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Federal Audit Reveals Billions of Dollars in Medicare Advantage Overpayments

Posted  December 20, 2019

A new government report reveals what whistleblowers and their counsel have known for some time: the Medicare Advantage program is vulnerable to fraud committed by unscrupulous private health insurance companies, as well as their owners, vendors, affiliates, and even some doctors.  These bad actors make patients enrolled in MA plans appear sicker than they actually are in order to increase their corporate profits.  Earlier this month, Joanne Chiedi, the Acting Inspector General for the U.S. Department of Health and Human Services, issued a report finding billions of dollars in estimated risk adjustment overpayments to Medicare Advantage Organizations (MAOs).

The MA program provides health insurance coverage to more than 21 million Americans, at an annual cost of approximately $210 billion. Risk adjustment fraud increases costs to U.S. taxpayers, lines the pockets of corporations, and exposes patients to inappropriate and often unnecessary healthcare services.

How Risk Adjustment is Vulnerable to Fraud

Here is how a “risk adjustment” fraud scheme typically works: In order to take advantage of the federal government’s promise to pay MAOs more than the usual capitated monthly rate for patients who are particularly sick or fall into certain high-risk categories, MAOs hire vendors to audit and review physician charts to capture any diagnoses not reported by the physician but meeting certain minimum standards and supported by the medical record.

This practice can be a legitimate way for MAOs to increase patient “risk scores” and obtain higher “risk adjustment” payments if the new diagnoses are properly supported. Some of the requirements for that—and there are many—include that the diagnosis code must:

  1. result from face-to-face encounters between a clinician and patient,
  2. that occurred during the relevant year,
  3. be appropriately documented in the patient’s medical record at the encounter, and
  4.  require or affect patient care treatment or management.

The problem is that MAOs, the vendors they hire, and even some physicians—all of whom potentially profit from MA beneficiaries having higher risk scores—sometimes fudge or ignore patients’ actual medical record and report new diagnoses that lack proper support or even have no clinical basis and result in no new patient care. MAOs and their affiliates who knowingly submit claims to the federal government for risk adjustment payments based on such false diagnoses, or cause others to submit such claims, have committed fraud that is actionable under the federal False Claims Act.

OIG Findings

Unfortunately, the OIG report strongly suggests that risk adjustment fraud is widespread in the MA program. The OIG auditors examined MA encounter data from just a single year, 2016, to determine the financial impact on the MA program the following year of diagnoses reported only on chart reviews and not on any service record in the encounter data. The auditors made four central findings.

  • First, MAOs “almost always used chart reviews as a tool to add, rather than to delete, diagnoses.”
  • Second, “[d]iagnoses that MAOs reported only on chart reviews—and not on any service records—resulted in an estimated $6.7 billion in risk-adjusted payments for 2017.”
  • Third, in 2017, CMS made an estimated $2.7 billion in risk-adjusted payments based on chart reviews “that MAOs did not link to a specific service provide to the beneficiary—much less a face-to-face visit.”
  • Fourth, “almost half of MAOs reviewed had payments from unlinked chart reviews where there was not a single record of a service being provided to the beneficiary in all of 2016.”

The HHS OIG audit findings indicate that many diagnoses on which MAOs rely to receive risk-adjustment payments are inaccurate and/or unsupported. And even if accurate, they suggest MA beneficiaries are not receiving needed services for potentially serious diagnoses. Either way, MAOs and their affiliates are potentially liable under the FCA for defrauding the MA program of billions of dollars. In a recent letter to the CMS Administrator, Seema Verma, five U.S. Senators estimate that taxpayers have overpaid MAOs “more than $30 billion dollars over the last three years.” A significant portion of these overpayments is likely due to risk adjustment fraud.

How Whistleblowers can Report Risk Adjustment Fraud

Whistleblowers can play a critical role in reporting risk adjustment fraud, by providing information to the government that it would not otherwise be able to discover.  By working with a whistleblower attorney to bring a claim under the False Claims Act, a successful whistleblower may be able to receive to 30% of funds recovered.

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Tagged in: FCA Federal, Healthcare Fraud, Importance of Whistleblowers, Managed Care, Risk Adjustment Fraud,


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