On April 19, 2021, the Office of Inspector General’s (OIG) Office of Audit Services (OAS) released the results of an audit conducted on the accuracy of diagnosis codes submitted to CMS by Humana, Inc. for 2015 dates of service. Based on the audit results, the OIG recommended Humana return a whopping $197.7 million in alleged overpayments and enhance its policies and procedures to prevent, detect and correct noncompliance with Federal requirements for diagnosis codes that are used to calculate risk-adjusted payments.

Under the Medicare Advantage (MA) program, the Centers for Medicare & Medicaid Services (CMS) makes monthly capitated payments to MA organizations using a risk adjustment system that takes into consideration the health status of its beneficiaries. MA organizations communicate the health status of its beneficiaries to CMS through the submission of diagnosis codes.

The OIG, under its authority to conduct audits to identify waste and mismanagement of federal health program dollars, has, more recently, been actively conducting audits on risk adjustment submissions from certain MA organizations using two different methodologies – (1) an approach similar to CMS’ historic Risk Adjustment Data Validation (RADV) audits where it samples all diagnosis codes submitted for 200 beneficiaries; and, (2) a targeted code approach, reviewing single instance submissions of certain codes that tend to carry a high error rate.  Both the Humana audit and an audit conducted on Essence Healthcare, Inc., used the RADV-like approach. In the Essence audit, OIG recommended that Essence repay CMS only $158,904 in overpayments. In doing so, the OIG did not apply an extrapolated overpayment amount. This is in sharp contrast to the almost $200 million extrapolated estimate by OIG for Humana.

Humana did not agree with the OIG audit results, challenging the OIG in both its coding and audit methodology. According to the OIG report, Humana was successful in overturning a number of coding determinations made by the government team, driving the error rate down and reducing the extrapolated overpayment amount from $261 million to $197 million. Other arguments raised by Humana include: (1) the OIG did not follow CMS’s established RADV methodology; (2) the OIG did not incorporate underpayments into its estimates of overpayments; (3) the OIG did not correctly calculate the overpayment amount; and, (4) the identification of unsupported diagnosis codes do not indicate a failure of Humana’s policies and procedures.

The OIG audit findings and recommendations do not represent final determinations by CMS. As indicated in the report, officials at CMS will determine whether an overpayment exists. MA organizations have the right to appeal the determination through CMS’ RADV appeals process.