MAOs use chart reviews to increase risk-adjusted payments is seen as inappropriate by the OIG. 

The U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) released a study that should cause a chill to run down the spines of hospital and Medicare Advantage plan leaders alike. The study was published on Dec. 13, 2019.

First, you have to understand how risk scoring works, and why hospitals and Medicare Advantage plans could even collude to increase reimbursement for both entities.

Medicare Advantage plans are reimbursed via a base “per patient day” (PPD) amount, adjusted for the individual weighted score computed using Hierarchical Condition Codes (HCCs). The Centers for Medicare & Medicaid Services (CMS) takes all of the diagnosis codes submitted on paid claims and uses them to adjust how much they think a patient with those codes should cost on a daily basis.

Hospitals are paid based on the diagnosis-related group (DRG) assigned, based on the same diagnosis codes.

Here is where it gets crazy. Since most contracts between hospitals and Medicare Advantage plans are based on Medicare DRGs, both the hospital and the Medicare Advantage plan increase reimbursement by coding (or maybe over-coding) certain diagnosis codes.

Let’s look at why the OIG performed this audit, in their own words:

“We undertook this study because of concerns that Medicare Advantage organizations (MAOs) may use chart reviews to increase risk-adjusted payments inappropriately. Unsupported risk-adjusted payments are a major driver of improper payments in the Medicare Advantage (MA) program, which provided coverage to 20 million beneficiaries in 2018 at a cost of $210 billion.”

What is the OIG talking about, with chart reviews to increase reimbursement to the Medicare Advantage plan? Most plans have teams of “risk adjustment auditors” that review claims using “suspect” data analysis. The plans look at billings from the last Medicare Advantage plan for patients, medications the patient may be taking, and computer modeling to see if the patient is really sicker than the billed claims data shows. If they confirm that the patients may have other diagnoses not listed on the billed data, they notify the providers, asking them to rebill claims with the new diagnosis found during the “audit.” That’s good news for the plan, and good news for the provider, in most cases. It is bad news for Medicare.

This is how the OIG described its audit process:

“We analyzed 2016 MA encounter data to determine the 2017 financial impact of diagnoses reported only on chart reviews, and not on any service record in the encounter data that year. We also analyzed CMS’s responses to a structured questionnaire to identify action taken by CMS to review the impact of chart reviews on MA payments.”

What did the OIG find?
“Our findings highlight potential issues about the extent to which chart reviews are leveraged by MAOs (Medicare Advantage Organizations) and overseen by CMS. Based on our analysis of MA encounter data, we found that MAOs almost always used chart reviews as a tool to add, rather than to delete, diagnoses – over 99 percent of chart reviews in our review added diagnoses. In addition, diagnoses that MAOs reported only on chart reviews (and not on any service records) resulted in an estimated $6.7 billion in risk-adjusted payments for 2017. CMS based an estimated $2.7 billion in risk-adjusted payments on chart review diagnoses that MAOs did not link to a specific service provided to the beneficiary – much less a face-to-face visit.”

What should hospitals do?
We think that hospitals should perform regular coding audits and compare findings between Medicare Advantage, standard Medicare, and managed care payers. We specifically think that providers need to request the results of coding audits performed by Medicare Advantage plans and to notify the compliance officer of the hospital of any changes made by the plan. Providers should also make sure that contracts with MA plans require the plan to disclose the results of any claim audits performed.

Read the OIG report:

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