Medicare Advantage Risk-Scoring Fraud

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Part I of this three-part series on Medicare Advantage (MA) Risk-Scoring Fraud explains the logic behind the 2003 health status based payment adjustments from CMS to Medicare Advantage (health insurance) plans, or payers: It is logical to compensate private payers more richly for providing coverage for the sicker, higher insurance-risk Medicare beneficiaries. Part I also explains the basis for developing “risk scores” based on provider-submitted diagnoses, which prospectively correlate with future need for both in-hospital resources and resources required to provide ambulatory care services. These diagnoses are easily retrieved from provider claims, and, if properly representative of medical records, the diagnoses truly predict the need for future medical care expenditures. Diagnoses (and associated ICD-9 codes) are aggregated into closely-related risk family categories known as Hierarchical Condition Categories (HCCs). [HCCs are calculated from the slightly more than 3,000 ICD-9-CM diagnosis codes approved by the Centers for Medicare & Medicaid Services (CMS)].

Part II of this three-part series describes widespread exaggeration of MA risk scores, based on medical record audits carried out by Medicare. These audits reviewed in and out-patient records which were documentation for diagnoses that were forwarded to Medicare and used to assign risk scores. The audits frequently uncovered absent of inadequate documentation of burden of illness to support the HCC assignment. The latter audits have been entitled, “Risk Adjustment Data Validation” (RADV) to determine that all diagnoses were substantiated by objective medical record documentation as true reflections of each beneficiary’s medical history, use of resources, and health status.

The latest chapter in this saga of abusive billing of the government was uncovered in June 2015. The Center for Public Integrity, a not-for-profit, 501(c)(3) watchdog organization, uncovered Medicare Advantage risk scoring fraud committed by some of America’s largest health insurers. An audit, disclosed under the Freedom of Information Act, uncovered excessive payments within the HCC Risk Scoring System involving some of the US’ largest plans. An estimate of the dollar impact of these Medicare overpayments, after extrapolation to the entire governmental Managed Medicare book of business, suggested many millions of dollars in overpayments. Recoupments are presently underway. Clearly, a medical accounting system designed to assure appropriate compensation for physician and hospital providers has been abused by some, to enhance revenue streams and mitigate insurance risk.

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