DEPARTMENT OF HEALTH & HUMAN SERVICES JUL 31 2015 Centers for Medicare & Medicaid Services Administrator Washington, DC 20201 The Honorable Charles E. Grassley Chairman Committee on the Judiciary United States Senate Washington, DC 20510 Dear Senator Grassley, Thank you for your recent letter regarding Medicare Advantage organizations' risk adjusted payments and your request for information about safeguards that the Centers for Medicare & Medicaid Services (CMS) is using to reduce fraud, waste, and abuse in the Medicare Advantage program. Reducing improper overpayments in Medicare Advantage, or Part C, is a top priority for CMS. Since we began measuring and reporting an improper payment rate for Part C, the improper payment rate due to over- and underpayments from inaccurate diagnosis data submitted by Medicare Advantage organizations has declined from approximately 15 percent in FY2009 to approximately 9 percent in FY2014, 6 percent if you exclude underpayments. While this trend is in the right direction, it is critical that we continue to build on this progress. It is important to remember that not all improper overpayments are necessarily fraud - improper payments are often caused by insufficient documentation or errors. CMS has worked to reduce improper payments associated with inaccurate Medicare Advantage diagnosis data through, among other means, the Risk Adjustment Data Validation (RADV) audit initiative. Under this initiative, CMS requires selected Medicare Advantage organizations to submit medical record documentation for a statistically-valid sample of beneficiaries so that CMS can validate the accuracy of the diagnosis data submitted for payment. As of May 2015, largely due to the sentinel effect of the RADV audits, as well as the "report and repay" requirement, which are described in more detail below, Medicare Advantage organizations have reported and returned approximately $1.5 billion in overpayments for payment years 2006 through 2013. CMS obligates approximately $30 million per year auditing Medicare Advantage fraud, waste, and abuse. CMS began the RADV initiative by conducting two sets of audits starting with the 2007 payment year: Pilot 2007, which involved five Medicare Advantage contracts, and Targeted 2007, which involved 32 Medicare Advantage contracts. Medicare Advantage organizations were notified of these reviews in 2008. We reported our determinations to each Medicare Advantage organization. Medicare Advantage organizations that disagree with CMS' s determinations can challenge them through a three-stage administrative appeal process established by regulation. Page 2 - The Honorable Charles E. Grassley For both sets of 2007 RADY audits, CMS recouped overpayments associated with sampled beneficiaries. Thus far, CMS has recovered $13.7 million from the contracts in the 2007 RADY audits, $3.4 million of which is from the five plans audited in Pilot 2007. CMS is currently conducting the dispute and appeals process. In the event an audit finding is overturned, the payment recovery amount will be adjusted downward as appropriate. The tables attached display the contracts selected for the 2007 RADY audits and the amounts recovered by CMS. RADY audits for contract year 2011 are currently underway for 30 Medicare Advantage contracts. Medicare Advantage organizations have already submitted medical records for their sampled contracts and these are currently under review. Unlike the 2007 audits, the payment error calculated for the sampled beneficiaries in these audits will be extrapolated to the contract population. For this reason, CMS expects significant recoveries from the 2011 audits. CMS is also exploring options to increase the effectiveness of the RADY audits, including additional funding to expand the scope of the audits. More information regarding the payment error calculation methodology for the 2011 RADY audit can be found at http://www.cms.gov/Medicare/Medicare-Advantage/Plan-Payment/PaymentYalidation.html. In addition to the RADY audits, CMS recently codified the Affordable Care Act requirement that Medicare Advantage organizations report and return overpayments that they identify, including those overpayments resulting from submission of improper risk adjustment data ("Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Program" (79 FR 100)). Under the Affordable Care Act, failure to report and return identified overpayments establishes liability under the