Avoiding Regulatory Scrutiny Through a Strong Risk Adjustment Compliance Culture

Achieving complete, accurate, and compliant risk adjustment outcomes is more important than ever.

Fraud and regulatory scrutiny within government programs is not new. From whistleblower suits like Poehling v. UnitedHealth Group Inc. in 2017 to the Department of Justice bringing charges against specific individuals, like in the HealthSun Health Plans fraud case in 2023, the pressure on all parties operating within government markets has never been higher. Medicare Advantage (MA) draws the most attention, but much of what is discussed in this article applies to those operating in the Affordable Care Act (ACA) and Managed Medicaid as well.

Recent Examples of Regulatory Scrutiny in Risk Adjustment

Insights from investigative journalism and federal actions illustrate the growing emphasis on compliance in risk adjustment.

• Wall Street Journal Criticizes In-Home Assessment Programs (August 2024):  A Wall Street Journal investigation of insurer home visits found that companies "pushed nurses to run screening tests and add unusual diagnoses, turning the roughly hourlong stops in patients' homes into an extra $1,818 per visit, on average, from 2019 to 2021. Those payments added up to about $15 billion during that period, according to a Journal analysis of Medicare data" (Wall Street Journal, August 2024)

• National Health Plan to Pay $172 Million to Resolve False Claims Act Allegations (September 2023): A major Medicare Advantage (MA) health plan agreed to pay $172 million to resolve allegations of false claims, emphasizing the high stakes of compliance.

• OIG: Medicare Advantage Compliance Audit of Specific Diagnosis Codes (2023-2024 YTD): TheOIGcompleted Hierarchical Condition Category (HCC) compliance audits on multiple H-Code contracts, with dates of service spanning from 2015 to 2018. Their extrapolated overpayment estimates for just 12 MA H-Code contracts was $165 million.

Cultivating a Culture of Compliance in Risk Adjustment: Key Areas of Risk and Best Practices

Compliance in risk adjustment programs goes well beyond the submission of deletes or unsubstantiated diagnoses from medical record reviews. Proper compliance is a culture established across all facets of the program. This relates to both health plans, risk bearing providers, and other organizations that support both parties to improve clinical documentation accuracy. To maintain compliance and improve risk adjustment outcomes, organizations should be aware of key areas where operating decisions can pose risks and adopt the following best practices:

• Align team member incentives with compliance goals. Improving risk score accuracy, which typically correlates with an increase, is a defining performance metric for a risk adjustment program. Employment contracts, bonus structures, and job requirements must be centered around achieving compliant outcomes. Establishing the wrong incentives can foster a culture that drives employees to push boundaries too far.

• Incentivize providers appropriately. Incentivize actions, not outcomes. For example, it’s proper to incentivize a provider to evaluate a set of conditions for a given patient, but not for coding each condition (e.g., achieving a specific condition recapture rate target). It is a subtle difference but incentivizing the provider to evaluate conditions allows the provider to disagree with the list and only document what they clinically substantiate during the visit without foregoing a financial incentive.

• Evolve retrospective programs. Whether performed in-house or outsourced, organizations should have their coding guidelines reviewed and updated periodically. Further, second-level review (2LR) and audit programs should include substantiating incremental HCCs, validating captured HCCs, and confirming deletes. A balanced approach is necessary for all 2LR and audit processes. Lastly, best-in-market health plans are now proactively augmenting their retrospective chase lists to include captured conditions that are likely not to be substantiated (e.g., single-source capture, clinical outliers, In-Home Assessment (IHA) captured only, OIG high-risk CMS HCCs) to mitigate their Risk Adjustment Data Validation (RADV) and audit exposure. Refining the retrospective process creates greater efficiencies from a bandwidth perspective, incorporates clinical feedback into potential conditions, reduces provider abrasion, and likely refines accrual projections.

• Strengthen vendor management and oversight. Routine audits and continual oversight programs are imperative to ensure vendors are acting in compliance with regulations and not increasing their clients’ risk exposure.

• Improve encounter data submissions. The shift from Risk Adjustment Processing System (RAPS) to Encounter Data System (EDS) reduced the compliance exposure from Medicare Advantage Organizations (MAOs) as they are no longer determining what is scoreable, though some risks still exists. Fraudulent submissions, like in the alleged HealthSun case referenced above, are the most obvious, but more nuanced is the handling of supplemental submissions. In the ACA, issuers are required to link all supplemental submissions to claims. This is encouraged for MA but not required. Guidance remains unclear from CMS/HHS on what is an acceptable linking methodology and actual practices vary greatly across health plans. Currently validation falls to RADV and Independent Validation and Assessment (IVA) audits, but this is an area of potential risk in future years.

Building a Culture of Compliance

Creating and sustaining a culture of compliance involves more than adhering to regulations; it requires proactive engagement and continuous improvement. Government sponsored programs (inclusive of MA, ACA, and Medicaid), risk-bearing providers, and their third-party partners must seek independent evaluations and expert guidance to navigate the evolving landscape of risk adjustment and compliance effectively.

Proactive Compliance Starts Here: Connect with Experts

At Pareto Intelligence, we specialize in navigating the complexities of risk adjustment and compliance. Our team provides comprehensive program evaluations to help organizations identify risks, implement best practices, and ensure regulatory adherence. Connect with us to safeguard your operations and enhance your compliance strategies. Explore our solutions and stay ahead of regulatory challenges with expert support from Pareto Intelligence. Together, we can ensure your organization remains compliant and efficient in managing risk adjustment.