OIG Finds Profits to Blame for Denied Medicare Advantage Claims

October 01, 2018 - Fifty-six percent of Medicare Advantage (MA) payers inappropriately denied claims from beneficiaries and providers to potentially profit from the capitated payment system, according to a report from the Office of Inspector General (OIG).

OIG reviewed the claims denial processes among several Medicare Advantage payers — referred to as Medicare Advantage Organizations (MAOs) in the report — and found that the many payers provided insufficient reasons for denying member claims.

In 2016, 45 percent of MAOs provided denial letters to beneficiaries or providers that contained insufficient information to properly explain why claims were denied.

OIG also found that MAOs have a history of improperly denying claims. From 2012 to 2016, several MAOs denied claims based on incorrect clinical decisions and insufficient outreach to individuals.

According to OIG, the findings likely point to MAOs denying claims to retain Medicare Advantage payments from CMS.

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“MAOs may have an incentive to deny preauthorization of services for beneficiaries, and payments to providers, in order to increase profits,” OIG said. “High overturn rates when beneficiaries and providers appeal denials, and CMS audit findings of inappropriate denials, raise concerns that some beneficiaries and providers may not be getting services and payment that MAOs are required to provide.”

MA claims denials were easy to contend if physicians and beneficiaries took the extra steps to appeal the denials, OIG said.

Between 2014 and 2016, 70 percent of appealed claims denials from beneficiaries or providers were overturned or partially overturned. Twenty-five percent of denials were not overturned.

Most overturned claims denials were for provider payments, which consisted of 82 percent of successful appeals. The remaining overturned denials were for beneficiary requests to override prior authorization for healthcare services.

However, beneficiaries and providers seldom use the appeals process when their claims are denied.

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OIG found that the range of claims appeals in MAOs was significant. Some MAOs experienced no appeals while some MAOs had 40.5 percent of beneficiaries or providers appeal denied claims.

In some cases, the ratio of denials to appeals was drastic.

For example, OIG observed among 18 MAOs that the organizations collectively denied 2.4 million pre-authorization and payment requests but only received 1,838 appeals.

The correlation between inappropriate denials and limited use of the appeals process could prove a challenge for providers seeking fair compensation for care. Additionally, inappropriate denials could extend the duration of the time until a beneficiary receives services through prior authorization.

MAOs could also inappropriately deny claims since CMS provides limited penalties to an organization’s finances and performance ratings, OIG said.

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Currently, CMS increases compliance and patient safety penalties for payers that serve large Medicare Advantage populations. A payer with more than 500,000 MA beneficiaries faces harsher penalties for program violations.

In 2016, CMS issued fines of $1.9 million to nine MAOs related to payment and claims grievances. CMS said these fines were issued after the agency found MAOs contributed to delays in care or increased members’ out-of-pocket costs. OIG noted that CMS suspended two MAOs from enrolling in the MA program after audits revealed the MAOs focused on profits over beneficiary care.

The federal agency’s MAO audits also do not impact an MAO’s Medicare Star Ratings, which could encourage MAOs to continue to improperly deny claims.

OIG said MAOs that received civil or monetary penalties in 2015 only experienced a three-percent reduction in the Beneficiary Access and Performance Problems category of star ratings.

In addition, CMS is removing the Beneficiary Access and Performance problems category from the Star Rating system in 2019. OIG said that removing the measure could allow MAOs to improperly deny claims while also earning high performance ratings. 

“The lack of a strong link between audit results and Star Ratings also means that MAOs that receive serious enforcement actions (including sanctions) — and quality bonus payments — in the same year,” OIG said.  “Of the 22 contracts that were sanctioned in 2016 for 2015 audit violations, 6 contracts received overall Star Ratings of 4 or higher for 2016.”

OIG recommended that CMS should conduct routine performance reviews of MAOs, conduct educational outreach about compliance requirements for MA payers, and streamline claims appeal processes for beneficiaries and providers.

The agency concurred with OIG’s findings and CMS will begin to test solutions for holding MAOs accountable to their regulatory requirements. CMS noted its commitment to addressing the gaps in MAO performance that impact beneficiary access to care.

“Although CMS uses several compliance and enforcement tools to address MAO performance problems, more action is needed to address these widespread and persistent problems in Medicare Advantage,” OIG concluded.