OIG: Medicare Advantage overturns 75% of its own claim denials

Wednesday, October 3, 2018

Medicare Advantage Organizations (MAO) may be gaming the capitated payment model to increase their profits, an Office of Inspector General (OIG) report suggested. The September 25 report details an OIG study undertaken to address concerns that MAOs are inappropriately denying authorization of services for beneficiaries or payments to providers.

MAOs administer Medicare Advantage (MA) plans. Medicare pays these organizations under a capitated payment model: a monthly risk-adjusted payment per beneficiary. A capitated payment is based on the beneficiary’s overall health and the projected resources required to treat the patient rather than payment for actual services rendered. In turn, MAOs agree to authorize and pay for all medically necessary care that is covered by beneficiaries’ benefits package, according to the OIG. However, some stakeholders have raised concerns that the capitated payment model incentivizes MAOs to inappropriately deny medically necessary services. Because more than 20 million individuals are covered by MA plans as of 2018, even a low rate of inappropriately denied or delayed authorizations or payments can have a significant impact on beneficiaries and providers.

To determine whether MAOs were correctly handling denials, the OIG study looked at data on denials, appeals, and appeal outcomes for 2014–2016 for each level of the MA appeal process. It also analyzed CMS’ 2015 MA audit results and enforcement actions, including Star Ratings data from 2016–2018. The findings strongly suggest that MAOs aren’t playing fair: MAOs overturned 75% of their own denials at the first level of the appeals process and additional denials were overturned by independent reviewers at higher levels of the appeals process. The high volume of successful appeals, particularly on the first level, raises concerns that MAOs were denying payment and authorization for services that should have been provided, the OIG said. And, even more concerning, beneficiaries and providers appealed only 1% of denials. Given the high rate of successful appeals, the low rate of denials that are appealed suggests that the MA appeals process is overly burdensome, particularly for beneficiaries.

“Together these facts tell the OIG that the appeal process is too confusing and often overwhelming for most patients, especially those with critical medical issues, and that if more patients and providers appealed, their chances of success would be high,” says Ronald Hirsch, MD, FACP, CHCQM, vice president of R1 RCM in Chicago.

Many revenue integrity professionals can attest to the complexity of the MAO appeals processes. Sarah L. Goodman, MBA, CHCAF, COC, CCP, FCS, president and CEO of SLG, Inc., in Raleigh, North Carolina, has seen several cases in which an MAO denied a claim for what was deemed incorrect coding. In one instance, a beneficiary received a denial for a mammogram performed in August 2018 that was correctly billed with 77067 (screening mammography, bilateral [2-view study of each breast], including computer-aided detection [CAD] when performed). The MAO stated that the facility should have billed with G0202 (Screening mammography, bilateral [2-view study of each breast], including computer-aided detection [CAD] when performed), a code that was deleted in 2017. This isn’t an isolated incident, according to Goodman.

“I recently did a claims audit and found that the MA plans were rejecting for incorrect coding; however, when I reviewed the codes they were requesting in lieu of the reported codes, I discovered that all had been deleted December 31, 2017, or prior,” Goodman says. “These denials are harming beneficiaries and providers alike. No one is winning here.”

MAOs may rely on the amount of work a rebill requires discouraging provider organizations from rebilling small amounts such as for a mammogram, says Elizabeth Lamkin, MHA, CEO and partner at PACE Healthcare Consulting, LLC, in Bluffton, South Carolina. Hospitals will generally need to focus efforts on larger claims, but, depending on the volume, those smaller claims can add up quickly.

The OIG’s report goes on to detail CMS’ past audit results and enforcement actions. In 2015, CMS cited 56% of audited MAO contracts for inappropriately denying requests for preauthorization of services or payment. CMS found that some MAOs made the wrong clinical decision based on information submitted by the provider organization or the beneficiary, while others did not request all the necessary information before they decided to issue a denial. Also in 2015, CMS cited 45% of audited MAOs for sending insufficient denial letters, meaning that provider organizations and beneficiaries may not have known exactly why authorization or payment was denied or how to appeal the decision. These findings are particularly troubling because by delaying payment or medically necessary care, MAOs are causing harm to beneficiaries who may already be critically ill.

CMS’ enforcement actions have generally resulted in fines. Nine MAOs were fined a total of $1.9 million for violations related to denials and appeals; CMS noted that some of these violations were common problems. The agency suspended new enrollment for two MAOs due to compliance violations that posed a serious threat to the safety of the two MAOs’ nearly half a million beneficiaries. However, even though CMS’ own audits point to systemic noncompliance among MAOs, beginning in 2019, audit violations will no longer impact MAOs’ Star Ratings.

Delays in medically necessary care and appropriate payment have far-reaching consequences, the OIG said. If care is delayed, a critically ill beneficiary may not receive treatment when it would have been most effective, leading to poorer outcomes and additional services. A beneficiary who has had to pay out of pocket for services that were inappropriately denied may be reluctant to seek care in the future. A provider organization may opt to write off these denials rather than work through the complex appeals process but that can ultimately hurt the organization’s bottom line and affect its ability to finance new services, improvements to facilities and existing services, or even stay open. In addition, the high volume of denials may deter provider organizations from offering services, the OIG said in its report.

Managing MA reimbursement has become a significant burden on provider organizations, according to Lamkin.

“From a provider point of view, the burden of managing these plans without clear and hard rules is becoming excessive. Hospitals are faced with manning the front door to ensure authorizations are obtained and notifications submitted according to each contract,” Lamkin says “Even if all of the front end is performed well on the hospital side, sometimes the MA plans do not provide the status level approved until after discharge, resulting in back tracking for physician orders or more labor in revenue cycle to challenge the status. And, other times the stay gets a denial because ‘authorization is not a guarantee’.”

CMS’ primary concerns are the health and safety of Medicare beneficiaries and the integrity of the Medicare Trust Fund. By inappropriately denying authorization and payment for medically necessary services, MAOs are both harming beneficiaries and potentially misusing Medicare funds, the OIG said. The OIG concluded its report by recommending that CMS enhance its oversight of MAOs and better educate beneficiaries. So far, CMS’ fines and enforcement actions have yielded limited returns and the agency continues to note the same violations in its MAO audits, Hirsch says. Revenue integrity should monitor and review MA denials and work with their organizations to bring ongoing problems to CMS’ attention.