Earlier this month, the U.S. Department of Health and Human Services Office of the Inspector General (the “OIG”) released a report highlighting concerns about the extent to which Medicare Advantage Organizations (“MAOs”) are using health risk assessments (“HRAs”) to improve care and health outcomes under the Medicare Advantage Program (“MA”), as intended, and about the sufficiency of oversight by the Centers for Medicare & Medicaid Services (“CMS”).

The OIG found that diagnoses that MAOs reported only on HRAs, and not on any other encounter records, resulted in an estimated $2.6 billion in risk-adjusted payments to MAOs for 2017.  According to the OIG, this and other findings in the report (discussed in more detail below) raise three types of concerns: (1) a data integrity concern that MAOs are not submitting all service records as required; (2) a care coordination concern that beneficiaries are not receiving follow-up care to address diagnoses identified during HRAs; and (3) a payment integrity concern that if diagnoses are inaccurate or unsupported, the associated risk-adjusted payments would then be inappropriate.

I. Brief Background

As the OIG acknowledged in its report, the risk adjustment program is an important payment mechanism under Medicare Advantage.  It levels the playing field for MAOs that enroll beneficiaries who need a costlier level of care, which helps to ensure these beneficiaries have continued access to MA plans.

CMS risk-adjusts payments by using beneficiaries’ diagnoses to pay higher capitated payments to MAOs for beneficiaries expected to have greater health care needs. For CMS to risk-adjust payments, MAOs report beneficiaries’ diagnoses—based on services provided to beneficiaries—to CMS’s MA Encounter Data Processing System and the Risk Adjustment Processing System. HRAs are an allowable source of diagnoses for risk adjustment purposes. An HRA occurs when a physician or other health care professional collects information from beneficiaries about their health to diagnose and identify gaps in care.

II. What Motivated the Report

CMS and the Medicare Payment Advisory Commission have raised concerns in the past that MAOs may receive financial benefits without improving beneficiaries’ health if MAOs initiate HRAs and use them to collect diagnoses without ensuring that beneficiaries receive needed follow-up care. In 2015, CMS stated that it had observed an increase in in-home visits to assess MA enrollees. According to CMS, non-physician practitioners working for companies hired by MAOs usually performed these in-home HRAs, and the resulting care coordination appeared to vary across plans. CMS previously identified best practices for in-home health risk assessments in its 2016 Call Letter.

OIG pointed to CMS’ and MedPACs’ concerns as rationale for undertaking this study while noting that the MA program provided coverage to 23 million beneficiaries in 2019 at a cost of $264 billion and that unsupported risk-adjusted payments have been a major driver of improper payments in the MA program.

III. Noteworthy Findings

OIG analyzed 2016 MA encounter data to determine the 2017 financial impact of diagnoses that were reported only on HRAs and not on any other service records in the encounter data that year. Below are some of OIG’s key findings.

a. MAOs received risk-adjusted payments for 617,652 beneficiaries based solely on HRA diagnoses, which payments totaled $2.6 billion in 2017.

According to OIG, MAOs reported diagnoses on HRAs for 3.5 million beneficiaries with no other encounter records of visits, procedures, tests, or supplies that contained the diagnosis reported on the HRA.  OIG estimated that MAOs received risk-adjusted payments for 617,652 beneficiaries (out of 3.5 million) based solely on such HRA diagnoses, which payments totaled $2.6 billion in 2017.

The OIG claims this means that, for the entire year, these beneficiaries may not have received other services for the medical conditions indicated by the diagnoses.  In an extreme case, a beneficiary had diagnoses reported only on an HRA that resulted in an estimated $51,804 in risk-adjusted payments to the MAO for 2017. This beneficiary’s diagnoses correspond to serious conditions including heart arrhythmias, severe hematological disorders, and major depression/bipolar/paranoid disorders that trigger risk-adjusted payments. However, these diagnoses did not appear on any other encounter record for this beneficiary in 2016.

b. In-home HRAs generated 80 percent of these estimated payments.

The OIG found that most in-home HRAs were conducted by companies that partner with or are hired by MAOs to conduct these assessments—and therefore are not likely conducted by the beneficiary’s own primary care provider.  According to the OIG, the lack of other encounter records that contain the diagnoses identified by the companies’ providers raises questions about whether MAOs ensured that (1) the results of these HRAs were forwarded to beneficiaries’ primary care providers; (2) beneficiaries received appropriate follow-up care and treatment; and (3) the diagnoses reported only on in-home HRAs were accurate.

c. Twenty MAOs generated millions in payments from in-home HRAs for beneficiaries for whom there was not a single record of any other service being provided in 2016.

According to the OIG, the lack of any other record aside from an in-home HRA that triggered a risk-adjusted payment raises concerns that these MAOs:

• may not have ensured that the MA encounter data contained all records of items and services provided to beneficiaries;

• may not have coordinated care following the HRA, including verifying that information was provided to the beneficiary’s provider(s) and verifying that appropriate follow-up care was provided to the beneficiary; or

• may have submitted diagnoses on the HRA that were not documented in the beneficiary’s medical record and, therefore, may have received inappropriate payments from CMS.

IV. What This Could Mean for MAOs

The OIG noted that almost all MAOs in its review had estimated risk-adjusted payments that resulted solely from HRAs, but a few drove a large portion of those payments.  Overall, 462 MAOs reported diagnoses only on HRAs. Ninety-five percent of these MAOs (438 of 462) had a payment resulting solely from HRAs. For these 438 MAOs, risk-adjusted payments due solely to diagnoses reported on HRAs varied significantly, ranging from a high of $243.9 million to a low of $1,558 across MAOs.

However, the OIG found that ten MAOs had an estimated $1.2 billion of the risk-adjusted payments that resulted from diagnoses only on HRAs. These 10 MAOs belonged to two parent organizations that had $2.1 billion in payments resulting solely from HRAs. These top two parent organizations had 81 percent of risk-adjusted payments from HRAs but enrolled just 40 percent of all MA beneficiaries.

In concluding its report, OIG recommended that CMS:

1. require MAOs to implement best practices to ensure care coordination for HRAs;

2. provide targeted oversight of the 10 parent organizations that drove most of the risk-adjusted payments resulting from in-home HRAs;

3. provide targeted oversight of the 20 MAOs that drove risk-adjusted payments resulting from in-home HRAs for beneficiaries who had no other service records in the encounter data;

4. reassess the risks and benefits of allowing in-home HRAs to be used as sources of diagnoses for risk adjustment; and

5. require MAOs to flag any MAO-initiated HRAs in their MA encounter data.

CMS concurred with recommendations two and three but it rejected the other recommendations, including establishing best practices for conducting in-home diagnoses and compelling health plans to flag any encounters where beneficiaries received in-home diagnoses.