Managed Care Organizations Use CMS Tools to Identify Outliers

June 1st, 2021 - Aimee Wilcox, CPMA, CCS-P, CST, MA, MT, Director of Content
Categories:   Audits/Auditing   Coding   Denials & Denial Management  

Managed Care Organizations (MCOs) are health plans that offer not only their own commercial health plans, but also risk-adjusted plans whose funding is based on the  health status of their beneficiaries, determined primarily through provider documentation and reporting of ICD-10-CM diagnosis codes. Certain health conditions are considered higher risk and more expensive than others and linking those conditions to individual beneficiary’s health profiles allows the health insurers to extrapolate their anticipated costs (as  a dollar amount) that will be required in order to properly care for these patients each year.

MCOs receive a capitated dollar amount to pay for the healthcare services of the beneficiaries enrolled in that plan, making it vital for them to identify which beneficiaries are more vulnerable due to their overall health status than others. By identifying and following those beneficiaries with health conditions that require additional monitoring or specialty care services, MCOs can better prepare for the cost of those services through risk adjustments reporting. Monitoring through preventive services, annual examinations, and periodic assessments also helps with early disease/condition identification and intervention thus lowering overall costs. 

In April this year, the Office of The Inspector General (OIG) outlined its 10 Key Compliance Priorities during a speech given at the Health Care Compliance Associations’ 25th Annual Compliance Institute in April. They are: 

  1. Overseeing COVID-19 Relief and Response 
  2. Realizing the Potential of Telehealth 
  3. Ensuring Quality of Care and Patient Safety in Nursing Homes
  4. Advancing Health Equities
  5. Modernizing Program Integrity and Compliance Resources
  6. Combating the Substance Use Disorder Epidemic
  7. Prioritizing Cybersecurity
  8. Information Blocking Enforcement
  9. Implementing Value-Based Care
  10. Strengthening Managed Care Program Integrity

“CMS and States have opportunities to improve MCO's efforts to protect Medicaid and ensure taxpayer dollars are being spent appropriately” -Office of Inspector General

MCOs funded by the federal government are required to investigate suspected cases of fraud, waste, and abuse (FWA) among contracted providers and report them to the States for further investigation. Recently, the OIG did their own investigation into how federally-funded MCOs approach these investigations and how they report FWA. This investigation resulted in seven (7) important OIG recommendations, which can be reviewed here

CMS relies heavily on data analytics to help identify potential provider and payer outliers that they intend to investigate. The OIG strongly recommends that MCOs work with CMS to become more adept at using data analytics to identify suspected cases of FWA, provide training programs for in-network providers on documentation practices and proper reporting, and help identify those providers who the MCO either terminated or who quit the MCO entirely. Finally, the OIG felt impressed to have these MCOs identify and share their best practices regarding payment-retention policies and incentives that may help to increase recoveries of improper payments. 

CMS has many resources at their disposal, including expert coders, auditors, and investigators. These professionals review and apply policies during audits and provide additional education and training to providers. The use of data analytics can help  payers identify outliers for investigation and potential payment recovery. MCOs that team up with Medicare may discover improvements in their FWA investigations and thus benefit from better financial outcomes.


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