans conduct audits of the claims submitted to them by providers, CMS conducts audits of MAOs because some diagnosis codes are at higher risk for being miscoded, and MA audits that allegedly identify any improper coding may result in overpayment demands from CMS.

Since MAOs receive additional payments when they cover patients with more severe health conditions, this structure presents a potential for fraud and abuse whereby some MAOs may use additional diagnoses to attain high-risk scores, while not necessary reflecting these diagnoses in any documentation. In fact, MA plans have come under scrutiny recently after a Freedom of Information Act (FOIA) lawsuit revealed millions of dollars in overcharges by certain MAOs, specifically health insurers that issue MA plans. A common allegation involves “chart reviews” wherein MA plans find additional diagnosis that are supported by the medical records but were not previously reported or coded. Federal authorities tend to take issue with such diagnoses where they lead to higher cost for the Medicare program but not additional service being provided to the beneficiary. Healthcare providers have historically also encountered significant issues with MA programs. Payment, audits of providers, and claim adjudication are usually governed by contracts that are not necessarily the same amongst MA plans, and which most likely differ from the rules and regulations applicable to traditional Medicare. This is, where providers are audited by MA plans, the audits tend to resemble the commercial insurance audits, rather than traditional Medicare audits.

To provide oversight of the MA program, CMS performs audits of MA plans through the Risk Adjustment Data Validation (RADV) program. RADV audits are designed to identify improper risk adjustment payments made to MAOs in situations where medical diagnoses submitted for payment allegedly were not supported in the beneficiary’s medical record, ensuring that MAOs do not game the system and claim more money than they should. Each year, CMS selects several MA plans for RADV audits to ensure that medical record documentation supports diagnoses submitted for risk adjustment. The RADV audit process generally requires MAOs and their providers to submit a sample of medical records to validate risk adjustment data, in addition to other requirements. In a recently issued final rule, CMS stated that it will only extrapolate audit findings beginning with the plan year 2018 RADV audit, and will not extrapolate audit findings prior to 2018. As MA plans are becoming increasingly popular amongst Medicare beneficiaries while at the same time drawing more scrutiny from government regulators, providers should make efforts to ensure compliance with MA program requirements, as well as be prepared to appeal any denials.

The Centers for Medicare & Medicaid Services (CMS) recently issued a proposed rule that would require disclosure of private equity (PE) or real estate investment trusts (REITs) ownership, managerial, and other disclosable information for Medicare skilled nursing facilities (SNFs). The proposed rule also includes recommendations for comparable requirements for Medicaid nursing facilities (NFs) at the state level. If finalized, the proposed rule would likely increase the complexity of transactions involving PE or REIT ownership of SNFs and increase the reporting burden of PE or REITs with existing ownership interest in these facilities.

The timing of this proposed rule, according to CMS, is purposefully aligned with the Biden Administration’s recent initiative to improve the safety, quality, and accountability of nursing homes. The proposed rule also complements other recent CMS efforts intended to strengthen provider enrollment rules to “stop fraud before it happens” and stop playing “pay and chase” with individuals and organizations that the agency views as posing an undue risk of fraud, waste, or abuse to the Medicare and Medicaid programs. CMS stated that this proposed rule is necessary to obtain important data about the owners and operators of Medicare SNFs and Medicaid NFs, enabling CMS and states to better monitor the ownership and management of these providers. Given allegations of quality issues and differences in outcomes of these facilities with certain types of owners, CMS views this as an especially critical consideration.

If finalized, the proposed rule would require disclosure of the following information for all Medicare SNFs and Medicaid NFs:

As part of the Inflation Reduction Act (IRA) of 2022, the Centers for Medicare & Medicaid Services (CMS) is required to establish the Medicare Drug Price Negotiation Program (Negotiation Program) to negotiate maximum fair prices (MFPs) for certain high expenditure, single source drugs and biologicals. In accordance with the IRA’s requirements, CMS recently issued an initial guidance memorandum for implementation of the Negotiation Program for initial price applicability year 2026, as well as solicitation of comments.

The initial guidance memorandum describes how CMS intends to implement the Negotiation Program for initial price applicability year 2026 (January 1, 2026 to December 31, 2026), and specifies the requirements that will be applicable to manufacturers of Medicare Part D drugs that are selected for negotiation and the procedures that may be applicable to manufacturers of Medicare Part D drugs, Medicare Part D plans (both Prescription Drug Plans (PDPs) and Medicare Advantage Drug Plans (MA-PDs)), and providers and suppliers (including retail pharmacies) that furnish Medicare Part D drugs.

Additionally, the IRA creates several new sections under the Social Security Act (Act) to administer and govern the Negotiation Program. Specifically, in accordance with the IRA and the newly created provisions under the Act, CMS’ initial guidance provides that with respect to each initial price applicability year, CMS shall:

In January 2023, the U.S. Department of Health and Human Services (HHS) through the Centers for Medicare & Medicaid Services (CMS) issued a final rule implementing policies for the Medicare Advantage (MA) Risk Adjustment Data Validation (RADV) program. The RADV program is CMS’s primary audit and oversight tool of MA program payments. Under the RADV program, CMS identifies improper risk adjustment payments made to Medicare Advantage Organizations (MAOs) in situations where medical diagnoses submitted for payment allegedly were not supported in the beneficiary’s medical record.  The RADV final rule is oriented to ensure that Medicare recipients have access to the benefits and services they need, including under MA plans, while protecting the fiscal administration of the Medicare program by aligning CMS’s oversight of traditional Medicare and MA programs.

Under the final rule, CMS will not extrapolate audit findings for payment years 2011 through 2017, and will collect only non-extrapolated overpayments for those plan years. This is a notable departure from previous rulemaking, which proposed to apply extrapolation beginning in payment year 2011. Audit extrapolations will begin with the plan year 2018 RADV audit using any extrapolation technique that is statistically valid. CMS has indicated that the audits will center on plans identified as highest risk for improper payments. CMS also stated its intention that, while they are not required to do so, CMS will continue to disclose their extrapolation methodology to MAOs in order to provide MAOs with information sufficient to understand the means by which CMS extrapolated the RADV payment error.

The final rule also solidifies the proposed policy that CMS will not apply a fee for service (FFS) adjuster in RADV audits. The final rule explains that the requirement for actuarial evidence in MA payments applies to how CMS risk-adjusts the payments it makes to MAOs, and not to the obligation to return overpayments for unsupported diagnosis codes, including overpayments identified during a RADV audit. Additionally, CMS has expressed that it does not believe that it is reasonable to interpret the relevant provisions in the Social Security Act as requiring a reduction in payments to MAOs by a statutorily set minimum adjustment in the coding pattern adjustment, while at the same time prohibiting CMS from paying at those reduced rates by mandating a FFS adjuster for RADV audits. In light of these recently finalized policies, MAOs should take steps to ensure compliance with the Medicare program in order to be fully prepared for increased audits of MA plans.