OIG Investigates SCAN Health for Risk Adjustment Overpayments With Surprising Results

Risk adjustment plans are widespread but most often thought of in terms of the Medicare Advantage (MA) programs offered through CMS and managed by private insurance payers. CMS contracts with these MA organizations that provide benefits to Medicare beneficiaries and also provide payment to the MA organizations, are a combination of a base Medicare payment per beneficiary and an additional payment based on the individual risk score of each beneficiary. Depending on the costs of healthcare services accessed during the year, the payer may either incur losses or realize profits from the program. As the base Medicare beneficiary payment is set annually, the only variable that can increase payment per beneficiary is the individual beneficiary's health risk score. 

The health risk score is calculated based on the enrollee’s demographics (e.g., gender, age) and health status. The enrollee’s health status is determined by the various diagnoses assigned to them by acceptable healthcare provider types who have rendered healthcare services to them during the year. MA organizations collect these diagnosis codes from provider billing and identify associated medical records within the specified timeframe that support the documented diagnoses reported. CMS is obligated to perform risk adjustment data validation audits to ensure the right types of providers have performed approved services and documented the diseases the payers have reported to CMS. In essence, they are validating the codes reported that are actually supported by the beneficiary’s medical record. Risk adjustable ICD-10-CM codes are assigned to a Hierarchical Condition Categories (HCCs) code, which in turn has an assigned risk value. The combination of all valid HCCs added together along with the demographic information equals the patient’s overall risk score, which is then calculated to determine a risk score payment that is paid to the MA organization, along with the base Medicare beneficiary payment. The sum of these two components is used to pay for the medical expenses based on enrollee benefits for the year. SCAN, an MA organization headquartered in Long Beach, California, provides coverage to approximately 179,000 Medicare beneficiaries to the tune of approximately $1.9 billion in CMS payments. The Office of Inspector General (OIG) recently audited SCAN Health for potential Risk Adjustment overpayments related to 200 enrollees for which they received payment during the 2015 payment year.

As is typical, the OIG used an independent medical review contractor to perform the risk adjustment data validation (RADV) audit and published the results of their findings. The audit included a review of 1,577 HCC codes for 200 enrollees. Of these HCCs, the OIG validated 1,413, and identified 41 additional HCCs of lesser value that SCAN Health had failed to report, but gave them credit for making the total validated 1,454 out of 1,577, resulting in an overpayment of $54,318.154. 

As always, it is a great exercise for MA organizations to review the details of RADV audits to identify and learn from the RADV auditor’s approach to certain ICD-10 codes and HCC supporting documentation. It is also very important that any MA organization being audited also perform an audit of the RADV auditor’s findings to ensure accuracy and, if possible, identify evidence to support the reporting of each HCC code. 

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