Recovery auditing, which has presented a challenge for the healthcare provider community, is poised to expand into health insurance.

Just before the Christmas holiday, the Centers for Medicare & Medicaid Services (CMS) released a request for information (RFI) for a Part C (Medicare Advantage) Recovery Auditor (RA). 

Although Congress mandated a Part C RAC in the Patient Protection and Affordable Care Act, CMS has made little effort to implement the requirement until now.

As currently envisioned, the Medicare Part C RA will undertake two types of audits: comprehensive risk-adjusted data validation (RADV) and condition-specific RADV. The Medicare Part C RA will conduct the comprehensive RADV audits for the purpose of ensuring the accuracy of risk adjustment data and conducting overpayment recovery from Medicare Advantage organizations. To effect these audits, CMS plans to select a subset of Medicare Advantage plan contracts to audit for each payment year. For each selected plan, CMS also will select a statistically valid sample of enrollees. The Medicare Advantage organizations will submit medical record documentation to CMS for each of the diagnoses that they reported to CMS for each enrollee in the audit sample. CMS also plans to extrapolate an overpayment estimate for each audited contract and recover money based on this estimate. 

Condition-specific RADV will be conducted for a subset of Medicare Advantage contracts not subject to a comprehensive RADV for any given payment year. The focus of the condition-specific audit will be a set(s) of hierarchical condition categories (HCCs), identified and proposed by the Part C RA and approved by CMS, that are likely to be erroneous. For example, a Medicare Part C RA may propose that the HCCs related to diabetes should be subject to targeted review. For each plan targeted for condition-specific RADV, the Medicare Part C RA will select a statistically valid sample of enrollees whose medical records they will audit and then will extrapolate overpayments based on its review of the statistical sample. 

As with Medicare Parts A and B RA, the Medicare Part C RA will be paid on contingency based on the overpayments identified.

A Medicare Part C RA is bad news for Medicare Advantage organizations, but by no means should they be surprised. CMS has been signaling this change since early 2015. Under the Part C RA, there will be more auditing; at least that is the intent. From the request for information (RFI) statement of work: 

“CMS is considering contracting with a Part C RA to increase the number of Medicare Advantage Organization contracts that are subject to some type of RADV audit for each payment year. Our ultimate goal is to have all MA contracts subject to either a comprehensive or condition-specific RADV audit for each payment year.” 

The additional auditing is also bad news for providers in Medicare Advantage networks. The Medicare Advantage organization that gets squeezed by RADV audits may look to providers as one source of protection of their margins. One of the Part A/B RAs, HMS Holdings, has indicated that it is working with Medicare Advantage organizations right now to review payments to providers on a prepayment basis. Providers should use the same diligence with respect to their Medicare Advantage claims as they do for their Part A/B submissions. 

CMS is accepting responses to the RFI until Feb. 1. We would anticipate that an RFP would be issued sometime in the summer of 2016 and contracts awarded in late 2016 or early 2017. 

About the Author

Emily Evans, a partner at the Obsidian Research Group, serves as the Monitor Mondays legislative analyst covering regulatory news coming out of Washington, D.C.

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