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Private Medicare Advantage plans continue to upcode for billions in extra payments

February 5, 2021

Topics: Quote of the Day

By David J. Meyers, Ph.D., M.P.H.; Amal N. Trivedi, M.D., M.P.H.
Medical Care, Official Journal of the Medical Care Section, American Public Health Association, February 2021


Background: In the Medicare Advantage (MA) program, private plans receive capitated payments that are adjusted based on their enrollees’ number and type of clinical conditions. Plans have the ability to review charts to identify additional conditions that are not present in claims data, thereby increasing risk-adjusted payments. Recently the Government Accountability Office released a report raising concerns about the use of these chart reviews as a potential tool for upcoding.

Objectives: To measure the extent to which plans receive additional payments for chart reviews, and the variation in chart reviews across plans.

Research Design: In this cross-sectional study we use 2015 MA Encounter data to calculate how many additional diagnoses codes were added for each enrollee using chart reviews. We then calculate how these additional diagnosis codes translate to additional reimbursements across plans.

Subjects: A total of 14,021,692 beneficiaries enrolled in 510 MA contracts in 2015.

Measures: Individual and contract level hierarchical condition category codes, total plan reimbursement.

Results: Chart reviews were associated with a $2.3 billion increase in payments to plans, a 3.7% increase in Medicare spending to MA plans. Just 10% of plans accounted for 42% of the $2.3 billion in additional spending attributed to chart review. Among these plans, the relative increase in risk score from chart review was 17.2%. For-profit plans engaged in chart reviews substantially more frequently than nonprofit plans.

Conclusions: Given the substantial and highly variable increase in payments attributable to chart review, further investigation of the validity of this practice and its implications for Medicare spending is needed.


Billions in Estimated Medicare Advantage Payments From Chart Reviews Raise Concerns

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

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.
  • 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.


Covered in a previous Quote of the Day:

Chapter 13: The Medicare Advantage program: Status report

MedPAC, March 2020

Encounter data

The Commission has long been interested in using MA encounter data to gather information about MA plan practices and utilization that can then be used to inform Medicare policies, by improving MA payment policy, providing a useful comparator with the FFS Medicare program, or generating new policy ideas that could be applied across the entire Medicare program. However, we previously found that the encounter data submitted for 2014 and 2015 (preliminary) lacked completeness and accuracy, making them insufficient for these purposes.

Risk adjustment and coding intensity

Most claims in FFS Medicare are paid using procedure codes, which offer little incentive for providers to record more diagnosis codes than necessary to justify ordering a procedure. In contrast, MA plans have had a financial incentive, since the current risk adjustment model was introduced, to ensure that their providers record all possible diagnoses: Higher enrollee risk scores result in higher payments to the plan.

Our updated analysis for 2018 shows that higher diagnosis coding intensity resulted in MA risk scores that were more than 8 percent higher than scores for similar FFS beneficiaries.

In 2018, the adjustment reduced MA risk scores by 5.91 percent, leaving MA risk scores and payments about 2 percent to 3 percent higher than they would have been if MA enrollees had been treated in FFS Medicare. In 2019 and subsequent years, the minimum adjustment for coding intensity will be 5.9 percent.


Sidley, August 2019

On August 6, 2019, the United States District Court for the Western District of Texas granted a motion to dismiss filed by Baylor Scott & White Health (“Baylor”), a network of inpatient short-term acute care hospitals, in a False Claims Act suit alleging that Baylor submitted “more than $61.8 million in false claims” by upcoding certain diagnosis codes.

In finding that the allegations did not satisfy the FCA’s pleading requirements, the Court reasoned that the alleged “scheme” to identify and code MCCs was “not in and of itself one to submit false claims” and was “equally consistent with a scheme to improve hospital revenue through accurate coding of patient diagnoses.” The Court noted that CMS has encouraged hospitals to code diagnoses accurately and completely and has acknowledged that taking advantage of coding opportunities to maximize payments supported by the medical record is not inappropriate.

The Court’s decision represents another significant victory for Medicare Advantage providers.



By Don McCanne, M.D.

We’ve been reporting for years on the upcoding of diagnoses which has allowed the private Medicare Advantage plans to cheat taxpayers out of billions of dollars. MedPAC has also been following this, but insufficient action seems to have been taken so far. There has been some success at obtaining partial refunds, but, as the Sidley report indicates, the courts seem to think that it is fine to add additional diagnosis gleaned from charts though not specific to the services billed for, since they state that “taking advantage of coding opportunities to maximize payments supported by the medical record is not inappropriate.”

Rather than continuing to pay the private Medicare Advantage plans billions of dollars extra, it seems more logical to dismiss them and move on with an improved, single payer version of the traditional Medicare program instead. As taxpayers we would certainly do better.

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About the Commentator, Don McCanne

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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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