Humana Sues HHS Over Final Rule on RADV Audits of MAOs

Humana Sues HHS Over Final Rule on RADV Audits of MAOs

The Centers for Medicare & Medicaid Services (CMS) released the Final Rule on risk adjustment data validation (RADV) audits of Medicare Advantage organizations (MAOs) on Jan.0 30, 2023. Humana then sued the U.S. Department of Health and Human Services (HHS) on Sept. 1, arguing that the RADV audits, as newly revised, are not accurate and should not be used.

The RADV program is CMS’s mechanism for validating the accuracy of diagnoses submitted by MAOs for risk adjustment. Arguably, the Medicare Advantage companies receive higher reimbursement rates for more severe diagnoses. The goal of RADV audits is to identify and correct any discrepancies or inaccuracies in the diagnoses reported by MAOs. Inaccurate coding can result in overpayments or underpayments.

A quick summary of the 2023 Rule:
CMS will extrapolate. This Final Rule allows CMS to audit a sample of an MAO’s diagnoses reported for risk adjustment purposes (from 2018 and later) and then use the audit findings to calculate an extrapolated improper payment amount for the MAO’s contract.

This extrapolation technique is controversial for a number of reasons, including whether CMS has the authority to use it in the manner proposed in the Final Rule, and whether it is an actuarially sound method of auditing.

CMS will not apply a fee-for-service (FFS) adjuster in RADV audits to account for any effect of erroneous diagnosis codes in the data from Medicare Parts A and B, which are used to calibrate the MA risk adjustment model.
MAOs will be required to remit improper payments identified during RADV audits in a manner specified by CMS.

Humana’s lawsuit also asks the court to vacate the Final Rule and enjoin CMS from applying it in any audits of the plaintiffs.

The plaintiffs allege that the MA program is based on a foundational bargain that is being threatened by the Final Rule. This bargain is that MAOs agree to provide their enrolled Medicare beneficiaries at least the same level of benefits that the beneficiaries would receive under traditional FFS Medicare, and in turn, CMS agrees to pay the MAOs the same amount that CMS would expect to pay to cover those beneficiaries if they remained in FFS Medicare. This bargain is codified in the statutory mandate of 42 U.S.C. § 1395w-23(a)(1)(C)(i), “to ensure actuarial equivalence.” According to the complaint, the Final Rule breaks this bargain and undermines the financial stability of the MA program.

At the heart of the plaintiffs’ complaint is an allegation that the Final Rule is actuarially unsound. The plaintiffs allege that the Final Rule would use one set of data when setting risk adjustment payment amounts for MAOs and a different set of data in RADV audits.

This disconnect will result in systemic underpayments to MAOs. More specifically, CMS will use reported diagnosis codes when estimating FFS Medicare costs and will use documented diagnosis codes in RADV audits. The complaint includes the following simplified illustration of why these different documentation standards could result in a payment problem:

If CMS were to divide $1,000 of total spending associated with epilepsy among 100 beneficiaries whose doctors report an epilepsy diagnosis code in FFS Medicare claims data, it would calculate an average incremental cost of $10 per beneficiary. But if the agency instead audited those claims against the underlying medical records for those beneficiaries and found that 50 of the diagnosis codes were not documented in the medical records, it would divide the $1,000 in spending associated with epilepsy across only the remaining 50 diagnosis codes, for an average expected incremental cost of $20 per beneficiary.

In other words, according to the plaintiffs, there is a greater number of Medicare beneficiaries who are reported to have a given condition than are documented to have that condition, and using one standard for risk adjustment payments and another for RADV audits is not an actuarially sound methodology unless an adjustment is made to account for this problem.

Print Friendly, PDF & Email

Knicole C. Emanuel Esq.

For more than 20 years, Knicole has maintained a health care litigation practice, concentrating on Medicare and Medicaid litigation, health care regulatory compliance, administrative law and regulatory law. Knicole has tried over 2,000 administrative cases in over 30 states and has appeared before multiple states’ medical boards. She has successfully obtained federal injunctions in numerous states, which allowed health care providers to remain in business despite the state or federal laws allegations of health care fraud, abhorrent billings, and data mining. Across the country, Knicole frequently lectures on health care law, the impact of the Affordable Care Act and regulatory compliance for providers, including physicians, home health and hospice, dentists, chiropractors, hospitals and durable medical equipment providers. Knicole is partner at Nelson Mullins and a member of the RACmonitor editorial board and a popular panelist on Monitor Monday.