False Claims Act. CMS's regulation specifies that a Medicare Advantage organization has identified an overpayment when the organization has determined, or should have determined through the exercise of reasonable diligence, that it has received an overpayment. CMS has also taken important steps to address increased federal Part C costs due to more aggressive reporting of diagnosis codes by Medicare Advantage organizations. First, since 2010, CMS has applied a coding pattern adjustment factor which reduces payments to Medicare Advantage organizations. For 2016, the coding pattern adjustment will be 5.41 percent. In addition, CMS has modified the Part C risk adjustment model to remove certain conditions, such as lower-level chronic kidney disease, that are more subject to differential coding by some Medicare Advantage organizations. CMS will fully implement this revised risk model in 2016. While the RADY audits measure the extent to which diagnoses are documented in medical record documentation, they are not designed to determine whether the diagnosis was fraudulently submitted, i.e., whether the plan intentionally submitted an inaccurate diagnosis. CMS works closely with the Department of Justice (DOJ) and the Department of Health and Human Services Office of the Inspector General (OIG) to support investigations ofrisk score fraud, including several ongoing investigations. Specifically, CMS provides technical assistance and training on Part C payment rules, risk adjustment methodologies, and other Medicare Advantage policies. Page 3 - The Honorable Charles E. Grassley CMS also works with DOJ and OIG to provide documentation and data, as appropriate, in support of False Claims Act investigations. CMS is also coordinating a variety of efforts with federal and state partners, as well as the private sector, to better share information to combat fraud. CMS issued new compliance program guidelines to assist Medicare Advantage plans in designing and implementing a comprehensive plan to detect, correct, and prevent fraud, waste, and abuse. CMS also enhanced its data analysis and improved coordination with law enforcement to get a more comprehensive view of activities in Medicare Advantage. Finally, CMS has launched a new system to help plan sponsors identify potential fraud, waste, and abuse, and share information with DOJ about the outcomes of their program integrity activities. We hope this information is helpful and addresses your concerns. We take our stewardship of the Medicare program seriously and look forward to working with you to strengthen payment integrity in the Medicare Advantage program. Sincerely, Andrew M. Slavitt Acting Administrator Enclosure Page 4 - The Honorable Charles E. Grassley Table 1. PILOT 2007 RADV Audits MA Parent Organization Contract# Care Plus Health Plan Aetna Health, Inc. Lovelace Health Plan, Inc. Independence Blue Cross PacifiCare of Washington, Inc. H1019 H3152 H3251 H3909 H5005 TOTAL: z Overpayment Recovery $477,235 $952,947 $512,182 $1,052,358 $381,776 $3,376,499 Table 2. Targeted 2007 RADV Audits MA Parent Organization Aetna Inc. California Physicians' Service Capital District Physicians' Health Plan, Inc. Coventry Health Care Inc. Coventry Health Care Inc. Elderplan, Inc. EmblemHealth, Inc. Group Health Cooperative Gunderson Lutheran, Inc. Health Alliance Medical Plans Health First Health Net, Inc. Health Net, Inc. HealthSpring, Inc. Humana Inc. Humana Inc. Humana Inc. Humana Inc. Humana Inc. Kaiser Foundation Health Plan McKinley Life Insurance Co. SCAN Health Plan, Inc. I 2 The contract did not have an overall net overpayment. May not sum due to rounding. Contract# Overpayment Recovery H0523 H0504 $473,340 $350,938 H3388 $244,941 H1013 H2663 H9101 H3330 H5050 H5262 H1463 H1099 H0351 H0562 H4454 H0307 H1036 H1406 H1951 H4461 H0524 H3664 H9104 $440,936 $329,055 $1 ,034,654 $675,718 N/A 1 $23,136 $321,771 $147,338 $248,324 $519,275 $152,917 $377,918 $346,499 $380,283 $232,845 $268,611 N/A 1 $149,381 $403,643 Page 5 - The Honorable Charles E. Grassley MA Parent Organization Contract# TAHMO,Inc. UAB Health System UnitedHealth Group, Inc. UnitedHealth Group, Inc. Universal American Corp. WellCare Health Plans, Inc. Wellpoint, Inc. Wellpoint, Inc. Wellpoint, Inc. Wellpoint, Inc. TOTAL: 2 H2256 H0154 H0151 H0609 H4506 H1032 H0540 H0564 H1849 H3655 Overpayment Recovery $656,129 $176,272 $362,527 $406,738 $456,253 $314,144 $96,410 $432,962 $152,339 $178,140 $10,353,439