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Medicare Advantage Plans Overturn 75% of Their Own Claim Denials

HHS OIG found high overturn rates for prior authorization and claim denials in the Medicare Advantage, indicating possible improper payment and care denials.

Claim denials and Medicare Advantage

Source: Thinkstock

By Jacqueline LaPointe

- A new report from the HHS Office of the Inspector General (OIG) reveals “widespread and persistent problems” related to prior authorization and claim denials in Medicare Advantage.

Using Medicare Advantage data on denials, appeals, and appeal outcomes from 2014 to 2016, the federal watchdog found that Medicare Advantage Organizations (MAOs) overturned 75 percent of their own prior authorization and claim denials from 2014 to 2016.

“The high number of overturned denials raises concerns that some Medicare Advantage beneficiaries and providers were initially denied services and payments that should have been provided,” the federal watchdog stated. “This is especially concerning because beneficiaries and providers rarely used the appeals process, which is designed to ensure access to care and payment. During 2014-16, beneficiaries and providers appealed only one percent of denials to the first level of appeal.”

Medicare pays MAOs a risk-adjusted capitated payment each month for each beneficiary enrolled in the health plan. MAOs are to use the capitated payments to pay for all the medically necessary care for the enrolled beneficiary as long as the services are within Medicare’s benefits package.

However, healthcare stakeholders have raised concerns that the capitated payment model may incentivize MAOs to inappropriately deny claims and prior authorization requests to maximize their profits.

READ MORE: 3 Best Practices for Hospital Claim Denials Management

The inappropriate denial of payment or services would significantly impact care access for beneficiaries in the rapidly growing program. In the last decade, the number of beneficiaries enrolled in Medicare Advantage skyrockets from just 8 million individuals in 2007 to 21 million beneficiaries in 2018.

“Because Medicare Advantage covers so many beneficiaries (more than 20 million in 2018), even low rates of inappropriately denied services or payment can create significant problems for many Medicare beneficiaries and their providers,” HHS OIG stated.

In 2016, the MAOs analyzed by the federal watchdog collectively denied 8 percent of payment requests from providers and 4 percent of prior authorization requests for services from beneficiaries. The percentages translated to providers receiving 36 million claim denials and beneficiaries receiving 1 million prior authorization denials in 2016.

Eighteen contracts alone denied a combined 2.4 million prior authorization and payment requests in 2016, HHS OIG pointed out.

Very few providers and beneficiaries appealed the MAO denials during the study period (1 percent), but those who did faced favorable odds.

READ MORE: RCCH Uses Predictive Analytics to Boost Claim Denials Management

Of the over 863,000 appeals from 2014 to 2016, MAOs completely or partially overturned their own decision in 649,000 cases at the first-level of appeals, representing about 216,000 denials overturned per year and a 75 percent success rate.

The majority of the overturned denials in the first appeals level (82 percent) were for payment requests for delivered services, and the remaining 18 percent were for prior authorizations of services that the beneficiary had yet to receive.

The total number of overturned denials was also significantly higher during the study period after the federal watchdog accounted for independent reviewers who also had the power to reverse claim denials, HHS OIG noted.

Independent reviewers overturned an additional 80,000 prior authorization and claim denials from 2014 to 2016, representing approximately 27,000 denials overturned per year.

The high overturn rates are a sign of persistent claim denial problems in the Medicare Advantage program, the report stated. And CMS audits confirm the OIG’s findings.

READ MORE: How to Maximize Revenue with Improved Claims Denials Management

CMS audits have found lingering issues related to denials of care and payment from 2012 to 2016. Audit violations related to denials were among the five most common audit violations cited each year during the period.

In 2015 alone, CMS cited over one-half of 140 MAO contracts (56 percent) for inappropriately denying payment and care requests. About 45 percent of the contracts also received violations for sending insufficient claim denial letters.

The denial-related audit violations could result in beneficiary harm, financial hardship for beneficiaries and/or providers, and unnecessary use of the appeals process, HHS OIG explained. Incorrect or incomplete denial letters could also prevent providers and beneficiaries from using the appeals process, which serves as a safeguard against inappropriate denials.

After the 2015 MAO contract audits, CMS took steps to address the denial-related problems in the Medicare Advantage program. For example, the federal agency suspended two MAOs, fined nine MAOs $1.9 million, and required each contract with an audit violation to develop a corrective action plan.

However, HHS OIG is also calling on CMS to step up oversight of MAO contracts, particularly those with significantly high overturn rates and/or low appeal rates.

“Because there may be many reasons why these MAOs had extreme rates, CMS should engage with the MAOs to determine whether they are meeting program requirements and take corrective action as appropriate,” the federal watchdog advised.

“Engagement could include having account managers meet with MAOs to determine why they had extreme rates, conducting a small probe review of denial or appeal cases, or other steps to determine the root causes of the rates,” the agency continued. “If through these efforts CMS identifies that an MAO is not meeting program requirements, it should take appropriate corrective action to improve compliance.”

CMS should also address problems with inappropriate denials and insufficient denial letters at the program, rather than individual contract, level, HHS OIG recommended. Technical assistance, training, education, and additional monitoring or enforcement actions should be used to stop MAOs from making inappropriate denials.

Finally, the watchdog advised CMS to provide beneficiaries with “clear, easily accessible” information about serious audit violations.

Audit violations impact an MAO’s Star Rating, which is a consumer-based quality rating system run by CMS. Audit violations and enforcement actions influence the number of stars a plan receives.

But by 2019, CMS will stop linking audit results to Star Ratings, which deliver consumer-directed quality ratings.

“Because audit results no longer impact Star Ratings, CMS should develop another method for informing beneficiaries of serious violations identified by audits, including those that lead to civil money penalties,” HHS OIG suggested. “This information should be clear, meaningful, and easily accessible to beneficiaries in places where beneficiaries typically access information, such as on the Medicare Plan Finder website.”

“CMS already includes information about MAO sanctions on the Medicare Plan Finder website, and could expand this effort to include civil money penalties, as it proposed in the 2019 draft call letter,” the watchdog added. “CMS could also consider including information about audit violations in addition to enforcement actions.”

Additionally, CMS should reconsider adjusting Star Ratings based on audit findings and enforcement actions. “This would help to ensure that Star Ratings serve as a ‘one-stop shop’ for beneficiaries to evaluate differences in performance among MAOs,” the report stated.

CMS concurred with HHS OIG’s three recommendations to address claim denial-related issues in the Medicare Advantage plan and plans to address the problems identified in the study.

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