Since the very start of Medicare risk-contracting with health plans, there has been controversy about the methods by which plans are reimbursed and the amounts paid to the plans. The current Medicare Advantage program certainly has the same issues and a recent Office of the Inspector General report finds that plans appear to be using chart reviews to boost risk scores and payments. (OIG Report) Plans have hired firms or used internal staff to do chart reviews for the purpose of identifying all potential diagnoses for a particular patient, regardless of whether the patient has been or will be treated for the diagnosis, although they are supposed to be related to a real visit. The more diagnoses, the higher the risk score and the resulting reimbursement. The incentive is obviously to go overboard and the identifying of these diagnoses isn’t necessarily linked to any care or health management plan for the patient. In 2016, 80% of plans submitted some diagnoses from chart reviews and 52.6 million chart reviews were submitted. OIG found that 99% of the chart reviews that they audited added diagnoses and only 1% deleted a diagnosis. These diagnoses are supposed to be validated by a face-to-face visit, but they often are not, according to OIG. A large number of these diagnoses were only based on chart reviews and were not found on any record of an actual health service, and OIG estimates that CMS overpaid the plans by $6.7 billion in 2017. About half of plans had payments for chart review-based diagnoses where no service at all was provided to the beneficiary. OIG further scolded CMS for its failure to investigate and take action in regard to the chart review issues, although it is well aware of them. And OIG noted that if the diagnoses derived from chart reviews but not reflected in actual visits are accurate, it suggests plans are not doing an appropriate job of making sure that beneficiaries receive adequate care for all their health needs.
In some senses it is hard to blame the plans for what is occurring, they are just responding to the incentives placed in front of them. But Congress and CMS have to be good stewards of taxpayer funds and more is clearly being paid to the plans for some patients than either needs to be paid to ensure adequate care or is justified by the real health needs of the patients. The whole point of having a Medicare Advantage program is that it could provide better quality care while reducing costs. CMS has already begun dealing with the chart review issue by moving to sole reliance on encounter codes to create a risk score and should outright ban submission of chart review codes. And Congress could raise the limit on payment reductions for coding intensity. The reimbursement mechanism could be further improved by moving to pure competitive bidding. Even under a payment system that accurately reflects the health needs of a beneficiary, the MA plans ought to be able to do just fine.