How the new "RADV" rule will affect physicians

SABRINA SKELDON, JD, CPC-A, CPMA, CRC, CIA, CHC, CCEP, CFE

On Feb. 1, 2023, the Centers for Medicare & Medicaid Services (CMS) issued its final rule on Risk Adjustment Data Validation (RADV) audits. The rule expanded CMS’ scope with regard to Medicare Advantage (MA) plans, which is expected to increase the frequency of claims audits as well as potential liability for MA plans, physicians, and other providers.

During a RADV audit, CMS looks at a sample of an MA plan's claims and confirms that any diagnoses submitted for risk adjustment are supported in the patient's medical record to ensure the plan did not receive an overpayment. CMS extrapolates the results from the sample to the entire plan contract. Historically, CMS collected overpayments only for the sample of audited beneficiaries, but that will no longer be the case.

RISKS TO PHYSICIANS AND OTHER PROVIDERS

MA plans, physicians, and other providers can expect an increase in the number of RADV audits, either because of CMS’ use of targeted audits based on diagnoses it believes to be at high risk for improper payment or because of CMS’ use of recovery audit contractors (RACs) to perform audits. On Dec. 22, 2015, CMS originally released a request for information and proposed statement of work seeking industry feedback on an expansion of the RAC program into the RADV audit process. That proposal was revived in late 2022 and would use the RACs to select MA enrollees for review, identify underpayments and overpayments associated with diagnosis data submitted to CMS, and calculate the final extrapolated over/under payment amount. There is expected to be an increase in targeted reviews, which will allow CMS to base audits on smaller sample sizes, permitting it to increase the number of audits performed. This will increase the burden on physicians and other providers required to respond to record requests and widen the specter of liability for those who participate in value-based contracts.

CMS will no longer be limited in its audit methodology or the method of extrapolating payment errors. The new rule has a look-back period beginning with the payment year 2018 and going forward, which means CMS can recover extrapolated overpayments from that period. MA plans could, in turn, seek to recover a share of the recouped payments from physicians and other providers who are parties to value-added contracts. Because physicians and other providers are responsible for submitting accurate and fully supported claims, they share in the liability for inaccurate coding and insufficient documentation of diagnoses. Any recoupment of monies from earlier periods will result in an unexpected loss of revenue to physicians and other providers in years where there has already been a final reconciliation. Audits of years where no final reconciliation has occurred could result in a reduction in the amount paid on claims not yet subject to a final reconciliation.  

As part of the Final Rule, CMS will no longer apply a risk adjustment factor (RAF), the fee for service adjuster (FFSA) in RADV audits, which calculates a permissible level of payment error. This means that plans will no longer have an offset against the extrapolated overpayment amount determined in the RADV audit. The financial impact of this change on MA plans is a key reason CMS limited the look-back period to 2018 and going forward.

An increase in the number of RADV audits will lead to greater scrutiny of physician documentation, which should be an impetus for improving clinical documentation. Managing risk in this area protects physicians against not only liability for overpayment but also potential fraud actions.¹ The areas RADV auditors will focus on to identify overpayments mirror the fraud areas targeted by the Department of Justice (DOJ). The RADV auditor guidance identifies several areas CMS has targeted that are the foundation of recent DOJ enforcement actions under the False Claims Act:²

• “Queries” from MA plans that direct physicians or other providers to supplement their documentation will result in no weight being applied to that documentation, and such diagnoses will be considered extraneous data from an alternative source and not allowed per the risk-adjustment policy.
• Amendments to medical records intended to add high risk-adjusted diagnoses that were not documented in the original record or added by parties not involved in the treatment and evaluation of the patient are inappropriate documentation and found to be unsupported.
• Addenda that are not timely and are not added for an appropriate purpose (to clarify an encounter, correct an error, or add data not available at the time of the encounter) are given no weight and fail to meet the criteria for risk-adjusted diagnoses.
• Inconsistencies between problem lists and current encounter documentation, without any indication that the problem list relates to conditions currently treated, are treated as unsupported clinical documentation of a diagnosis.

GUIDANCE FOR ENSURING COMPLIANCE AND MITIGATING RISK

Physicians and other providers should perform internal billing compliance audits to ensure that diagnosis codes are clinically supported and coding is accurate. Audit reports should be created that capture audit findings, such as incomplete documentation of patient encounters, as well as recommendations. Corrective action plans should be created and follow up should be performed to ensure the appropriate action has been taken. One-on-one training of physicians and other providers should be offered, where needed, to assist them in documenting completely their evaluation and treatment of patients during encounters.

Practices should implement a clinical documentation improvement (CDI) program to improve documentation and put in place a continuous education program. Coders or billing and coding auditors can provide practices with reference materials reflecting the most current and accurate information related to codes billed, including current ICD-10 guidance, CMS guidance addressing hierarchical condition categories (HCCs), as well as guidelines for clinical documentation.

— Sabrina Skeldon, JD, CPC-A, CPMA, CRC, CIA, CHC, CCEP, CFE, is the founder of Physician Practice Guidance

_{1. Physicians and other providers could be subject to a Medicare Advantage False Claims Act proceeding, where they were parties to a value-based contract and benefited financially from inflating plan revenues. The following conduct would subject providers to liability: upcoding to increase RAF scores (for example, assigning a high-dollar HCC for a diagnosis where the encounter note does not indicate a severe diagnosis; false reporting of conditions with high HCCs where the conditions have resolved; making post-encounter addenda to report unsupported HCC codes; and failing to delete inappropriate codes that are part of a problem list).}

_{2. Per United States ex rel. Ronda Osinek v. Kaiser Permanente, Case No. 3:13-cv-03891-EMC, Kaiser Permanente created programs to mine patients’ electronic medical records for certain data — key words, lab results, medications, clinical indicators — suggestive of potential diagnoses that would increase risk-adjustment payments. DOJ, as part of its False Claims Act case, cited the information from a Kaiser training deck. Per United States ex rel. Kathy Ormsby v. Sutter Health and Palo Alto Medical Foundation, Case No. 3:15-cv-01062-JD, Sutter Health physicians were pressured to add risk-adjusting diagnoses codes for conditions that had resolved in prior years and no longer mapped to an HCC, and to add addenda for past patient encounters, even a year old. Sutter Health settled the False Claims Act suit in 2021 for $90 million plus a five-year Corporate Integrity Agreement.}

Posted on Sept. 12, 2023