Health Information Management

The guiding principles of Medicare Advantage: Keeping risk adjustment compliant

JustCoding News: Outpatient, May 30, 2012

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by Holly J. Cassano, CPC 

The guiding principle is the definitive methodology used for all risk adjustment medical record reviews. Successful Medicare Advantage (MA) plans focus on early disease detection, coordination of care, and accurate reporting of members’ chronic conditions by primary care physicians, retrospective and prospective pursuits to drive and improve health outcomes.

MA plans accomplish this in several ways, including:

  • Annual Wellness Visit (AWV)—introduced in 2011
  • Annual Health Risk Assessment(HRA) for all members (mandatory for 2012)
  • Early detection and assessment of active chronic conditions
  • Continual coordination of care with ongoing assessments of any active chronic conditions
  • Observance of the guiding principles for risk adjustment (RA)

In order to properly understand the guiding principles for risk adjustment, we first must know what they are and how CMS intended MA Plans to follow them. In 2008, CMS published “The 2008 RAPs Participant Guide” for MA Plans to assist and offer guidance in the world of risk adjustment and to deter fraud and abuse in the healthcare system.

According to section 7.1.5 RADV of the 2008 RAPs Participant Guide:

The risk adjustment guiding principle states that all diagnoses submitted for payment (e.g. used for hierarchical condition categories [HCCs]) must be:

  • • Documented in a medical record that was based on a face-to-face health service encounter between a patient and a healthcare provider
  • • Coded in accordance with the ICD-9-CM Guidelines for Coding and Reporting
  • • Assigned based on dates of service within the data collection period
  • • From an acceptable RA provider type and RA physician specialty

A total of 10 Guiding Principles define CMS’ HCC Classification System:

  1. Categories must be clinically relevant to ICD-9-CM codes within a category and relate to specific chronic medical conditions in order to prevent gaming and/or discretionary coding
  2. Categories should predict medical expenditures and impacts on healthcare costs
  3. Diseases within each category should allow accurate estimations of their impact on healthcare cost
  4. Hierarchies should be used to characterize the person’s illness level within each disease process, while the effects of unrelated disease processes accumulate
  5. The diagnostic classifications should encourage specific coding in order to accurately reflect disease burden
  6. The diagnostic classification should not reward coding proliferation
  7. Providers should not be penalized for recording additional diagnoses, meaning no condition category should carry a negative payment weight, and a condition that is higher-ranked in a disease hierarchy should have at least as large a payment weight as lower-ranked conditions in the same hierarchy
  8. The classification system should be internally consistent
  9. The diagnostic classification should assign all ICD-9-CM codes
  10. Discretionary diagnostic categories should be excluded from payment models

How does this relate to the OIG?

MA plans need to follow the guiding principles for several reasons, including observance of CMS compliance. In addition, the OIG has put MA plans on its radar for the 2012 Work Plan, published in October 2011.

As part of the 2012 Work Plan, the OIG plans to:

  • Review diagnoses submitted to CMS for compliance with federal rules
  • Review the extent to which MA organizations identified and addressed potential fraud and abuse incidents
  • Ensure documentation supports diagnoses submitted to CMS
  • Review claims for HCC upcoding

The OIG is targeting MA plans and providers who collude and submit claims that are considered to be upcoded. Upcoding under MA is when a plan encourages providers and facilities to submit false claims in a variety of ways that may include some of the following practices:

  • Induces physicians to submit diagnoses that are fictitious or indicate a more severe disease process than the member actually has
  • Encourages physicians to falsify medical records in order to support higher levels of complexity than what actually is present
  • Arbitrarily submits claims inclusive of the above and without the physicians knowledge to gain higher HCC reimbursement

Why take such a risk for risk adjustment?

As sad a realization as this may be, a physician or group may participate in the first two practices on the list in exchange for one or several types of inducements from the plan. This practice can infuse significant dollars back to the physician or group in an environment when physician reimbursement has been declining and costs to treat patients continue to rise.

Inducements can be in the form of one or several of the following:

  • Higher capitation rates per member per month
  • Higher fee-for-service payments
  • Periodic “bonus” payments that have no relation to medical loss ratio/ healthcare effectiveness data and information set bonuses

The following is an actual case example of MA fraud.

This case involves an alleged fraud against the federal Medicare program, in violation of the federal False Claims Act (FCA). The Department of Justice (DOJ) alleged that Walter Janke, MD and Lalita Janke (and Medical Resources, LLC (MR), violated the FCA by making, or causing to be made, false statements and claims that resulted in millions of dollars of Medicare overpayments in excess of $12 million.

The Jankes falsely represented or caused MR and America's Health Choice Medical Plan (AHC) to falsely represent that AHC beneficiaries suffered from serious illnesses that were not supported by the patients' own medical records, according to the DOJ. AHC, now defunct, was a MA health plan, of which the Jankes were sole shareholders. MR, a network of clinics that provided primary health care to AHC beneficiaries, was its corporate affiliate.

The government alleged that the defendants:

  • Submitted false or fraudulent claims to cause overpayments to an MA Plan (the Jankes were the sole owners of the MA Plan)
  • Improperly assigned ICD-9-CM codes that were not documented by medical records or supported by the actual medical conditions of beneficiaries
  • Knowingly failed to review claims for erroneous data before submitting them to CMS
  • Failed to delete incorrect diagnoses from CMS’s database after they learned of the inaccuracies

The DOJ and the Jankes settled the case for $22.6 million in November 2010.

This practice is commonly known as “gaming the system” and not only goes against the guiding principles for risk adjustment, but also directly violates the FCA and anti-kickback laws. When a plan chooses this course of deception, it not only is fraudulent, but it depletes precious resources from an already exhausted fund pool for present and future generations of Medicare and Medicaid enrollees.

Editor’s note: Holly J. Cassano, CPC, is a clinical documentation improvement specialist for Preferred Care Partners for The Villages, in Lady Lakes, FL. E-mail her at

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