At a Glance
- Risk-adjusted payment models like Medicare Advantage reimburse providers based on the complexity of their patients. This creates an incentive for providers to over-report diagnoses to increase payments.
- Medicare and commercial insurers conduct audits to identify improper coding and recoup overpayments. Practices can face financial penalties and allegations of fraud.
- To mitigate audit risk, practices should conduct internal audits to identify documentation and coding issues. Key steps include randomly selecting cases for review, carefully reviewing documentation using a CMS checklist, educating physicians on coding, and addressing gaps in care and coding.
In risk-adjusted payment models, physicians are paid based on their patients’ clinical complexity. Generally speaking, the sicker and more complex the patient, the higher the payment.
Risk adjustment plays a significant role in Medicare Advantage contracts, commercial capitated payment arrangements, and CMS alternative payment models such as shared-savings contracts and accountable care organizations. Although several risk-adjusted methodologies exist, CMS’ hierarchical condition category (HCC) risk adjustment model is one of the most widely recognized.
Risk-adjusted payments under the microscope
As with any payment model, there’s always the potential to "game the system" and over-report CMS-HCCs to increase reimbursement. As a result, it’s unsurprising that the agency performs Risk Adjustment Data Validation (RADV) audits of its Medicare Advantage plans.
According to data from CMS, the agency made $13.94 billion in improper payments to its Part C supplemental plans, representing a 5.42% improper payment rate. There have been lawsuits as well, such as the one against Cigna Group in which the federal government accused the carrier of submitting and failing to withdraw inaccurate and untruthful diagnosis codes. The group agreed to pay $172 million to resolve the allegations.
How risk adjustment audits affect independent practices
When Medicare Advantage plans lose money due to recoupments, the pool of funds from which they pay providers also shrinks. However, commercial plans using a risk-adjusted payment methodology also pose a threat because they’ll be able to recoup money directly from physicians who over-code HCC diagnoses, says Sean M. Weiss, CHC, CEMA, CMCO, CPMA, CPC-P, CPC, partner and vice president of Compliance at Doctors Management, a medical and healthcare consulting firm based in Knoxville, TN.
“Commercial plans using a risk-adjusted payment methodology also pose a threat because they’ll be able to recoup money directly from physicians who over-code HCC diagnoses. ”
Commercial payer HCC audits can result in repercussions for physicians based on improper reporting or poor performance and quality.
Steps to performing an internal HCC compliance audit
Performing an internal HCC audit helps physicians identify compliance risks before payers do, says Weiss. He provides these steps to help practices get started:
1. Select cases for review
For a baseline audit, randomly select 10 encounters per physician. For follow-up audits, Weiss says to randomly select at least 5 claims per physician on a quarterly basis. Random selection could be every 3rd patient encounter per day, for example.
Another option is to consider software that automatically identifies claims that are at high risk for an HCC audit.
2. Review documentation carefully
This checklist reminds physicians, for example, to clarify the historical status of all diagnoses (e.g., history of cancer vs. current cancer) and to validate all diagnoses on the problem list. That’s because, in some EHRs, diagnoses never drop off the list, even though they’re resolved.
3. Act on audit findings
If the audit reveals low HCC scores, determine why HCC capture is difficult. For example, do physicians continually report unspecified codes? If so, can the practice work with its EHR vendor to develop templates or other prompts that encourage physicians to assign more specified codes when appropriate? When it comes to HCCs, specificity matters.
Physician education may also be warranted, says Weiss. Physicians need to understand the fundamentals of HCCs but also have a general awareness of the fact that payers will increasingly reimburse them based on the ICD-10 diagnosis codes — not CPT codes — they report, he adds.
“When it comes to HCCs, specificity matters. ”
Payers, many of which have a comprehensive process for data collection, may also be able to initially help practices identify each patient’s HCCs, says Weiss. This is especially helpful for new patients who may not provide accurate and comprehensive information about all of the chronic conditions for which they receive treatment, he adds.
What if the practice discovers that patients simply don’t present to the office on an annual basis? This is important because physicians must evaluate, document, and bill HCCs annually to ensure that capitated payment calculations include these diagnoses. Identifying and addressing care gaps is critical, says Weiss.
New audit, same focus
HCC audits aren’t really that different from other types of audits that practices should perform regularly, says Weiss. As long as practices focus on accurate and comprehensive documentation that justifies medical necessity, they should be able to avoid costly recoupments, he adds.
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