On February 1, 2023, CMS published its final rule addressing the Medicare Advantage (MA) Risk Adjustment Data Validation (RADV) program. CMS uses RADV audits to identify whether Medicare made overpayments to MA plans by validating that the diagnoses submitted by MA organizations are properly supported by the beneficiary’s medical record. CMS estimates that it made over $15 billion in Part C overpayments in fiscal year 2021, based on 2019 payments.
Although CMS had proposed to apply extrapolation starting with payment year (PY) 2011, the final rule provides that extrapolation will instead begin with the PY 2018 audit. CMS will still collect non-extrapolated overpayments identified in audits during PYs 2011-2017, but this means some improper payments made during those years will be left uncollected. CMS’s decision came as a result of consideration of public comments regarding the timeliness of the RADV audits and operational concerns regarding the volume of active appeals.
CMS described potential audit methodologies in previous proposed rules, such as contract-level sampling and extrapolation techniques, or a specific extrapolated audit methodology based on subcohorts of enrollees. In the final rule, however, CMS announced that it will not adopt any specific extrapolation or sampling audit methodology. Instead, CMS will rely on any statistically valid method for extrapolation or sampling that it determines is best suited for a specific audit. CMS explained that it will disclose its methodology to MA organizations through Health Plan Management System memoranda or other means.
CMS also concluded for purposes of the final rule that the so-called fee-for-service (FFS) adjuster is not appropriate for use in in RADV audits and finalized the policy that CMS will not apply the FFS adjuster. CMS previously used the FFS adjuster in RADV audits to account for the difference between Medicare FFS and MA diagnosis data. MA organizations had argued, however, that Medicare FFS data is unaudited and, as a result, understates the treatment cost of various conditions. CMS explained in the preamble to the final rule that the FFS adjuster is not appropriate for two reasons. First, the actuarial equivalence provision of section 1853(a)(1)(C)(i) of the Social Security Act only applies to how CMS risk adjusts its payments to MA organizations and does not apply to the MA organizations’ obligation to return overpayments. Second, CMS explained, it would not be reasonable to read the Act as requiring a payment reduction to MA organizations by using a statutorily set minimum adjustment, while at the same time “prohibiting CMS from enforcing longstanding documentation requirements by requiring an offset to the recovery amounts calculated for CMS audits.”
CMS estimates that RADV audits will recover $4.7 billion from MA organizations from 2023 through 2032.
The Final Rule is available here, and CMS’s fact sheet is available here.
