A new Office of Inspector General (OIG) report found that 20 of 162 Medicare Advantage (MA) companies studied drove a disproportionate share of the $9.2 billion in payments from diagnoses that were reported only on chart reviews and health risk assessments (HRA) and on no other service records.

The OIG conducted the study to determine whether MA plans leverage chart reviews and HRAs, which are allowable sources of diagnoses for risk adjustment, to make patients appear as sick as possible to maximize payments even though beneficiaries didn’t receive care for those diagnoses. The Centers for Medicare & Medicaid Services (CMS) will risk adjust payments based on beneficiaries’ diagnoses to pay higher capitated payments to MA companies that care for members with higher-than-average medical costs. This risk adjustment process levels the playing field for MA plans that have sicker members and who need expensive care.

Unsupported risk adjusted payments have been a major driver of improper payments in the MA program, according to the OIG. Two prior investigations found that the diagnoses that MA plans reported only on chart reviews or HRAs in the 2016 encounter data led to billions in risk-adjustment payments for 2017. These reports raised concerns about the completeness of encounter data, the validity of submitted diagnoses on chart reviews or HRAs, and the quality of care provided to MA members.

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The latest OIG report uses the previously collected MA encounter data from 2016 to identify MA plans that disproportionately drove increases in risk adjusted payments from both chart reviews and HRAs.

The analysis determined that 20 of the 162 MA companies drove a disproportionate share of the $9.2 billion in payments from diagnoses that were reported only on chart reviews and HRAs and on no other service records. The OIG said the plans’ higher share of payments could not be explained by the size of their beneficiary enrollment. Each company plan generated a share of payments from these chart reviews and HRAs that was more than 25 percent higher than its share of enrolled MA beneficiaries.

However, one company stood out among the 20 plans for its use of chart reviews and HRAs to drive risk adjusted payments without encounter records of any other services provided to the beneficiaries for those diagnoses. The OIG did not identify the plan but said it had 40 percent of the risk-adjusted payments from both mechanisms yet enrolled only 22 percent of MA beneficiaries. The plan accounted for about a third of all payments from diagnoses reported solely on chart reviews and more than half of all payments from diagnoses reported solely on HRAs. Further, almost all its HRAs were conducted in beneficiaries' homes. Since in-home HRAs are often conducted by vendors hired by MA companies (and not likely conducted by beneficiaries' primary care providers), this raises concerns about the quality-of-care coordination for these beneficiaries and the validity of diagnoses that were reported on the HRAs.

OIG recommended that CMS provide oversight of these 20 MA plans and take additional action to determine the appropriateness of payments and care for the one MA company that substantially drove risk adjustment payments from chart reviews and HRAs. The agency also suggested CMS conduct periodic monitoring to identify MA plans that had a disproportionate share of risk adjusted payments from chart reviews and HRAs.

CMS said it would take the recommendations under consideration as part of its process to determine future policy options. It acknowledged concerns that in-home HRAs could be used by some MA plans primarily to gather diagnoses for payment rather than to provide treatment and or follow-up care to members. The agency said it has issued guidance to ensure MA plans use HRAs and chart reviews appropriately and conducts Risk Adjustment Data Validation audits to verify the accuracy of diagnoses that MA plans report for risk adjustment and to recoup overpayments.