CMS Proposes Expansion of the Risk Adjustment Data Validation (RADV) Compliance Program with Recovery Audit Contractors

Richard Popper
Judith Nelson
Richard Popper
Director of Medicaid and Duals Strategy
Judith Nelson
Director of Medicare Advantage

Near the end of 2015, Centers for Medicare and Medicaid Services (CMS) issued a DRAFT Request for Information (RFI) to Recovery Audit Contractors to identify and correct overpayments and underpayments in Medicare Part C. Attached to the RFI is the proposed Medicare Risk Adjustment Statement of Work (SOW) to expand CMS' Medicare Advantage Risk Adjustment Data Validation (RADV) program, through the use of Recovery Audit Contractors (RACs). This proposed SOW contains major changes in CMS' Medicare Advantage (MA) risk adjustment strategy that your plan should consider. The SOW was released on and, and CMS is requesting comments that must be submitted by 10:00 a.m. EST on February 1, 2016 to and

Expanded RADV Audits Through Use of RAC Contractors

CMS has engaged RAC contractors since 2005 to recover overpayments to providers made under the traditional Medicare fee-for-service system. RAC contractors are paid on a contingency basis from recovered amounts. CMS' December Medicare SOW proposes a new use of RAC auditors to expand RADV activities. This is the first time that RADV auditors would be funded on a contingency basis, receiving a portion of erroneous payments recovered. According to CMS, this new initiative's "ultimate goal is to have all MA contracts subject to either a Comprehensive or Condition‐Specific RADV audit for each payment year"1. Currently, CMS audits 30 plans (approximately 5% of plans) per payment year and the expansion of the RADV audit program via RAC contractors may place a significant administrative and financial burden on plans.

Under the new RADV process outlined in the SOW, RACs would compare plan encounter diagnoses submitted for risk adjustment with supporting medical records. Where medical record documentation is missing, a payment error would be identified, which plans would be required to pay back to CMS. The RFI doesn't specifically outline the extrapolation methodology, but you should be aware that CMS intends to "calculate the impact of discrepant CMS-HCC findings on the sampled enrollee risk scores and extrapolate these findings to the MA contract level to estimate a contract level payment error."1 RAC auditors would receive a portion of these payments returned to CMS, and each payment error identified by RAC auditors would be independently reviewed and verified by a Secondary Review RADV contractor not funded on a contingency basis. Medicare Advantage and Special Needs plans need to evaluate CMS' proposed changes in risk adjustment strategy closely.

New "Condition Specific" RADV Audits

CMS' proposed SOW would additionally authorize a new form of targeted Risk Adjustment documentation reviews, called "Condition Specific RADV Audits." In contrast to the current approach, which reviews diagnoses from a statistically valid sample of enrollees, the new "condition specific audits" would be conducted on a subset of Medicare Advantage and Special Needs Plan contracts with health conditions and diagnoses that have a higher probability of being erroneous. For example, CMS cites targeted reviews of all plan diagnoses related to diabetes. This additional audit approach could lead to disproportionate RADV/RAC auditing of Special Needs Plans specifically created to cover dual eligibles, certain health conditions, or those in institutional setting such as nursing homes.

In light of these significant changes being proposed by CMS, you should consider expanding the language in your provider contracts to specifically address the provider's responsibility to accurately code claims for payment and follow industry standard medical record documentation practices. Comprehensive provider audit programs should be designed to support contractual compliance with the reimbursement methodologies outlined in the plan's provider agreements as well as accurate claim submission, and medical record documentation. The results from a provider audit program will identify educational and training opportunities with your contracted providers while proactively identifying providers that consistently submit inaccurate or incomplete claims for payment. You may also want to consider the provider's audit results from internal or external RADV audits in their contracting strategy as well as provider quality scorecards or incentive programs. In many cases, implementing penalties for incomplete and inaccurate records and faulty coding may be appropriate.

When DST established our HCC Revenue Management Services, we made a very conscious decision to "code every diagnosis" supporting the collection of all relevant information from the patient's medical record. We take a holistic approach to identify risk-score discrepancies and substantiate undocumented diagnoses and conditions to provide the highest quality retrospective reviews. Our solutions are designed to provide accurate analytics that help ensure quality of care and risk score payment accuracy, and support your growth strategy.

We have also tailored our solutions to deliver actionable information. For example, this information enables you to enhance provider contracts to include incentives for fully and accurately documenting members' health conditions each year and for coding these correctly. In this complex risk adjustment environment, implementing new operational processes as well as developing initiatives that support the accurate documentation and timely submission of medical records is vital to supporting Medicare Part C risk scoring.

As CMS' RADV strategy continues to evolve, DST can help guide you through successfully managing your most important business functions while facilitating strategic and financial growth. Our integrated risk, clinical and quality management solutions can help positively impact revenue, lower administrative costs, and help you optimize member health outcomes.

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