The Apixio Blog

So You Don’t Have Time to Read the CMS RADV Audit Proposal

Last week, CMS proposed expanding the risk adjustment audit program to cover all Medicare Advantage (MA) plans, every year. This is because they believe that mistakes in the diagnosis data that MA organizations submit to CMS lead to a drastic misallocation of resources–some plans are overpaid for their patients, and some are underpaid. CMS currently audits only five percent of MA plans each year, so moving to a system where all plans are audited would be a huge policy change.

Three different contractors involved in Medicare Advantage RADV Audits

Given that every single MA plan will likely be audited in the future, it’s important that everyone involved with MA be informed about what this new process is like. (It’s officially known as Risk Adjustment Data Validation, or RADV). While before, MA plan audits had all been done by the government, CMS is now proposing that private contractors do the audits, so the program can be scaled up. The new process is extremely complex, weaving together actions by three different types of private contractors, who serve as checks and balances to each other.

There are Part C Recovery Audit Contractors (RACs) who are the first people to review the audit documents (e.g. medical records with diagnosis data on it) and who send the audit results to the MA plans. Then there are Secondary Review Contractors (SRCs) who double-check the RAC’s work at each step. And lastly there are Lead Analytic Contractors (LACs), who select the beneficiaries in each MA plan who will be audited in the first place, and calculate the final overpayment/underpayment amount.

These contractors receive a portion of the money they recover for Medicare, so MA plans have historically complained that there’s an incentive for them to find impropriety. For this reason, CMS has incorporated a cross-check into each step of the proposed audit process, so that every contracting team’s work is verified by another. (This cross-check is also what makes the process so complicated and hard to follow!)

The contractors also help decide how the records are evaluated. According to the proposal, RACs and CMS will collectively develop coding guidance.

Five Steps in Proposed RADV Audit Process

There are five steps in the proposed audit process:

  1. Sample document selection. The LAC selects a statistically-valid sample of patients from an MA plan that is being audited, and requests diagnosis and claims data from the MA plan for these patients.
  2. Intake documentation review. RACs review the medical records the MA plan has sent over, to confirm they are from appropriate time period and are the correct type ( hospital inpatient, hospital outpatient, or physician office records). SRCs review all the documents that RACs determine are invalid a second time. If the RAC and SRC’s judgments are in conflict, the SRC’s wins out.
  3. Medical record review. ICD codes are removed from the documents, RACs recode them, and then the new codes are compared with the old ones. This step must be completed within two weeks of whenever the RAC’s get the records from the MA plans–so it gets done fast. SRCs do a secondary review, and again, their decision trumps the RAC’s in case of conflict.
  4. Payment error calculation. For every instance where the RAC and SRC found that the diagnosis and claims data didn’t match up, the LAC determines the impact of this gap on the patient’s risk scores. They assume that the amount of error they found across the sampled patients is representative of the amount of error across the entire MA  plan, and make a determination of how much the plan is being over or underpaid based on this. The RAC collects these findings, sends draft audit results to CMS, and then sends the final results to the MA plans.
  5. Administrative appeals process. The proposal says that RAC shall have an “appeal overturn rate” of less than 10% at the first level of appeal, making it seem like very few decisions will be overturned via appeal.

Two Different Types of RADV Audits

It’s important to note that CMS is proposing that this process be used for two different types of RADV audits.  First, there are comprehensive audits, which review all patients and HCCs across a contract. Second, there are condition-specific audits, which review documentation for a specific HCC. The latter type of audit is necessary because CMS feels that there are certain conditions (like diabetes, which they specifically call out in the proposal) that they consistently overpay for.

This proposed audit means MA plans face a drastic increase in scrutiny by CMS of their medical records. Now, more than ever, it’s important that MA plans have accurate, comprehensive evidence for every diagnosis they code. There’s no telling which beneficiaries or records will be pulled for auditing, so all of them need to be verified.

How to Bring Up Issues or Concerns with CMS

You can read the complete statement of work here. Responses to the proposal can be sent to and by 10 AM EST, February 1st.