A new report released by the Office of Inspector General (OIG) determined Medicare Advantage Organizations (MAOs) sometimes delayed or denied MA beneficiaries’ access to services even when the requests met Medicare coverage rules.

The OIG conducted the study due to a concern that the capitated payment model used in MA provides a potential incentive for an MAO to deny a member’s access to services and deny payments to providers in order to increase profits. The OIG acknowledged that MAOs approve most requests for services and payment, however, said they also deny millions of requests each year. Indeed, the OIG said that annual audits by the Centers for Medicare & Medicaid Services (CMS) have highlighted widespread and persistent problems related to inappropriate denials of services and payments.

To conduct the study, the OIG selected a stratified random sample of 250 prior authorization denials and 250 payment denials issued by 15 of the largest MAOs during June 1-7, 2019. Health care coding experts conducted case file reviews of all cases, and physician reviewers examined medical records for a subset of cases. From these results, the OIG estimated the rates at which MAOs denied prior authorization and payment requests that met Medicare coverage and MAO billing rules. Auditors also examined the reasons that these denials occurred, and the types of services associated with these denials in the sample.

The review determined that MAOs sometimes delayed or denied MA members’ access to services, even though the requests met Medicare coverage rules. In addition, they also denied payments to providers for some services that met both Medicare coverage rules and MAO billing rules. As a result, denied requests that should have been approved may prevent or delay MA beneficiaries from receiving medically necessary care and can burden providers.

“Although some of the denials that we reviewed were ultimately reversed by the MAOs, avoidable delays and extra steps create friction in the program and may create an administrative burden for beneficiaries, providers, and MAOs,” the OIG said in the report. “Examples of health care services involved in denials that met Medicare coverage rules included advanced imaging services (e.g., MRIs) and post-acute facility stays (e.g., inpatient rehabilitation).”

Among the prior authorization requests that MAOs denied, 13 percent met Medicare coverage rules. These services likely would have been approved for these MA beneficiaries under original Medicare. Two common causes for the denials:

  • MAOs used clinical criteria that are not contained in Medicare coverage rules, such as requiring an x-ray before approving more advanced imaging, which led them to deny requests for services that OIG physician reviewers determined were medically necessary. While the cases did meet Medicare coverage rules, CMS guidance is not sufficiently detailed to determine whether MAOs may deny authorization based on internal MAO clinical criteria that go beyond Medicare coverage rules.
  • MAOs indicated that some prior authorization requests did not have enough documentation to support approval, yet OIG reviewers found that the existing beneficiary medical records were sufficient to support the medical necessity of the services.

Among the payment requests that MAOs denied, the OIG found that 18 percent of the requests met Medicare coverage rules and MAO billing rules. Most of these payment denials in the sample were caused by human error during manual claims processing reviews, such as overlooking a document and system processing errors, such as the MAO's system was not programmed or updated correctly.

The study found that MAOs reversed some of the denied prior authorization and payment requests that met Medicare coverage and MAO billing rules when a beneficiary or provider appealed or disputed the denial. In some cases, MAOs identified their own errors.

To ensure that MA beneficiaries have timely access to all necessary health care services, the OIG recommended that CMS:

  • Issue new guidance on the appropriate use of MAO clinical criteria in medical necessity reviews
  • Update its audit protocols to address the issues identified in this report, such as MAO use of clinical criteria and/or examining particular service types
  • Direct MAOs to take additional steps to identify and address vulnerabilities that can lead to manual review errors and system errors

CMS concurred with the recommendations.