CMS Proposed Rule Would Modify Risk Adjustment Data Collection, Data Validation Audits with Some Material Effects



In Depth

The Centers for Medicare & Medicaid Services’ proposal for risk adjustment data collection demonstrates the agency’s continued concern that Medicare Advantage Organizations’ activities are resulting in more “intense” coding, and higher risk scores affecting payments, as compared to Medicare fee-for-service.

Among the proposed policy changes in the Centers for Medicare & Medicaid Services’ (CMS’s) proposed rule (Proposed Rule) are revisions to risk adjustment data collection requirements as well as risk adjustment data validation (RADV) audits. Although many of the proposed changes are procedural and not likely to have a material impact on industry stakeholders, a few of the proposals, including limits on medical record reviews and changes to risk adjustment data validation appeals, could prove to be more significant.

This summary is the fourth in a series regarding the Proposed Rule. The first three On the Subjects in this series address issues of interest for both Medicare Advantage (MA) Organizations and Part D Plan Sponsors, issues specific to the Part D Program, and the overpayment identification and repayment obligations imposed under Section 6402 of the Affordable Care Act.

Comments on the Proposed Rule, which was published in the Federal Register on January 10, 2014, are due to CMS by 5 p.m. EST on March 7, 2014.

Medical Record Reviews

In recent years, Medicare Advantage (MA) Organizations have sometimes reviewed medical records to identify and submit to CMS additional diagnoses codes that were documented in the medical records but were not submitted by providers in their claims or encounter data. These diagnoses could have the effect of raising the risk score of the MA Plan-enrolled beneficiary, potentially enhancing CMS’s risk-adjusted payment to the MA Organization. In the Proposed Rule, CMS proposes to require that any retrospective review be “designed to determine the accuracy of diagnoses” submitted by the provider in addition to identifying diagnoses that were not submitted and that would warrant additional payments. According to CMS, this restriction is part of an effort to enhance the accuracy of risk adjustment data.

CMS’s proposal would apparently address the type of MA Organization activity that was alleged in a recent False Claims Act settlement (United States ex rel. _____ v. SCAN Health Plan) that involved an alleged retrospective chart review. CMS’s proposal demonstrates its continued concern that MA Organizations’ activities are resulting in more “intense” coding, and higher risk scores, for MA Organizations as compared to Medicare fee-for-service (FFS). CMS has already signaled that it intends to rein in some aspects of MA Organizations’ use of so-called “prospective” risk adjustment programs—specifically, submission of risk adjustment codes based on risk assessment visits conducted in the home. (Although the CY 2014 “call letter” released in April 2013 indicated concerns regarding these house call programs, CMS does not address them specifically in the Proposed Rule.)

Risk Adjustment Data Validation Appeals

The Proposed Rule also would modify the RADV administrative appeals process. A few changes are procedural in nature. Under the current rules, there are separate appeals procedures for medical record review determination appeals and RADV payment error calculation appeals. CMS proposes to consolidate these two types of appeals. The Proposed Rule also reaffirms and expands the list of the types of issues that are not eligible for appeal; the current prohibition on challenges to the payment error calculation methodology for RADV audits would be expanded to include a prohibition on the medical record review determination methodology.

CMS also states that it will not necessarily publish the RADV payment calculation methodology each year, but will publish it only if there is a change that would require publication. CMS does not address when or through what mechanism it will publish the amount of the so-called “FFS Adjuster,” described in the February 2012 Notice of Final Payment Error Calculation Methodology for Part C Medicare Advantage Risk Adjustment Data Validation Contract-Level Audits (Methodology Notice), or whether CMS will reveal the analysis behind the calculation. The FFS Adjuster, according to CMS in the Methodology Notice, “accounts for the fact that the documentation standard used in RADV audits to determine a contract’s payment error (medical records) is different from the documentation standard used to develop the Part C risk-adjustment model (FFS claims).”


Risk adjustment continues to be significant to MA Organizations’ financial performance and presents significant audit and False Claims Act risks. Therefore, Plan Sponsors should consider the implications of CMS’s proposal on their current and anticipated operations.