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.
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