CMS Medicare Advantage Final Rule Takes Aim at Risk Adjustment Coding

Yesterday, CMS released the Medicare Advantage (MA) Risk Adjustment Data Validation Final Rule.  The Final Rule is intended to strengthen the accuracy of risk adjustment payments made by CMS to MA plans and reduce the amount of overpayments related to improperly reported diagnoses.

CMS makes payments to MA plans based, in part, on the reported beneficiary diagnosis codes.  Providers evaluate a patient and submit claims containing the patient’s ICD-10 codes to the MA plan.  The MA plan in turn reports the ICD-10 information along with other information regarding the enrollee population to CMS.  Based on the information submitted to CMS from the MA  plan, CMS makes risk adjustment payments to the MA plan.  Those payments are intended to cover the cost of caring for the enrollees.

MA plans are required to conduct auditing of providers to ensure the ICD-10 codes submitted are supported by the medical record documentation and are appropriately reported.  Both CMS and the Office of Inspector General (OIG) have conducted numerous audits of MA plans with respect to risk adjustment coding and have found extremely high error rates.  The audit reports have consistently identified high volumes of reported ICD-10 codes which were not supported by the provider’s medical record documentation.  The reports have also repeatedly indicated the auditing efforts by the MA plans were ineffective.

The new Final Rule was designed to incentivize MA plans to conduct more effective auditing of providers to identify improperly reported conditions and thereby improve the accuracy of the diagnosis data they report to CMS.  CMS specifically stated it is the intent of the Final Rule to “incentivize MAOs to take meaningful steps to reduce improper risk adjusted payments in the future.”

One of the key components of the Final Rule is the ability for CMS to extrapolate overpayments made to the MA plan back to 2018.  Additionally, CMS is able to recoup actual overpayments made to the MA plan from 2011-2017.

There is no doubt the Final Rule is going to have significant downstream impact on providers.  We expect MA plans to ramp up auditing of risk adjustment/HCC reporting.  Providers who are currently participating in risk adjustment reporting should take immediate steps to evaluate the accuracy and compliance of their risk adjustment/HCC programs.  Your risk adjustment/HCC program should have the following at a minimum:

  • Formal policies and procedures that address appropriate documentation and capture of HCC conditions
  • Certified risk adjustment coders
  • Formal auditing and monitoring procedures 
  • Formal education and training for providers and coders
  • Appropriate corrective action and mitigation processes 

We are here to help.  The HBE team is available to assist you with all of your clinical documentation, coding and compliance needs.  We routinely provide compliance partner services to large health systems as well as physician practices. Our services include:

  • Clinical documentation improvement reviews
  • Coding accuracy reviews
  • Policy and procedure development
  • Customized education and training for clinical and administrative staff

For more information, visit our website at:

The Fact Sheet is here:

The Final Rule is here:

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