CMS Updates Medicare Advantage RADV Program

At a Glance

• In January, the Centers for Medicare & Medicaid Services (CMS) updated the Medicare Advantage Risk Adjustment Data Validation (RADV) program when it issued its final rule of this year. 
• CMS estimates that by implementation of this rule through 2023, CMS may recover an extra $4.7 billion from insurers through the new audit methodology.

The Centers for Medicare & Medicaid Services (CMS) updated the Medicare Advantage (MA) Risk Adjustment Data Validation (RADV) program when it issued a final rule in January of this year. The rule outlined updated audit methodology and related policies for the contract-level RADV program. The RADV program, used by CMS to recover improper risk adjustment payments made to MA Organizations (MAOs), is CMS’s main corrective action for overpayments made to MAOs. Specifically, contract-level RADV audits are the corrective action for overpayments to MAOs when there is a lack of documentation in the medical records to support the diagnoses reported for risk adjustment. There is a statutory obligation and fiduciary duty for CMS to ensure payments in the Medicare program are accurate, including conducting oversight of payments made to MAOs.

The final rule, which became effective April 3, 2023, made two key changes. First, the final rule specified that extrapolated overpayments could only be recouped beginning with payment year (PY) 2018 and that CMS would not extrapolate RADV audit findings for PYs 2011 through 2017. This means that for PY 2011 through 2017, CMS will only collect the non-extrapolated overpayments that are identified in the CMS RADV audits and the Department of Health and Human Services Office of Inspector General (HHS-OIG) audits. CMS did not, however, adopt a specific sampling methodology in the final rule; it intends to use statistically valid methods for sampling and extrapolation methods suited to a particular RADV audit. CMS expects to be able to better control the volume of active appeals submitted without using an extrapolation methodology prior to PY 2018. Appeals that follow an RADV audit will continue as a three-level process through which MAOs may appeal their audit results.

Second, CMS will not utilize an adjustment factor (a Fee-For-Service [FFS] Adjuster) in RADV audits. CMS concluded that the “actuarial equivalence” and “same methodology” provisions in section 1853 (a)(1)(C)(i) of the Social Security Act (the Act) did not apply to the obligation of an MAO to report and return improper payments for diagnoses codes unsupported by medical records, including those improper payments identified during a RADV audit. MAOs will be required to remit improper payments identified during RADV audits in a CMS specified manner. 

CMS intends to notify MAOs on a rolling basis, over a period of months, of when it will begin issuing enrollee-level audit findings from the RADV audits that have been completed, in addition to recovering enrollee-level improper payments identified in HHS-OIG audits. CMS estimates that by implementation of this rule through 2023, CMS may recover an extra $4.7 billion from insurers through the new audit methodology. CMS reiterated, however, that this rule has no bearing on the longstanding principle that a diagnosis code undocumented in a patient's medical record is not a valid basis for CMS risk adjustment payments to an MAO. Similarly, this rule does not change the obligation of an insurer to refund payments to CMS if it learns that a diagnosis is unsupported in the beneficiary’s medical record.