DEPARTMENT OF HEALTH & HUMAN SERVICES

The Honorable Charles E. Grassley Chairman Committee on the Judiciary United States Senate Washington, DC 20510

Dear Senator Grassley,

JUL 3 1 2015

Centers for Medicare & Medicaid Services

Administrator Washington, DC 20201

Thank you for your recent letter regarding Medicare Advantage organizations' risk adjusted payments and your request for information about safeguards that the Centers for Medicare & Medicaid Services (CMS) is using to reduce fraud, waste, and abuse in the Medicare Advantage program.

Reducing improper overpayments in Medicare Advantage, or Part C, is a top priority for CMS. Since we began measuring and reporting an improper payment rate for Part C, the improper payment rate due to over- and underpayments from inaccurate diagnosis data submitted by Medicare Advantage organizations has declined from approximately 15 percent in FY2009 to approximately 9 percent in FY2014, 6 percent if you exclude underpayments. While this trend is in the right direction, it is critical that we continue to build on this progress. It is important to remember that not all improper overpayments are necessarily fraud - improper payments are often caused by insufficient documentation or errors.

CMS has worked to reduce improper payments associated with inaccurate Medicare Advantage diagnosis data through, among other means, the Risk Adjustment Data Validation (RADV) audit initiative. Under this initiative, CMS requires selected Medicare Advantage organizations to submit medical record documentation for a statistically-valid sample of beneficiaries so that CMS can validate the accuracy of the diagnosis data submitted for payment. As of May 2015, largely due to the sentinel effect of the RADV audits, as well as the "report and repay" requirement, which are described in more detail below, Medicare Advantage organizations have reported and returned approximately $1.5 billion in overpayments for payment years 2006 through 2013. CMS obligates approximately $30 million per year auditing Medicare Advantage fraud, waste, and abuse.

CMS began the RADV initiative by conducting two sets of audits starting with the 2007 payment year: Pilot 2007, which involved five Medicare Advantage contracts, and Targeted 2007, which involved 32 Medicare Advantage contracts. Medicare Advantage organizations were notified of these reviews in 2008. We reported our determinations to each Medicare Advantage organization. Medicare Advantage organizations that disagree with CMS' s determinations can challenge them through a three-stage administrative appeal process established by regulation.

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For both sets of 2007 RADV audits, CMS recouped overpayments associated with sampled beneficiaries. Thus far, CMS has recovered $13.7 million from the contracts in the 2007 RADV audits, $3.4 million of which is :from the five plans audited in Pilot 2007. CMS is currently conducting the dispute and appeals process. In the event an audit finding is overturned, the payment recovery amount will be adjusted downward as appropriate. The tables attached display the contracts selected for the 2007 RADV audits and the amounts recovered by CMS.

RADV audits for contract year 2011 are currently underway for 30 Medicare Advantage contracts. Medicare Advantage organizations have already submitted medical records for their sampled contracts and these are currently under review. Unlike the 2007 audits, the payment error calculated for the sampled beneficiaries in these audits will be extrapolated to the contract population. For this reason, CMS expects significant recoveries from the 2011 audits. CMS is also exploring options to increase the effectiveness of the RADV audits, including additional funding to expand the scope of the audits. More information regarding the payment error calculation methodology for the 2011 RADV audit can be found at http://www.cms.gov/Medicare/Medicare-Advantage/Plan-Payment/PaymentValidation.html.

In addition to the RADV audits, CMS recently codified the Affordable Care Act requirement that Medicare Advantage organizations report and return overpayments that they identify, including those overpayments resulting :from submission of improper risk adjustment data ("Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Program" (79 FR 100)). Under the Affordable Care Act, failure to report and return identified overpayments establishes liability under the False Claims Act. CMS' s regulation specifies that a Medicare Advantage organization has identified an overpayment when the organization has determined, or should have determined through the exercise of reasonable diligence, that it has received an overpayment.

CMS has also taken important steps to address increased federal Part C costs due to more aggressive reporting of diagnosis codes by Medicare Advantage organizations. First, since 2010, CMS has applied a coding pattern adjustment factor which reduces payments to Medicare Advantage organizations. For 2016, the coding pattern adjustment will be 5.41 percent. In addition, CMS has modified the Part C risk adjustment model to remove certain conditions, such as lower-level chronic kidney disease, that are more subject to differential coding by some Medicare Advantage organizations. CMS will fully implement this revised risk model in 2016.

While the RADV audits measure the extent to which diagnoses are documented in medical record documentation, they are not designed to determine whether the diagnosis was :fraudulently submitted, i.e., whether the plan intentionally submitted an inaccurate diagnosis. CMS works closely with the Department of Justice (DOJ) and the Department of Health and Human Services Office of the Inspector General (OIG) to support investigations of risk score :fraud, including several ongoing investigations. Specifically, CMS provides technical assistance and training on Part C payment rules, risk adjustment methodologies, and other Medicare Advantage policies.

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CMS also works with DOJ and OIG to provide documentation and data, as appropriate, in support of False Claims Act investigations. CMS is also coordinating a variety of efforts with federal and state partners, as well as the private sector, to better share information to combat fraud. CMS issued new compliance program guidelines to assist Medicare Advantage plans in designing and implementing a comprehensive plan to detect, correct, and prevent fraud, waste, and abuse. CMS also enhanced its data analysis and improved coordination with law enforcement to get a more comprehensive view of activities in Medicare Advantage. Finally, CMS has launched a new system to help plan sponsors identify potential fraud, waste, and abuse, and share information with DOJ about the outcomes of their program integrity activities.

We hope this information is helpful and addresses your concerns. We take our stewardship of the Medicare program seriously and look forward to working with you to strengthen payment integrity in the Medicare Advantage program.

Enclosure

Sincerely,

Andrew M. Slavitt Acting Administrator

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Table 1. PILOT 2007 RADV Audits

Care Plus Health Plan H1019 $477,235 Aetna Health, Inc. H3152 $952,947 Lovelace Health Plan, Inc. H3251 $512,182 Inde endence Blue Cross H3909 $1,052,358 PacifiCare ofWashin on, Inc. H5005 $381,776

TOTAL: $3,376,499

Table 2. Targeted 2007 RADV Audits

Aetna Inc. H0523 $473,340 California Ph sicians' Service H0504 $350,938 Capital District Physicians'

H3388 $244,941 Health Plan, Inc. Covent Health Care Inc. H1013 $440,936 Covent Health Care Inc. H2663 $329,055 Eide lan, Inc. H9101 $1,034,654 EmblemHealth, Inc. H3330 $675,718 Grou Health Coo rative H5050 NIA Gunderson Lutheran, Inc. H5262 $23,136 Health Alliance Medical Plans H1463 $321,771 Health First H1099 $147,338 Health Net, Inc. H0351 $248,324 Health Net, Inc. H0562 $519,275 HealthS rin , Inc. H4454 $152,917 Humana Inc. H0307 $377,918 Humana Inc. H1036 $346,499 Humana Inc. H1406 $380,283 Humana Inc. H1951 $232,845 Humana Inc. H4461 $268,611 Kaiser Foundation Health Plan H0524 NIA McKinle Life Insurance Co. H3664 $149,381 SCAN Health Plan, Inc. H9104 $403,643

1 The contract did not have an overall net overpayment. 2 May not sum due to rounding.

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TAHMO, Inc. H2256 $656,129 H0154 $176,272 H0151 $362,527 H0609 $406,738 H4506 $456,253

WellCare Health Plans, Inc. H1032 $314,144 H0540 $96,410 H0564 $432,962 H1849 $152,339 H3655 $178,140

TOTAL: $10,353,439