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Private Medicare Advantage plans use chart review to bilk the taxpayers out of billions

December 13, 2019

Topics: Quote of the Day

U.S. Department of Health and Human Services, Office of Inspector General, December 2019

The risk adjustment program is an important Medicare Advantage (MA) payment mechanism. It levels the playing field for MA organizations (MAOs) that enroll sicker beneficiaries who need a more costly level of care. This helps to ensure that sicker beneficiaries have continued access to MA plans. Chart reviews can be a tool to improve the accuracy of risk-adjusted payments by allowing MAOs to add and delete diagnoses in the encounter data based on reviews of patients’ records. However, chart reviews—particularly those not linked to service records—may provide MAOs opportunities to circumvent the Centers for Medicare & Medicaid Services (CMS) face-to-face requirement and inflate risk-adjusted payments inappropriately.

Why OIG Did This Review

We undertook this study because of concerns that MAOs may use chart reviews to increase risk-adjusted payments inappropriately. Unsupported risk-adjusted payments are a major driver of improper payments in the MA program, which provided coverage to 21 million beneficiaries in 2018 at a cost of $210 billion.

CMS risk-adjusts payments by using beneficiaries’ diagnoses to pay higher capitated payments to MAOs for sicker beneficiaries―which may create financial incentives for MAOs to make beneficiaries appear as sick as possible. MAOs report these diagnoses via CMS’s MA encounter data system and RAPS based on services and chart reviews (i.e., MAO’s reviews of a beneficiary’s medical record to identify diagnoses that a provider did not submit or submitted in error).

To be eligible for risk adjustment, a diagnosis must be documented in a medical record as a result of a face-to-face visit. Although CMS requires MAOs to identify chart reviews in the encounter data, CMS does not require MAOs to link these chart reviews to a specific service associated with the diagnoses. This may provide MAOs opportunities to circumvent CMS’s face-to-face requirement and inflate risk-adjusted payments inappropriately.

What OIG Found

Our findings highlight potential issues about the extent to which chart reviews are leveraged by MAOs 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.
  • 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.
  • Although limited to a small number of beneficiaries, almost half of MAOs reviewed had payments from unlinked chart reviews where there was not a single record of a service being provided to the beneficiary in all of 2016.

These findings raise three types of potential concerns. First, there may be a data integrity concern that MAOs are not submitting all service records as required. Second, there may be a payment integrity concern if diagnoses are inaccurate or unsupported— making the associated risk-adjusted payments inappropriate. Third, there may be a quality-of-care concern that beneficiaries are not receiving needed services for potentially serious diagnoses listed on chart reviews, but with no service records.

Despite the potential for MAOs to misuse chart reviews, CMS has not reviewed the financial impact of chart reviews in the encounter data on risk-adjusted payments. CMS has not assessed variation across MAOs in their chart review submissions. In addition, CMS has not analyzed the quality of care provided to beneficiaries who may have serious health conditions and may not be receiving needed services. Finally, CMS has not yet performed audits that validate diagnoses reported on chart reviews in the encounter data against beneficiaries’ medical records. CMS reported that it plans to begin audits that would include such chart reviews later this year.

What OIG Recommends

We recommend that CMS (1) provide targeted oversight of MAOs that had risk-adjusted payments resulting from unlinked chart reviews for beneficiaries who had no service records in the 2016 encounter data, (2) conduct audits that validate diagnoses reported on chart reviews in the MA encounter data, and (3) reassess the risks and benefits of allowing chart reviews that are not linked to service records to be used as sources of diagnoses for risk adjustment. CMS concurred with these recommendations.

Findings

Less than 1 percent of chart reviews deleted risk-adjustment-eligible diagnoses from the MA encounter data for payment year 2017

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 any service provided to the beneficiary

Although limited to a small number of beneficiaries, almost half of MAOs reviewed had payments from unlinked chart reviews where there was not a single record of a service being provided to the beneficiary in all of 2016

CMS has not validated diagnoses or reviewed the financial impact of diagnoses reported on chart reviews in the encounter data

Conclusion

The risk adjustment program is an important mechanism for accurately reimbursing MAOs based on the differences in health status across beneficiaries. It levels the playing field for MA organizations (MAOs) that enroll sicker beneficiaries who need a more costly level of care. This helps to ensure that sicker beneficiaries have continued access to MA plans. Chart reviews can be a tool to improve the accuracy of risk-adjusted payments by allowing MAOs to add and delete diagnoses in the encounter data based on reviews of patients’ records. We found that MAOs’ chart reviews almost always resulted in added diagnoses (over 99 percent of chart reviews), and almost never deleted diagnoses (less than 1 percent).

