On January 30, 2023, the U.S. Centers for Medicare & Medicaid Services (CMS) issued a final rule making significant changes to the 2012 audit methodology for the Medicare Advantage (MA) Risk Adjustment Data Validation (RADV) program. The rule (RADV Final Rule) finalizes changes that were first proposed in November 2018 and is scheduled to take effect on April 3, 2023, but is certain to be the subject of litigation challenges in the coming months. With some modifications to the proposed rule, CMS determined that it will extrapolate RADV audit findings beginning in payment year 2018 (rather than 2011 as proposed) but will not apply an adjustment factor, referred to as a Fee-for-Service (FFS) Adjuster, in RADV audits.
As a result of the RADV Final Rule, CMS suggests that it will recover “significant amounts of overpayments” from MA organizations (MAOs).1 As of August 2022, over 29 million people received Medicare benefits through the MA program. This amounts to roughly half of the total population of Medicare beneficiaries. In fiscal year 2021, based on 2019 payments, CMS asserts that it made more than $15 billion in overpayments under the MA program. In the Final Rule, CMS contends that it will recover approximately $479 million from MAOs per year beginning with payment year 2018, amounting to an estimated recovery of $4.7 billion from MAOs from 2023 through 2032.
This rule does not recognize the substantial steps MAOs and providers have taken over the past 10 years to improve the accuracy of their risk adjustment coding and documentation practices. It also does not acknowledge the significant disputes between the healthcare community, on the one hand, and the government, on the other, regarding the applicable documentation and audit standards, payment methodology, and other issues that have been hotly contested in both enforcement actions and litigation. Notwithstanding the rule’s failure to address these points, CMS suggests that the Final Rule will lead to a decline in “improper payments” as “MAOs improve their processes to report only those diagnoses that meet CMS requirements for risk adjustment payment.”2
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