DOJ's Risk Adjustment Investigation May Extend to Additional Payers and Providers

Published by the AHLA Health Care Liability and Litigation and Payers, Plans, and Managed Care Practice Group and Physician In-House Counsel Affinity Group Leaderships

The Centers for Medicare & Medicaid Services (CMS) factors the health risk of the beneficiaries enrolled in Medicare Advantage (MA) plans into the monthly capitated payments those plans receive. CMS' risk adjustment models are based on Hierarchical Condition Categories, which are determined based on enrollee health status (diagnosis codes) and demographic characteristics. These, in turn, are used to calculate risk scores intended to predict individual beneficiary health care expenditures. CMS then uses these risk scores to determine the monthly capitated payment amount based on the plan's bid.

Risk adjustment data may give rise to potential civil and criminal liability including under the federal False Claims Act, and the U.S. Department of Justice (DOJ) currently is investigating several risk adjustment matters. For example, on February 18 Humana disclosed that the company had received a voluntary request for information from DOJ regarding an ongoing review of its Medicare risk adjustment matters related to a prior whistleblower matter.1 On March 23, Humana expanded upon its previous disclosure by explaining that the company believes DOJ's request for information "is in connection with a wider review of Medicare Risk Adjustment generally that includes a number of Risk Adjustment plans, providers and vendors."2

Humana's news came a day after DaVita Healthcare Partners Inc. (DaVita) disclosed that the company had received a subpoena from the U.S. Department of Health and Human Services Office of Inspector General (OIG) relating to Humana's ongoing civil investigation concerning MA risk adjustment data. DOJ requested DaVita provide information covering the time period 2008 through 2013 for all Humana MA Plans for which a DaVita subsidiary, JSA HealthCare Corporation (JSA), provided services. DOJ also requested information regarding JSA's communications with Humana about patient diagnoses related to Humana MA plans generally, and more specifically, related to two Florida physicians with whom JSA previously contracted.3

News that DOJ's investigation has expanded to other plans and providers is significant, especially because MA plans have grown in recent years. Indeed, approximately 30% of Medicare beneficiaries are enrolled in MA plans, which is double the number of beneficiaries a decade ago.4 As of March 2015, there were more than 17.3 million members enrolled in MA plans according to CMS data, which shows that the payers with the highest enrollment include UnitedHealth Group Inc. (3,448,776 members), Humana (3,175,124 members), Kaiser Foundation Health Plan Inc. (1,295,465 members), and Aetna Inc. (1,251,326 members), which together comprise 53% of total enrollment. The remaining 47% of total enrollment is comprised of more than 270 additional payers.5

Furthermore, government enforcement also has been on the rise. OIG's 2015 work plan specifies that OIG will review medical record documentation to ensure that it supports the diagnoses MA organizations submitted to CMS for use in risk-score calculations and to determine whether the diagnoses submitted complied with federal requirements. OIG also noted that prior OIG reviews had shown that medical record documentation did not always support the diagnoses submitted to CMS by MA organizations.6

As evidenced by the disclosures above, the risks associated with accurately reflecting risk adjustment data will only increase in the future in light of the expansions under the Affordable Care Act beyond MA plans to include commercial plans in the individual and small group markets, both inside and outside the exchanges beginning in 2014, and for which the data will be reported to the federal government for the first time in mid-2015.


1 Humana Inc. Form 10-K for the period ended December 31, 2014, filed with the U.S. Securities and Exchange Commission, page 117.
2 Humana Inc. Form 8-K, filed with the U.S. Securities and Exchange Commission on March 24, 2015.
3 DaVita HealthCare Partners Inc. Form 8-K, filed with the U.S. Securities and Exchange Commission on March 23, 2015.
4 Kaiser Family Foundation, State Health Facts, Medicare Advantage Enrollees as a Percent of Total Medicare Population.
5 Payers are defined based on the listed Parent Organization. Source: CMS, Sum of Total Local Medicare Advantage, Cost, PACE, and Demo Plans and Regional Medicare Advantage Plans as of March 2015. The report reflects enrollment as of the March 1, 2015 payment. The March payment reflects enrollments accepted through February 6, 2015.
6 Office of Inspector General, U.S. Department of Health and Human Services, Work Plan, Fiscal Year 2015, pages 24-25.

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