Risk Adjustment Data Validation of Payments Made to Paramount Care, Inc., for Calendar Year 2007 (Contract Number H3653)

The diagnoses that Paramount Care, Inc. (Paramount), submitted to CMS for use in CMS's risk score calculations did not always comply with Federal requirements. As a result of these unsupported diagnoses, Paramount received $206,000 in overpayments from CMS. Based on our sample results, we estimated that Paramount was overpaid approximately $18.2 million in calendar year 2007.

The risk scores calculated using the diagnoses that Paramount submitted for 56 of the 100 beneficiaries in our sample were valid. The risk scores for the remaining 44 beneficiaries were invalid. Medicare Advantage (MA) organizations, including Paramount, submit diagnoses to CMS. CMS categorizes the diagnoses into groups of clinically related diseases called Hierarchical Condition Categories and uses the categories and demographic characteristics to calculate a risk score for each beneficiary. CMS then uses the risk scores to adjust the monthly capitated payments to MA organizations for the next payment period.

The risk scores for the remaining 44 beneficiaries were invalid because the diagnoses were not supported for 1 or more of the following reasons: (1) documentation did not support the associated diagnosis, (2) documentation did not include the provider's signature or credentials, (3) Paramount did not provide any documentation to support the associated diagnosis, or (4) the diagnosis was unconfirmed.

We recommended that Paramount (1) refund to the Federal Government $206,000 in overpayments identified for the sampled beneficiaries; (2) work with CMS to determine the correct contract-level adjustment for the projected $18.2 million of overpayments; (3) monitor the effectiveness of its newly developed written policies and procedures for obtaining, processing, and submitting valid risk adjustment data; and (4) improve its current practices to ensure compliance with the Federal requirements. Paramount generally disagreed with our findings.