The Department of Health and Humana Services Office of the Inspector General has issued a report estimating that the Medicare program made $2.6 billion in risk adjustment payments to Medicare Advantage organizations (“MAOS”) in 2017 based solely on diagnoses reported in Health Risk Assessments (“HRAs”). The OIG further found that 80% of the estimated payments resulted from in-home HRAs conducted by companies retained by the MAOs to make these assessments. In addition, the OIG found that twenty MAOs generated millions in payments from in-home HRAs for beneficiaries for whom no other services were provided.

The Medicare program pays MAOs on a per member per month basis that reflects CMS’s predicated cost of providing care to that Medicare beneficiary. Payments are risk adjusted based on beneficiaries’ demographic information and diagnoses from the previous year.

HRAs are intended to be used as tools for early identification of health risks to improve care coordination and health outcomes. In the Medicare fee-for-service program, beneficiaries’ physicians generally conduct HRAs as part of their annual wellness examinations. In addition to annual wellness visits, MAOs frequently use in-home visits to conduct HRAs.

The OIG conducted its review due to concern with MAOs’ use of in-home HRAs to increase risk-adjusted payments. The Report stated:

We undertook this study because of concerns that MAOs may use HRAs to increase risk-adjusted payments inappropriately…Unsupported risk-adjusted payments have been a major driver of improper payments in the MA program….HRAs are an allowable source of diagnosis for risk adjustment….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.

The OIG Report did not name the MAOs whose practices generated the concerns. It did note, however, that approximately $2.1 billion in the payments made solely based on diagnoses from HRAs were to 10 MAOs that “belonged to two parent organizations that generated 81% of the $2.6B but enrolled only 40% of beneficiaries.”

The OIG made the following recommendations:

  1. That CMS require MAOs to implement best practices to ensure care coordination for HRAs
  2. That CMS provide target oversight of the 10 parent organization driving most of the risk-adjusted payments from in-home HRAs
  3. That CMS 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 encounter data
  4. That CMS reassess the risks and benefits of allowing in-home HRS to be used as sources of diagnosis for risk adjustment; and
  5. That CMS require MAOs to flag any MAO-initiated HRAs in their MA encounter data.

CMS has agreed only to implement recommendations 2 and 3.

The OIG Report, along with CMS’ response, is linked here.