February 2, 2016

Be Sure Your Documentation Can Withstand a Medicare Advantage Risk Adjustment Data Validation (RADV) Audit

RADV auditIn 2015, the Centers for Medicare & Medicaid Services (CMS) estimated that three-quarters of estimated overpayments to Medicare Advantage (MA) plans were related to deficiencies in the provider documentation needed to support the patient’s risk score through the reported diagnosis codes.[1]

CMS looks to recover these overpayments through Risk Adjustment Data Validation or RADV (pronounced RAD’-vee) audits. A RADV audit is an annual assessment conducted by CMS to ensure the integrity and accuracy of risk‐adjusted payments. In a RADV audit, CMS reviews providers’ documentation to verify that the records support the diseases that were treated and reimbursed by the MA health plans. If a patient’s medical record does not confirm the diagnosis, CMS demands a refund from the MA plan. In turn, the MA plan will likely pursue some remedy from the provider.

For example, a typical RADV audit process could involve the following steps:RADV ProcessCMS pays an MA plan a set amount each month to provide healthcare services for the Medicare beneficiaries enrolled in that plan. The amount of that payment varies based on the risk score assigned to those beneficiaries. The risk score is determined using a risk-adjustment model based on diseases reported to the health plan by physicians (i.e., ICD-10 codes).

There are two types of risk-adjustment payment models currently utilized in healthcare: a prospective/future predictive model, and a concurrent/retrospective model. The prospective/future predictive risk-adjustment model utilizes historic diagnoses as a measure of health status, and combines the health status with demographic information to predict future expenses as illustrated in the CMS Hierarchical Condition Categories (CMS-HCC) Model. In contrast, the concurrent/retrospective risk-adjustment model, exemplified in the Department of Health and Human Services Hierarchical Condition Categories (HHS-HCC), uses diagnosis codes in the current year to predict medical and drug spending in the same year.

Although there is only a 5% chance that an MA plan may be selected for a RADV audit, the benefits of a provider adhering to RADV requirements far outweigh the risk of either having to repay a large sum of money, or potentially losing revenue from being removed from a healthcare plan. As CMS considers an increase in the percentage of both comprehensive and condition-specific RADV-type audits through the use of Recovery Audit Contractors (RAC), being proactively prepared to deal with a RADV Audit or MA RAC scrutiny is the fiscal responsibility of any participating organization. Below are some helpful steps to prepare your organization for a Medicare Advantage or Healthcare Marketplace Exchange RADV or future RAC Audit:

  • Evaluate the organization’s ability to respond to a RADV Audit.
    • Build a dedicated RADV work team.
    • Meet internally to develop a strategy for RADV and determine the need for assistance from a third-party vendor.
    • Review policies and procedures related to RADV coding and documentation requirements.
  • Assess the quality of the data available.
  • Validate adherence to RADV documentation requirements in current medical records.
  • Conduct targeted audits of the data to gain a better understanding of any weaknesses in both the process and medical record data.
  • Determine the steps required to resolve any uncovered issues.
  • Conduct internal education and training of physicians and practice management staff.

PYA is ready to assist you in evaluating the accuracy of your providers’ coding and documentation to determine accurate reimbursement under CMS-HCC and HHS-HCC risk-adjusted models. If you would like to discuss how we can customize a review, or if you have other questions related to the risk adjustment and HCCs, contact one of our executives listed below, (888) 420-9876.


[1]   According to the FY 2015 U.S. Department of Health & Human Services (HHS) Agency Financial Report:   http://www.hhs.gov/afr/fy-2015-hhs-agency-financial-report/other-information-3.html#partc