Billions in Estimated Medicare Advantage Payments From Diagnoses Reported Only on Health Risk Assessments Raise Concerns

WHY WE DID THIS STUDY

We undertook this study because of concerns that Medicare Advantage organizations (MAOs) may use health risk assessments (HRAs) to increase risk adjusted payments inappropriately. The Medicare Advantage (MA) program provided coverage to 23 million beneficiaries in 2019 at a cost of $264 billion. Unsupported risk adjusted payments have been a major driver of improper payments in the MA program. CMS risk-adjusts payments by using beneficiaries' diagnoses to pay higher capitated payments to MAOs for sicker beneficiaries, which may create financial incentives for MAOs to make beneficiaries appear as sick as possible. For CMS to risk adjust payments, MAOs report beneficiaries' diagnoses, based on services provided to beneficiaries, to CMS's MA encounter data system and the Risk Adjustment Processing System. HRAs are an allowable source of diagnoses for risk adjustment. An HRA occurs when a physician or other health care professional collects information from beneficiaries about their health to diagnose and identify gaps in care. However, CMS and the Medicare Payment Advisory Commission have raised concerns that MAOs may use HRAs mainly as a tool to collect diagnoses and increase payments to MAOs rather than to improve the health of beneficiaries.

HOW WE DID THIS STUDY

We analyzed 2016 MA encounter data to determine the 2017 financial impact of diagnoses reported only on HRAs and not on any other records in the encounter data that year. We also analyzed CMS's responses to a structured questionnaire to identify actions taken by CMS to review the impact of HRAs on MA payments.

WHAT WE FOUND

Our findings highlight concerns about the extent to which MAOs are using HRAs to improve care, as intended, and about the sufficiency of CMS's oversight. From our analysis of 2016 MA encounter data, we found that diagnoses that MAOs reported only on HRAs-and on no other service records-resulted in an estimated $2.6 billion in risk-adjusted payments for 2017. In addition, in-home HRAs generated 80 percent of these estimated payments. Most in home HRAs were conducted by companies that partner with or are hired by MAOs to conduct these assessments-and therefore are not likely conducted by the beneficiary's own primary care provider. Twenty MAOs generated millions in payments from in-home HRAs for beneficiaries for whom there was not a single record of any other service being provided in all of 2016. Our findings raise concerns about the completeness of payment data submitted to CMS, the validity of diagnoses on HRAs, and the quality of care coordination for beneficiaries. Despite potential issues regarding HRAs, CMS has not yet reviewed the impact of HRAs on risk adjusted payments or quality of care.

WHAT WE RECOMMEND

We recommend that CMS: (1) require MAOs to implement best practices to ensure care coordination for HRAs; (2) provide targeted oversight of the 10 parent organizations that drove most of the risk-adjusted payments resulting from in-home HRAs; (3) provide targeted oversight of the 20 MAOs that drove risk-adjusted payments resulting from in-home HRAs for beneficiaries who had no other service records in the 2016 encounter data; (4) reassess the risks and benefits of allowing in-home HRAs to be used as sources of diagnoses for risk adjustment, and reconsider excluding such diagnoses from risk-adjustment; and (5) require MAOs to flag any MAO initiated HRAs in their MA encounter data. CMS concurred with our second and third recommendations and disagreed with the others.