Related Stories

Knowing the Score: MIPS

Knowing the Score: MIPS

EDITOR’S NOTE: Medicare’s legacy quality reporting programs were consolidated and streamlined into the Merit-Based Incentive Payment System, known as “MIPS.”  The Merit-Based Incentive Payment System

Read More

Leave a Reply

Please log in to your account to comment on this article.

Featured Webcasts

2024 Observation Services Billing: How to Get It Right

2024 Observation Services Billing: How to Get It Right

Dr. Ronald Hirsch presents an essential “A to Z” review of Observation, including proper use for Medicare, Medicare Advantage, and commercial payers. He addresses the correct use of Observation in medical patients and surgical patients, and how to deal with the billing of unnecessary Observation services, professional fee billing, and more.

March 21, 2024
Top-10 Compliance Risk Areas for Hospitals & Physicians in 2024: Get Ahead of Federal Audit Targets

Top-10 Compliance Risk Areas for Hospitals & Physicians in 2024: Get Ahead of Federal Audit Targets

Explore the top-10 federal audit targets for 2024 in our webcast, “Top-10 Compliance Risk Areas for Hospitals & Physicians in 2024: Get Ahead of Federal Audit Targets,” featuring Certified Compliance Officer Michael G. Calahan, PA, MBA. Gain insights and best practices to proactively address risks, enhance compliance, and ensure financial well-being for your healthcare facility or practice. Join us for a comprehensive guide to successfully navigating the federal audit landscape.

February 22, 2024
Mastering Healthcare Refunds: Navigating Compliance with Confidence

Mastering Healthcare Refunds: Navigating Compliance with Confidence

Join healthcare attorney David Glaser, as he debunks refund myths, clarifies compliance essentials, and empowers healthcare professionals to safeguard facility finances. Uncover the secrets behind when to refund and why it matters. Don’t miss this crucial insight into strategic refund management.

February 29, 2024
Mastering Medicare Notices: Your Essential Guide to the MOON and Beyond

Mastering Medicare Notices: Your Essential Guide to the MOON and Beyond

Hospital staff continue to grapple with the complexities of Medicare notices.  In this webcast, Tiffany Ferguson, LMSW, CMAC, ACM, will present the latest requirements for preparation and delivery of CMS-mandated forms, including the Advance Beneficiary Notice (ABN), Hospital-Issued Notices of Noncoverage (HINNs), Important Message from Medicare (IMM) and Medicare Outpatient Observation Notice (MOON), and practical solutions through foolproof workflows and compliance auditing.

January 25, 2024
OBGYN ICD-10-CM/PCS Coding: Mastering Complex Guidelines and Compliance

OBGYN ICD-10-CM/PCS Coding: Mastering Complex Guidelines and Compliance

Dive into the complexities of Obstetrics and Gynecology coding, addressing challenges from antepartum to postpartum care. Learn to decode intricate guidelines, tackle claim denials, and safeguard your practice’s financial health. Uncover the secrets to compliant coding, reducing errors, and optimizing reimbursement. With practical exercises and expert insights, this webcast empowers coders, auditors, and healthcare professionals to elevate their OBGYN coding prowess.

February 28, 2024
Unlocking Clinical Documentation Excellence: Empowering CDISs & Coders

Unlocking Clinical Documentation Excellence: How to Engage the Provider

Uncover effective techniques to foster provider understanding of CDI, empower CDISs and coders to customize their queries for enhanced effectiveness, and learn to engage adult learners, leveraging their experiences for superior learning outcomes. Elevate your CDI expertise, leading to fewer coding errors, reduced claim denials, and minimized audit issues.

December 14, 2023
Coding for Spinal Procedures: A 2-Part Webcast Series

Coding for Spinal Procedures: A 2-Part Webcast Series

This exclusive ICD10monitor webcast series will help you acquire the critical knowledge you need to completely and accurately assign ICD-10-PCS and CPT® codes for spinal fusion and other common spinal procedures.

October 26, 2023

Trending News

It’s Heart Month! Use code HEART24 at checkout to receive 20% off your cardiology products. Click here to view our suite of Cardiology products!