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Federal watchdog cracks down on inflated Medicare payments

Insurers were allegedly found to be exaggerating the health ailments of patients, receiving billions.

Insurance companies have been inflating risk-adjustment payments by inaccurately reporting diagnoses, according to a new report from the Inspector General, bringing in billions in potentially "inappropriate" Medicare dollars.

An estimated $6.7 billion in risk-adjustment payments were received by health insurers with patients on Medicare Advantage as a result of diagnoses not backed by service records, according to the report from the U.S. Department of Health and Human Service's Office of Inspector General. 

The report said $2.7 million was received based on diagnoses that Medicare Advantage organizations did not link to a specific service or a face-to-face visit as required by the Center for Medicare and Medicaid Services. The inspectors said the findings warrant targeted oversight of MAOs to protect against insurers exaggerating how sick patients are to bring in more Medicare dollars.

The OIG analyzed 2016 Medicare Advantage data to determine the 2017 financial impact of diagnoses that were based on chart reviews without any service record linked to it. Chart reviews are retrospective reviews of patients' medical record documentation. Service records are based on information that insurers submit to MAOs after providing services or medical items to patients.

Insurers can use chart reviews to add diagnoses without a face-to-visit as well as delete ones that were logged erroneously, but the OIG said in its report that MAOs almost always used chart reviews as a tool to add rather than delete.

The report said 99% of chart reviews examined by inspectors had added diagnoses, including for serious illnesses like cancer, diabetes and heart disease. The study showed there were 4,616 patients who had chart reviews that were not linked to service records.


The OIG describes the risk adjustment program as an important mechanism for accurately reimbursing MAOs based on the differences in patients' health status. It says it "levels the playing field" for MA organizations that enroll sicker beneficiaries with more costly care to ensure they have continued access to MA plans.

The report says  MAOs have been questioned by the federal government for the former's use of chart reviews to add diagnoses for risk adjustment. In 2017, the U.S. joined a whistleblower lawsuit filed under the False Claims Act alleging that an MAO used the results of chart reviews to report diagnoses that the treating physician did not originally report, according to the report. It said the suit alleged the MAO did so, but also did not use the chart review results to delete diagnoses found to be invalid.


Medicaid Advantage receives almost a third of the money spent each year on the Medicare program, which is available to Americans 65 and older, as well as some younger people depending on disability status. There were about 21 million people enrolled in private Medicare plans in 2018, according to the report. It said the Medicare Advantage program received $210 billion in 2018, $711 being spent overall on the Medicaid program.

Moving forward, the OIG recommends targeted oversight of the MAOs that had risk-adjusted payments based on chart reviews not linked to service records. They said CMS should conduct reviews by reaching out to implicated MAOs, and then "take action" to remedy any problems with completeness of data submissions.

The report also recommended the MAOs reassess the risks and benefits of allowing chart reviews not linked to service records to be used as sources of diagnoses for risk adjustment. Inspectors say CMS should be examining data to determine the impact of unlinked chart reviews in regards to inflating "data integrity" and overpayments.


"Our findings highlight potential issues about the extent to which chart reviews are leveraged by MAOs and overseen by CMS," the OIG's summary of its report states. "Our findings raise potential concerns about the completeness of payment data submitted to CMS, the validity of diagnoses on chart reviews, and the quality of care provided to beneficiaries."

Max Sullivan is a freelance writer and reporter who, in addition to writing about healthcare, has covered business stories, municipal government, education and crime. Twitter: @maxsullivanlive