$30M Settlement for Medicare Advantage Upcoding

Apr 24, 2019

A California-based healthcare services provider and several of its affiliates have agreed to pay $30 million to resolve allegations they submitted inaccurate information about the health status of beneficiaries enrolled in Medicare Advantage Plans, according to the Department of Justice.


The provider was allegedly involved in the scheme known as “upcoding,” which is when an inaccurate billing code for a medical procedure or treatment is assigned to increase reimbursement.

From the press release:

Under Medicare Advantage, also known as the Medicare Part C program, Medicare beneficiaries have the option of enrolling in managed healthcare insurance plans called Medicare Advantage Plans (“MA Plans”) that are owned and operated by private Medicare Advantage Organizations (“MAOs”). MA Plans are paid a capitated, or per-person, amount to provide Medicare-covered benefits to beneficiaries who enroll in one of their plans. The Centers for Medicare and Medicaid Services (“CMS”), which oversees the Medicare program, adjusts the payments to MA Plans based on demographic information and the health status of each plan beneficiary. The adjustments are commonly referred to as “risk scores.” In general, a beneficiary with more severe diagnoses will have a higher risk score, and CMS will make a larger risk-adjusted payment to the MA Plan for that beneficiary.

The provider allegedly contracted with certain MAOs to provide healthcare services to California beneficiaries enrolled in the MAOs’ MA Plans. In exchange, they received a share of the payments that the MAOs received from CMS for the beneficiaries under Sutter’s care.

According to the press release, the provider submitted diagnoses to the MAOs for the MA Plan enrollees that they treated. The MAOs, in turn, submitted the diagnosis codes to CMS from the beneficiaries’ medical encounters, such as office visits and hospital stays. The diagnosis codes were used in CMS’ calculation of a risk factor score for each beneficiary.

What is a risk factor score? In 2003, CMS implemented Risk Adjustment Factors (RAF) and Hierarchical Condition Category (HCC) coding to identify individuals with serious and/or chronic illnesses and assign them a risk factor score that is based on a combination of demographic information and reported diagnoses. Diagnoses are reported using ICD-10-CM diagnosis codes and submitted by providers. The higher the number of chronic conditions listed, the more care is assumed—thus a greater cost for delivering that care.

For coders, the push toward value-based care and the HCC payment model have increased the significance of coding accurately and thoroughly. The coding of chronic conditions is not only used in determining healthcare outcomes, they are driving costs and, ultimately, reimbursement.

Therefore, when it comes to upcoding, it’s common to see government intervention. So how can you be sure your facility is safe? To start with, partner with a quality coding consulting company and conduct frequent audits. This ensures:

  • The services billed are supported by the clinical documentation in the record
  • Inaccurate coding or trends are identified before they become a pattern
  • Effectiveness as smaller, more frequent audits of focused samples can be more beneficial than large annual engagements
  • The codes assigned are supported by coding guidelines/references/laws
  • Targeted education for your coding staff based on specific audit findings

Contact us today to learn more about our coding support and coding review services.

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