Risk Adjustment Coding Challenges: Reducing MA Audit Risk

Risk Adjustment Coding Challenges: Reducing MA Audit Risk

Medicare Advantage (MA) organizations are under extreme scrutiny to ensure proper coding to reduce overpayments for MA beneficiaries. The recent toolkit released by the Office of Inspector General (OIG) identifies the commonly miscoded diagnosis codes that result in inaccurate risk adjustment scores and lead to overpayments. OIG found that over 70% of the codes were not supported in medical records and have provided the SQL used to identify these errors in audits, encouraging health plans to run it against their own data before submission. This presents a critical issue for MA plans – there will no longer be any excuse for submitting incorrect codes to CMS.

CMS pays MA plans more for members who are likely to be high utilizers of services due to their chronic conditions. The CMS Hierarchical Condition Category (HCC) risk model is used to perform risk adjustment on member data. Diagnosis codes submitted on medical claims by providers are the primary input used to calculate the risk score. Risk scores for MA plans have been increasing every year due to additional efforts by MA plans to capture diagnosis codes used for risk adjustment through in-home assessments, scheduling PCP visits, and performing chart reviews. Finding supplemental data not submitted by providers on claims is acceptable to CMS. Under increased pressure, organizations need a plan in place to eliminate improper risk adjustment coding. 

Risk to Health Plans 

The Department of Justice (DOJ) has been investigating Medicare Advantage plans for overpayment for years, and some of these investigations have made news headlines. These plans face penalty amounts in the millions of dollars that must be paid back to the Centers for Medicare & Medicaid Services (CMS) due to incorrect coding and overpayments found during audits. Every MA plan is now on notice to ensure they have solutions in place to review provider coding and diagnosis code submissions to CMS being used to calculate risk adjustment scores for monthly MA plan payments.  

Historically, CMS has selected a handful of MA plans to undergo a full audit each year. Others are given a sample of members to validate submitted diagnosis codes. The results of these audits consistently show insufficient documentation in medical records to support the diagnosis codes submitted, which determined MA payments. CMS typically audits payments dating back 4-5 years, making it harder for plans to obtain medical records that support each HCC being audited in the audit sample. Medical record review determines if the HCC used to justify the diagnosis code meets Risk Adjustment Data Validation (RADV) audit standards based on CMS coding guidelines. 

The RADV final rule published in January 2023 states that CMS may extrapolate the HCC error rate, potentially to the entire population, starting with audits for payment year 2018. This means that CMS could assume the HCC error rate for the audit sample to be the error rate for the entire member population for that HCC. As a result, CMS could ask plans to pay back the money received in overpayments for the entire member population, instead of overpayments found only in the sample as requested in previous years. CMS has not definitively stated when and how they would perform the extrapolation, but MA plans are aware that it could happen. It is estimated that the potential recoveries of extrapolated audit findings could amount to $4.7 billion by 2032.  

Comprehensive Risk Adjustment Strategy 

Medicare Advantage plans need a comprehensive plan in place to reduce the risk of RADV audits caused by poorly documented diagnosis codes submitted by providers on claims. At the same time, MA plans have been reviewing millions of charts to identify additional diagnosis codes documented by providers in medical records but not submitted on claims, which CMS will allow to be submitted as supplemental data. It is critical for MA plans to focus on identifying and removing improperly coded diagnosis codes while searching for codes to add. 

Advantmed offers risk adjustment coding solutions to help health plans mitigate the risk of a RADV audit while performing medical record retrieval and coding for risk adjustment. We offer blind coding as well as analytically informed chase lists that identify claims that need validation. Additionally, our team can help identify valid codes that were not submitted on provider claims to ensure they are submitted as supplemental data to CMS. 

CMS, the DOJ, and OIG have spent years performing their investigations and, with these new guidelines, have given notice that MA plans need new strategies for overseeing what is submitted for risk adjustment coding and scoring. With potential penalties reaching millions of dollars, MA plans will need to keep enough dollars in reserve in case of audit penalties, and proactively implement a risk mitigation solution to prepare for this new reality. 

To learn more about Advantmed’s risk adjustment coding solution, click here