Tougher audits of Medicare Advantage insurers could lead them to more stringently review the patient codes providers submit and the physician-enablement companies that help clinicians take on patient risk.
That may dampen the already cool market for value-based primary care startups and digital health businesses, and intensify contract disputes between insurers and companies such as Oak Street Health and Agilon Health, said Jason Silberberg, a partner at Frier Levitt’s healthcare litigation section and co-chair of the law firm’s value-based care litigation group.
“Medicare Advantage organizations are going to do whatever they can to try and offset the major losses they're going to take onto the providers,” said Silberberg, who primarily represents providers. “One way I could perceive that happening is them effectively pushing the fraud narrative on the providers.”
On Feb. 1, the Centers for Medicare and Medicaid Services is slated to finalize the Risk Adjustment Data Validation rule, which would increase the amount of overpayments Medicare Advantage insurers must return to the government. Private Medicare carriers generated an estimated $17 billion through overpayments last year, according to a report the Medicare Payment Advisory Commission, a federal expert panel that makes policy recommendations to Congress, issued this month.
The insurance industry is gearing up to fight the policy. Industry lobbying group AHIP, which declined to comment, reportedly would sue if the rule were enacted as-is. Medicare Advantage heavyweights Humana, CVS Health's Aetna and Centene have also signaled they would fight the regulation in court.
The Alliance of Community Health Plans called on CMS to reopen the comment period on the rule, which has been pending since 2018. “The comments that [CMS is] using for this rulemaking are now several years outdated and therefore require additional review and new consideration,” said Michael Bagel, associate vice president of public policy for the Alliance of Community Health Plans, a trade group for nonprofit insurers.
Insurers could ask a court to stay the regulation, which would delay implementation, Silberberg said. But the sue-to-stop strategy has not been successful so far, he said. The Supreme Court dealt the industry a blow in June when it declined to hear UnitedHealth Group’s challenge to a regulation that makes Medicare Advantage insurers liable for False Claims Act lawsuits when they fail to return overpayments. That opened the door to more Justice Department lawsuits against Medicare Advantage carriers—and providers.
Companies such as Oak Street Health and Agilon Health bear the greatest legal and financial risk if the Medicare Advantage audit process changes, Silberberg said.
Insurers typically pay these risk-bearing providers flat, monthly rates to cover members’ anticipated expenses. Providers that take care of sicker patients, and document more risk codes, receive higher capitated rates. These companies therefore have a financial incentive to capture as many codes as possible, and potentially to exaggerate patient conditions, Silberberg said. Insurers that ink shared savings agreements with these companies often also dispense bonuses when they help reach savings targets.
Agilon Health referred to CEO Steven Sell’s comments at the J.P. Morgan Healthcare Conference this month, where he said the proposed rule does not pose a significant risk to the physician-enablement company. “The way we do it is the way plans want it to be done. We're driving our results based on managing costs,” he said. Sell said that the company has a strong, peer-reviewed risk adjustment process, and he does not expect Medicare Advantage plans to alter their deals with Agilon Health over the regulation.
Sell’s tone was a stark departure from the amicus curiae brief Agilon Health submitted in the UnitedHealth Group case last March, in which the company wrote that clawing back more Medicare Advantage overpayments would cause “negative impacts [that] are foreseeable and inevitable” for Agilon Health and other companies whose capitation rates are determined by what CMS pays insurers.
Oak Street Health, a Chicago-based primary care provider, declined to comment.
But the downstream impact of strengthened audit standards would not be felt immediately because contracts between insurers, providers and technology companies are generally negotiated on a three-year basis, said Fred Bentley, managing director of ATI Advisory, a healthcare research and advisory firm.
Many insurers include clauses in these contracts that allow them to reclaim reimbursements that CMS determines were overpaid, Bentley said. When clinicians are been found to have submitted improper patient codes, insurers also can recoup any bonuses granted for helping them achieve savings goals, he said.
“It's a good thing to make sure that you're capturing all that information about your patients’ clinical conditions,” Bentley said. “But that cannot be the growth driver. This could change the calculus, or the underlying economics, for these [provider] groups and where they need to focus to be successful.”
Not everyone is convinced strengthened audits would hamper the Medicare Advantage industry. Insurers’ ability to administratively appeal audits reduces the financial and legal risks, said Mark Miller, executive vice president of healthcare at Arnold Ventures, a philanthropy. A more impactful approach would be recouping the overpayments MedPAC already uncovered, said Miller, who was MedPAC's executive director from 2002 to 2017.
“If people were serious about Medicare Advantage oversight, there is like $20 billion annually going out the door that MedPAC has identified,” Miller said. “The [Health and Human Services] secretary has the authority to capture, and Congress could legislate and recapture. But that is not actively being considered.”
Insurers and providers could gain some relief if the legal standard for False Claims Act cases were raised, as CMS proposed last month. Under the agency's draft plan, Medicare Advantage insurers would be liable for False Claims Act violations when they "knowingly" submit improper claims, a higher bar for regulators than the current standard of negligence.
That would make it harder for the Justice Department to sue Medicare Advantage insurers and providers for failing to return overpayments, Silberberg said. “Maybe the government's thinking, ‘Well, we're going to hit them with the hammer on this side, and we're going to give them a little bit of a band-aid on the other side,’” he said.