Risk adjustment audits can actually be helpful

June 1, 2013

RADV audits can help by confirming that a plan has actually captured the most accurate and complete diagnostic information about its members to deliver the right care to those members based on their needs

For those plans offering Medicare Advantage (MA) products or soon to be offering products on the health insurance exchanges (HIX), Risk Adjustment Data Validation Audits (RADV) have become a four letter word. In fact, just hearing the term can raise a leader’s blood pressure and get them thinking about the plan’s risks, and for MA, when the plan be informed if it has been selected. For HIX, plan leaders wonder what resources they will need for the annual audit, which members will be selected, and how much might be at stake financially.

These are all legitimate questions, if a plan is actually selected for a RADV. But the purpose of this article is to suggest both an alternative attitude and concrete preparations your plan can take to prepare. Specific behaviors and changing the perception of what it means to have, and prepare for, a RADV can go a long way.

Perception is Reality

For those executives responsible for risk adjustment, very few ask: “How can a RADV audit actually help our plan?”

RADV audits can help by confirming that a plan has actually captured the most accurate and complete diagnostic information about its members to deliver the right care to those members based on their needs. Put another way, the original intent of what risk adjustment has set out to accomplish is capturing the right information to deliver the right care. If preparing for the RADV accomplishes this goal, this is a positive step that a plan can take.

This is not to minimize the legitimate downside risks of an unsuccessful audit: financial impacts, operational conflicts, reputation decline, strained network relationships, etc. But, by taking the long-term view, perhaps the long term gains outweigh the short term pain.

Put another way, a plan is unlikely to want to be paid incorrectly for inaccurate information.  With the right information about a plan’s members, the ability to care for them will pay benefits down the road.

An Ounce of Prevention

First off, plans must dissuade themselves from the notion of preventing a RADV. Put simply, that is not possible. Second, there are ways to mitigate-but not completely eliminate-some of the risk by implementing some or all of the five action steps described below.

1

Promote an internal attitude change

 

If perception is reality, perhaps leaders can change the perception of a RADV by becoming internal champions. Communicating within your plan the attitude that RADV is not a threat but an opportunity may go a long way toward reducing the perceived burden a RADV has placed on your plan.

 

 

2

Reduce or eliminate taking risk adjustments solely from claims

Not surprisingly, a fair number of plans continue to take risk adjustments solely from claims. Instituting a robust coding effort makes good economic sense. In fact, according to the Government Accountability Office, risk scores for Medicare Advantage beneficiaries were on average 5% to 8% higher than those of fee for service after coding strategies were deployed. Moreover, plans can expect a 2% annual increase in scores for MA plans from better clinical coding. Put another way, each 1% of clinical documentation improvement can yield payments from 1% to 5% of individual and small group premium. Plans should expect a similar impact with the Health Insurance Exchange.

 

3

Don’t neglect to retrospectively review the charts of members who have had in-home prospective assessments

 

Just because a member of a plan has been prospectively reviewed does not guarantee that no additional risk adjustments will be captured in their other medical records. Done well, a prospective assessment will capture the right diagnostic information for the member. However, the assessment will not completely eliminate additional diagnostic information found in the charts. For example, a client of our organization had carved out 5,000 members from retrospective reviews because they had been prospectively reviewed earlier in the same year. After completing a retrospective review for these members, our organization recovered almost $400,000 from those members on our client’s behalf.

 

4

Conduct an internal audit

 

There is continued debate about the pros and cons of conducting an internal audit. Some risk adjustment professionals suggest it is simply a waste of time and money because there is no way to guarantee that the diagnoses substantiated in the internal audit will be the same ones that CMS selects. While this is true, a plan must consider completing an internal audit is to determine where the risks are as well as to prepare operationally for the actual RADV. A RADV audit is time and labor intensive. Having conducted a dry run in the form of an internal audit will help prepare all parties involved by having given them the chance to determine where the land mines are and also to work out the operational kinks.

 

5

Consider instituting a Risk Verification Program

Perhaps the most important option for plans, one that is neither inexpensive nor easy, is to proactively substantiate diagnoses that have been previously submitted before they even get selected for a RADV. To some executives, this may seem to be a radical idea. But if one goes back to the true intent of risk adjustment-the most accurate and complete capture of member’s diagnostic information-implementing a risk verification program simply supports this intention. Most experts suggest that upwards of 20% of claim based diagnostic information is wrong-one out of every five diagnoses. Put another way, a plans’ disease and case management efforts are working with inaccurate information.

It’s not just about the money. But it does boil down to how much money a plan is willing to invest to not only reduce the risk of RADV financial payments but paint the most accurate picture about its members.

So how can a Risk Verification program be implemented that doesn’t break the bank and legitimately reduces the plan’s risk?

The RADV extrapolation methodology segments the targeted diagnoses into three equal payment stratums-high, medium and low. A plan could consider targeting the highest paid stratum or about one-third of its population and verify those diagnoses for those individuals.

Our organization modeled such an approach for a plan with 20,000 members using a 10% and 20% error rate. The results are significant and summarized in the table below. By verifying the top one-third diagnoses or approximately 7,000 members, the plan can reduce its payment recovery between $3.2 million and  $12.7 million. Deciding to move forward with Risk Verification will depend on the cost of that service and the plan’s threshold for the projected return on its investment.

 

The Bottom Line

Plans do not have easy decisions to make when it comes to RADV. Ultimately, the determination comes down to a simple decision. Does a plan take a wait and see approach and hope things work out well or does a plan proactively get in front of the challenge? Our guidance is to get in front of the challenge. Only then can a plan truly protect itself from the RADV downside risks and, ultimately, optimize the health care services being delivered to its members.

Kim Browning is executive vice president of Cognisight, LLC. She can be reached at kbrowning@cognisight.com