What CMS’ Risk Adjustment Data Validation Means for Your MA Plan


After many years of anxious speculation, the Centers for Medicare & Medicaid Services (CMS) has issued a Final Rule around Risk Adjustment Data Validation (RADV). The RADV program is how CMS addresses incorrect overpayments to Medicare Advantage plans. The Final Rule’s impacts are enormous to Medicare Advantage health plans, providers and risk adjustment vendors. If you feel nervous about the impact of RADV on your organization, you are not alone.

The rule is consistent with CMS clearly indicating it will hold plans financially accountable for submitting accurate diagnosis code data to support risk adjustment payments. CMS estimates that the rule will return $4.7 billion to the government over 10 years.

It’s important for industry participants to understand key elements of the rule and adopt solid processes and practices to realize positive RADV outcomes. Let’s explore the most important provisions of the rule.

Extrapolation Begins with 2018 and Subsequent Audits

CMS will extrapolate payment errors with audits in plan year (PY) 2018 and forward. For prior years, CMS will only recoup non-extrapolated amounts. In its proposed rule, CMS said it intended to extrapolate as far back as PY2011. Since CMS incurs substantial costs to perform RADV, CMS can’t justify the expense of RADV administration without some form of extrapolation. It appears CMS performed a balancing act by choosing PY2018.

No Fee-For-Service Adjuster

The fee-for-service (FFS) adjuster would have essentially lowered the amount Medicare Advantage (MA) plans owed for payment errors. It has been hotly debated. MA plans argue an FFS adjuster was necessary for proper statutory payment, also referred to as actuarial equivalence. CMS countered that an FFS adjuster is not appropriate for several reasons including the requirement on Medicare Advantage plans to only submit diagnosis codes supported by medical records, the results of an FFS study, and legal rulings around actuarial equivalence.

CMS Maintains Audit Flexibility and Extrapolation Methodologies

The industry was hoping for clarity around whether RADV audits would be at a contract level, sub-cohorts or some other methodology. Additionally, plans wanted to understand how results would be extrapolated. CMS has kept its options open saying, “We are not adopting any specific sampling or extrapolated audit methodology but will rely on any statistically valid method for sampling and extrapolation that is determined to be well-suited to a particular audit.”

Doing nothing, or making minor adjustments to your risk adjustment program, is not enough given the financial implications of RADV.

If you are feeling anxious about the potential impact of the rule, rest assured this is not an insurmountable hill to climb. To be successful, there are a few practical things you can do to improve your outcomes.

Review Contracts

MA plans, providers and vendors should review their contracted payment terms to understand how payment adjustments from CMS will be handled. This is important not only going forward, but also retroactively, particularly for extrapolated recoupments. Remember, extrapolated amounts will not be at the member level, at least for contract level RADV extrapolation, so it will be harder for MA plans to directly assign amounts to individual members. I expect there will be strong disagreements between providers and health plans on this topic, particularly in situations where a provider did not have members in the audit sample, or whose members validated 100%.

Identify High Risk Codes

Ensure your risk adjustment program identifies and audits suspect and high-risk diagnosis codes. CMS says they will focus RADV efforts on plans and Hierarchical Condition Categories (HCC) at high risk of not validating. This includes plans with high coding intensity scores, and plans and HCCs with poor results in prior audits. So, design your analytics and provider reporting to not only find incremental diagnosis codes, but also codes that may not validate. Work with your providers to determine the accuracy of these codes.

Proactively Delete Unsupported Codes

Create a formal process to proactively submit deletes to CMS for unsupported diagnosis codes. With extrapolation, the cost of an unsupported diagnosis code grows exponentially. Audit these “delete” submissions to ensure they are received and processed by CMS. Deletes should be treated with the same, or greater, urgency and care as added diagnosis codes.

Implement a Robust Compliance Program

CMS is clear that RADV is only one tool for recouping incorrect payments saying, “While RADV audits are intended to identify improper risk adjustment payments, they are not specifically designed to detect fraud, nor are they intended to identify all improper diagnosis submissions made by Medicare Advantage Organizations for risk adjustment payment.” Further, CMS references the Department of Justice and its responsibility in pursuing violations of the False Claims Act. So, a robust risk adjustment compliance program is critical for RADV and more.

Integrate Risk Adjustment Across Your Organization

Integrate risk adjustment knowledge, data and programs across your organization. For example, when your organization is asking providers to act on Star Ratings and quality data, include your risk adjustment suspects, potential over and under coded conditions, for action as well. Include coding accuracy requirements in your provider and vendor agreements. Make sure your analytics team is educated on risk adjustment as they can be a great resource in developing new data to uncover opportunities. These are just a few examples.

Share Information with Partners

Create open communication channels between plans, providers and vendors. Share data amongst one another. Create common goals and processes around diagnosis coding accuracy. Implement support structures to ensure best practices are implemented. Provide oversight and accountability channels to ensure issues are surfaced and addressed quickly.

Healthmine’s consulting team has the experience and expertise to help you navigate these changes. Contact me at to get your work plan in place based on how RADV will uniquely impact your plan.

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