On January 30, 2023, the Centers for Medicare and Medicaid Services ("CMS") issued a highly anticipated final rule (the "Final Rule") regarding its Risk Adjustment Data Validation ("RADV") program for Medicare Advantage organizations ("MAOs").1 The Final Rule, which will have a significant impact on MAOs as well as health systems and other providers that contract with MAOs, follows several years of debate regarding the appropriate approach to auditing and recoupment from MAOs. We anticipate that certain provisions of the Final Rule, which were strongly opposed by key stakeholders, may give rise to legal challenges. More broadly, the Final Rule arises in the context of a growing government focus on overpayments in the Medicare Advantage ("MA") program, including through increased enforcement under False Claims Act ("FCA") theories that impact both MAOs and providers.
CMS's monthly capitation payments to MAOs under the MA program are risk-adjusted to account for variations in health status and to address potential disincentives to treat more complex patients. CMS uses diagnosis codes reported by MAOs, which must be supported by the enrollee's medical records, to determine the risk-adjustment factor it applies to the capitation payment. Through the RADV program, CMS audits MA program payments to identify improper risk adjustments where the diagnosis codes submitted by the MAO are not supported by the enrollee's medical record.
The Final Rule makes...
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