On February 1, 2017, the Centers for Medicare & Medicaid Services (CMS) released proposed updates to the Medicare Advantage (MA) and Part D programs through the CY 2018 Advance Notice and Draft Call Letter. Despite largely holding policies constant, CMS does discuss numerous areas of significant importance to MA Organizations (MAOs).

In Depth

The Centers for Medicare & Medicaid Services (CMS) last week released its CY 2018 Advance Notice and Draft Call Letter (the Draft Call Letter), with comments due on March 3, 2017. Although we expect that plan actuaries are analyzing the various financial components of the Draft Call Letter, it does appear to largely continue policies already in place, and in some cases proposes suspending certain planned transitions that were already underway. For example, the Draft Call Letter does not contain any substantial changes to the risk adjustment model for 2018, and postpones further movement in the transition to using encounter data for risk adjustment. Similarly, the Draft Call Letter signals CMS might be willing to postpone full adoption of a new payment methodology for Medicare Advantage (MA) employer group waiver plans (EGWPs) that was announced last year, which would have based MA EGWP payments entirely on individual market MA bids in 2018.

Despite largely holding policies constant, CMS does discuss numerous areas of significant importance to MA Organizations (MAOs). Below, we highlight two such significant issues that have been percolating for a number of years—the implementation of enhanced monitoring and enforcement of encounter data submission requirements and several changes to the Quality Star Ratings program.

Despite Pausing Phase-In of Encounter Data for Risk Scoring, CMS Proposes Enhanced Monitoring and Enforcement

CMS Postpones Further Phase-In of Encounter Data and Proposes Possible Industry-Wide Adjustment

For several years, CMS has transitioned towards the use of encounter data for calculating risk adjustment scores, with the stated intention of ultimately replacing the Risk Adjustment Processing System (RAPS) entirely with the use of encounter data. CMS began this transition in 2016, using a blend of 10 percent encounter data and 90 percent RAPS data, and in 2017, moved to a 25 percent / 75 percent split. The 2018 Draft Call Letter proposes to hold these weights steady, rather than increasing to a 50/50 weighting per the schedule announced last year.

Significant questions have been raised about the reliability of encounter data and the unknown impact of this untested data source on risk scores. CMS does not have a comprehensive process for validating the accuracy of encounter data—for example, by reviewing medical records. Reports issued by the Government Accountability Office (GAO) in 2014  and 2017 expressed concerns about CMS’s use of encounter data for risk adjustment, payment and other purposes without thoroughly vetting the validity and reliability of this information. GAO has recommended that CMS postpone use of encounter data until it is able to assess the quality of the data.

The proposed pause in the phase-in of encounter data for risk scoring may be intended to respond to these concerns about data validity and reliability. Notably, however, CMS has not decreased the weight of encounter data in the risk adjustment calculation nor indicated that it plans to roll back use of encounter data entirely. As a result, a full quarter of risk adjustment payments to MAOs will still be based on encounter data in 2017, and potentially in 2018, giving rise to continued concerns about the unpredictable impact this data may have on MAO payments.

Acknowledging these concerns from MAOs, the 2018 Draft Call Letter requests comment on the application of a uniform, industry-wide adjustment to the encounter data-based portion of the blended risk score to “provide stability as [CMS] and plans transition to the use of encounter data for payment.” CMS appears to be in the early stages of assembling this proposal and specifically asks for stakeholder input on how to develop such an adjustment.

CMS Proposes Increased Monitoring and Enforcement of Encounter Data Submission Standards

Pursuant to federal regulations, MAOs are required to certify, on an annual basis, to the accuracy, completeness and truthfulness of their encounter data based on their “best knowledge, information, and belief.” At the same time that MAOs and the GAO are questioning the reliability of encounter data, CMS appears to be shifting some responsibility for data accuracy to MAOs, stating that it expects MAOs to be conducting self-assessments regarding the accuracy and completeness of their encounter data submissions and applying findings from their self-assessments to improve the accuracy and completeness of such submissions.

CMS also proposes to increase its oversight, monitoring and enforcement of encounter data submissions from MAOs, focusing on “operational performance, completeness, and accuracy.” The Draft Call Letter includes seven proposed performance measures designed to assess MAO compliance with encounter data submission standards covering performance and completeness, but does not appear at this time to have proposed any specific performance measures relating to data accuracy. CMS indicates it will begin initiating compliance actions against MAOs for poor performance on these measures, including warning letters and corrective action plans to improve performance; the Draft Call Letter does not specifically mention the imposition of civil money penalties (CMPs).

Any increased monitoring may bring to a head some of the key concerns MAOs have long articulated with respect to the encounter data submission and attestation standards. In particular, MAOs rely on data submitted by providers and are limited in their ability to comprehensively detect incomplete or inaccurate data. As CMS takes steps to hold MAOs accountable for encounter data, the underlying limitations on MAOs may result in tension between MAOs, their contracted (and non-contracted) providers and CMS.

Although the Methodology for Calculating Star Ratings Remains Largely Unchanged, Some Small Adjustments Could Have Financial Impact

In general, CMS proposes to largely retain the current Star Ratings program, mostly making tweaks to individual measures and leaving the overall methodology intact. Below is a discussion of several items that CMS proposes to hold constant, as well as some proposals that appear to be more significant.

Beneficiary Access and Performance Problems Measure

CMS proposes to move forward with some of the modifications to the Beneficiary Access and Performance Problems (BAPP) measure that it previously identified in a Request for Comments released November 10, 2016 (November 2016 Request for Comments). Most significantly, CMS proposes to change the way in which the CMP deduction—one component of the BAPP—will be calculated. Under the proposal, the CMP deduction would range from 10 to 40 points to reflect the number of beneficiaries harmed and the severity of the alleged compliance issue, with a maximum deduction of 40 points for a particular contract irrespective of the number of CMPs. This represents a significant change from the current scoring method, which deducts 40 points for each CMP.

Data Integrity Policy

Despite signaling a potential change to its data integrity policy (whereby CMS reduces a contract’s measure to one star if CMS determines that “incomplete, biased, or erroneous data” were submitted) in the November 2016 Request for Comments, CMS proposes to instead continue to impose the automatic reduction, while potentially increasing the scope of its data integrity reviews to identify the problematic data. CMS highlights two programs in particular that may inform data integrity reviews: the new Medication Therapy Management (MTM) program audits and the expanded, industry-wide monitoring of appeals timeliness data.

Categorical Adjustment Index

CMS also proposes to retain the Categorical Adjustment Index (CAI) to adjust for within-contract disparities due to high enrollment of low-income subsidy and dual eligible and/or disabled beneficiaries. Initially implemented in the 2017 Star Ratings, the CAI is intended to be an interim adjustment that is reconsidered annually, and it is possible that CMS will develop a more permanent solution in the future. While CMS proposes to retain the overall CAI methodology, the CAI would apply to only five measures, as opposed to the seven measures adjusted in the 2017 Star Ratings.

Removal of Measures with Consistently High Performance

Finally, CMS proposes to move measures that it considers to be “topped out”—i.e., those measures in which there is consistently high performance across MAOs—to the display page, and seeks input on which measures should be moved. The selected measures would not be moved until the 2019 Star Ratings, presumably allowing time for CMS to propose, and for MAOs to comment, on a stated list of measures. In commenting on the proposal generally and on specific measures, it may be helpful to note that CMS states sensitivity towards moving measures on which MAOs have only recently attained consistent high performance, those that are critical to improving patient care and those without other similar measures. CMS also notes the importance of avoiding a decline in performance on measures that will no longer be factored into the Star Ratings.