CMS uses the diagnoses from chart reviews to determine risk-adjusted payments―as long as the diagnoses are based on a face-to-face visit between beneficiaries and their providers. 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.

Of the $6.7 billion in risk-adjusted payments, CMS based an estimated $2.7 billion on diagnoses that MAOs did not link to any service provided to the beneficiary in 2016. Allowing unlinked chart reviews provides opportunities for MAOs to circumvent CMS’ face-to-face requirement and inflate risk-adjusted payments inappropriately. Although limited to a small number of beneficiaries, almost half of MAOs reviewed had risk-adjusted payments from unlinked chart review for beneficiaries where there was not a single record of any service being provided to them in all of 2016. For beneficiaries with unlinked chart reviews, and no records of services in all of 2016, it is not at all clear what services were used to generate diagnoses added on these chart reviews.

These findings raise three types of potential concerns. First, there may be a data integrity concern that MAOs are not submitting all service records as required. Second, there may be a payment integrity concern if diagnoses are inaccurate or unsupported—making the associated risk-adjusted payments inappropriate. Third, there may be a quality of care concern that beneficiaries are not receiving needed services for potentially serious diagnoses listed on chart reviews but no service records. Despite the potential for MAOs to misuse chart reviews, CMS has not yet validated the diagnoses reported on chart reviews and has not reviewed the financial impact of chart reviews on risk-adjusted payments.

We understand that MAOs need a mechanism to add diagnoses to the encounter data that providers have neglected to include in the service information submitted to the MAO. However, in the absence of monitoring and oversight by CMS, our findings raise questions about the vulnerabilities associated with using chart reviews, particularly unlinked chart reviews, as this mechanism.

https://oig.hhs.gov…


Comment:

By Don McCanne, M.D.

We have long complained about the devious methods that the private Medicare Advantage plans use to cheat taxpayers. Originally they selectively marketed their plans to healthy populations while being paid at rates representing average health care costs for Medicare beneficiaries. Since the healthier 80 percent of the population uses only 20 percent of health care, this strategy of marketing to the healthy has been quite profitable for the Medicare Advantage plans.

To counter this fraud, the government introduced risk adjustment. The insurers that included individuals with greater costs would be paid at higher rates for that less healthy population. Today’s report from CMS’s Inspector General confirms that the insurers have found another way to game the system. They began to use chart reviews to “correct” the diagnoses that were to be submitted to CMS – diagnoses that would determine whether they were entitled to higher payments based on the patients’ risk evaluations. Over 99 percent of the corrections added new diagnoses whereas less than 1 percent deleted risk-adjustment-eligible diagnoses. These additional diagnoses based on diagnoses from chart reviews that were not linked to records of services actually rendered resulted in a $6.7 billion windfall for the private Medicare Advantage plans. Thus the plans have been successful in continuing to enroll the large, relatively healthier portion of the Medicare population while reporting them as sick enough to merit additional risk adjustment payments.

From the OIG report: “Of the 137 parent organizations reviewed, 10 parent organizations drove 79 percent of the risk-adjusted payments from chart reviews. These 10 parent organizations enrolled 70 percent of MA beneficiaries.” Thus this has occurred on a massive scale, perpetrated by the big boys. Although the report does not list these organizations, it is well known which companies have enrolled 70 percent of the Medicare Advantage beneficiaries.

Appendix D of the OIG report is a letter from CMS administrator Seema Verma indicating general agreement with the OIG recommendations, when it is difficult to come to any other conclusion than CMS has been complicit with the private insurers in perpetrating this fraud (this is my gut feeling and not a legal opinion). She repeatedly condemns the concept of Medicare for All while celebrating the private Medicare Advantage plans.

Yesterday’s Quote of the Day discussed President Trump’s Executive Order designed to further privatize Medicare. The administration is attempting to shift greater control of the Medicare program to the Medicare Advantage plans with transitional recommendations that would move the patients in the traditional fee-for-service Medicare program into the marketplace, presumably eventually placing the private plans in complete control of the entire Medicare program. Can you imagine how that would bend the concept of Medicare for All? Put the crooks in charge and hit the taxpayers even harder.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

About the Commentator, Don McCanne

Don McCanne is a retired family practitioner who dedicated the 2nd phase of his career to speaking and writing extensively on single payer and related issues. He served as Physicians for a National Health Program president in 2002 and 2003, then as Senior Health Policy Fellow. For two decades, Don wrote "Quote of the Day", a daily health policy update which inspired HJM.

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