As a result of a new rule published on February 1, 2023, at 88 Fed. Reg. 6643, Medicare Advantage (MA) organizations soon will be facing enhanced exposure from Risk Adjustment Data Validation (RADV) audits. Under the new rule, effective for audits of payment years 2018 and after, Centers for Medicare & Medicaid Services (CMS) will use extrapolation to calculate MA organizations’ repayment obligations based on RADV audit findings. While CMS did not adopt any specific extrapolation methodology and plans to use methodologies appropriate to the specific audit, it will be focused on contracts identified as being high-risk for improper payments using statistical modeling, data analytics, or both. CMS does commit to disclosing the extrapolation methodology used in connection with any particular audit so that MA organizations will know how their repayment obligation was calculated. Notwithstanding its prior proposal to do so (https://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/recovery-audit-program-parts-c-and-d/Other-Content-Types/RADV-Docs/RADV-Methodology.pdf), CMS did not adopt a Fee-For-Service Adjuster in RADV Audits.  Relying on a recent D.C. Circuit decision, CMS takes the position that the obligation to report and return overpayments is not subject to the “actuarial equivalence” provision of the statute (42 U.S.C. § 1395w-23(a)(1)(C)) that applies to the risk adjustment payment methodology. UnitedHealthcare Ins. Co. v. Becerra, 16 F.4th 867, 885-86 (D.C. Cir. 2021), cert denied, 142 S. Ct. 2851 (2022).

CMS believes that as much as 7% of total aggregate payments made to MA organizations constitute overpayments and expects the new rule to recover more than $479 million in excess payments when implemented in full in 2025.  The new rule is certain to be challenged in court; nonetheless, MA organizations would be well-advised to continue efforts to shore up and enhance compliance programs and procedures to minimize or avoid errors in coding submissions.

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Photo of Kelly Knivila Kelly Knivila

Kelly Knivila is a healthcare regulatory lawyer who specializes in helping clients solve problems with federal and state regulatory agencies. She has deep experience in the Medicaid program having spent over two decades representing Medicaid Managed Care Organizations, providers and state Medicaid agencies…

Kelly Knivila is a healthcare regulatory lawyer who specializes in helping clients solve problems with federal and state regulatory agencies. She has deep experience in the Medicaid program having spent over two decades representing Medicaid Managed Care Organizations, providers and state Medicaid agencies on a wide array of regulatory issues. Kelly also regularly counsels clients on a variety of other healthcare regulatory requirements including Medicare audits and billing requirements, physician self-referral laws (the federal Stark Law and similar state laws), the anti-kickback statute, compliance programs, self-disclosures and internal investigations.

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Photo of Anthony Miles Anthony Miles

Tony Miles is a partner who focuses his practice on health care law with an emphasis on health care regulation and technology. He provides corporate, transactional and regulatory advice to a broad range of clients and entities whose products and services include multi-specialty…

Tony Miles is a partner who focuses his practice on health care law with an emphasis on health care regulation and technology. He provides corporate, transactional and regulatory advice to a broad range of clients and entities whose products and services include multi-specialty physician practices, specialty and retail pharmacies, diagnostic radiology, disease management, electronic patient communication, e-prescribing and database support for clinical trials.

Tony helps health industry clients conceive, negotiate and implement strategic affiliations to expand their service offerings through collaboration, alternative care delivery structures and innovative benefits program structures in compliance with federal health program rules such as Medicare Part D, anti-kickback and self-referral (“Stark”) prohibitions and other fraud and abuse provisions. Tony also helps clients protect and manage sensitive individual health information in compliance with HIPAA, FDA electronic recordkeeping requirements, security breach notification requirements and other federal and state privacy and security requirements. He also advises clients with legal and regulatory requirements concerning the distribution and marketing of FDA-regulated drugs, biologics and devices.

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