How Can Medicare Advantage Organizations Prepare for RADV Audits?

August 22, 2023 - Increasing internal audits and implementing additional coding oversight can benefit Medicare Advantage organizations as they manage new auditing regulations, Melissa James, senior consultant at Wolters Kluwer, told HealthPayerIntelligence. 

The Medicare Advantage Risk Adjustment Data Validation (RADV) final rule changed how CMS determines payment adjustments for Medicare Advantage plans. Medicare Advantage organizations must prepare accordingly to successfully navigate these audit changes.  

The RADV process aims to reduce Medicare Advantage overpayments by auditing plans to confirm their coding activities accurately reflect beneficiaries’ health statuses. Major changes in the RADV final rule revolved around the fee-for-service (FFS) adjuster and extrapolation, sparking some concern from payers.

Specifically, CMS removed the FFS adjuster from the RADV process in the final rule. The FFS adjuster established a margin of FFS payment errors to create a baseline level of payment errors for Medicare Advantage organizations, resulting in a buffer of sorts.

The agency also finalized using extrapolation to estimate error rates starting with 2018 diagnostics.

“[CMS] is no longer determining repayment amounts at the member level, meaning it’s not just taking back money that [Medicare Advantage organizations] should have never been paid for a particular patient. They’re estimating that error rate across the entire health plan, so those repayment amounts get very large, very fast,” James explained.

The final rule exhibits gray areas for coding rules and less-than-transparent audit methodologies, making it difficult for health plans to ensure compliance, James said.

While James did not expect that the majority of health plans are intentionally upcoding and gaming the system, she noted that human coding errors are prevalent. The final rule presents challenges for Medicare Advantage plans, but it could help encourage investments in technology that can address these coding challenges.

As RADV audits approach, Medicare Advantage plans can prioritize certain actions to prepare.

Organizations should be performing mock RADV audits and increasing the number of internal audits performed on their coding vendors.

“They need to review more charts because ultimately, the health plan is the one that’s responsible for any diagnosis code submitted to CMS, so they need to have more oversight and auditing of those activities,” James added. “Right now, it’s probably anywhere from 8 to 12 percent of charts that get reviewed by way of these internal audit activities, and that just isn’t enough.”

Health plans would benefit from reviewing reports from the Office of Inspector General (OIG) that offer insight into typical avoidable coding errors. Investing in compliance programs could also help plans ensure adequate staff, policies, and procedures are in place to succeed at the regulatory audits. Health plans should be taking a proactive approach and ticking all these boxes before the audits start.

“When an audit starts, [health plans] only have a certain amount of time and CMS doesn’t provide a lot of leeway,” James explained. “[Plans] are usually notified that they’re going to be in an audit and just within a week or two…the clock starts ticking on this deadline, and it’s only 20 to 25 weeks away.”

James also quoted a section of the final rule stating, “It is expected the use of extrapolation will incentivize Medicare Advantage organizations to take meaningful steps to reduce improper risk adjustment payments in the future.”

“I call that out because they need to keep that in mind. It’s not too late for them to make meaningful efforts to reduce these potential repayments,” James indicated. “There is no submission deadline or timeline for health plans to provide redaction files to CMS letting them know that a [hierarchical condition category (HCC)] shouldn’t have ever been submitted on this patient’s behalf.”

Identifying and returning non-validated HCCs can help mitigate organizations’ future audit risk. Taking the proper steps to prepare is crucial to avoid monetary consequences and poor reputations, James pointed out.

Going forward, Medicare Advantage organizations must keep in mind all regulatory audits, not just RADV audits. For example, they must comply with OIG audits and improper payment measure (IPM) audits.

“Through all of these other auditing activities that CMS or OIG does, that’s how they’re identifying the highest-risk health plans for these [RADV audits],” James explained. “Medicare Advantage organizations need to take all of the audits very seriously because if they perform well in these other audits, their chances of being pulled into a RADV audit are less.”