What is Risk Adjustment Fraud?

Managed care is a healthcare system designed to manage the cost, quality, and utilization of services. It emphasizes preventive care, coordinates healthcare provision, and integrates payment structures.

The main goal of managed care is to offer high-quality care while reducing costs, which is achieved by promoting early interventions, ensuring cohesive care across providers, negotiating service fees, endorsing evidence-based treatments, and monitoring the use of healthcare services to avoid unnecessary expenditures.

Essentially, managed care seeks to optimize the value derived from healthcare spending.

Today, in managed care approaches like Part C or Medicaid managed care, traditional fee-for-service methods have been substituted by the government with a capitation payment system, a common approach in managed care to save costs.

Here, the Centers for Medicare and Medicaid Services (CMS) compensates Medicare Advantage (MA) plans on a per-member-per-month (PMPM) basis to deliver care.

Yet, CMS understands that some beneficiaries with specific conditions incur higher treatment costs. Hence, both CMS and states overseeing Medicaid managed care offer supplementary “risk adjustment” payments for patients with certain high-cost ailments, ensuring plans don’t shy away from enrolling more unwell individuals.

These supplemental payments are determined by the patients’ diagnoses. Plans can apply for enhanced reimbursements by presenting these diagnoses as risk adjustment claims, ensuring:

• The patient’s diagnosis is correctly recorded in their medical file;
• A qualified professional managed the diagnosis;
• The care was given within the stipulated year; and
• The care was delivered during an in-person consultation.

How is fraudulent behavior conducted through managed care you may ask? Continue reading to see examples.

Whistleblowers can identify Risk Adjustment Fraud in Medicare and Medicaid by observing and documenting instances where diagnostic data is manipulated to unjustifiably augment risk adjustment payments.

Key indicators include:

• Unsupported Risk Adjustment Claims – look for claims that lack genuine backing when submitted to the government for payment.
• Fabrication of Supporting Documents – identify any documents that seem to be created or altered to justify unsupported claims.
• Failure to Correct False Claims – pay attention to previously submitted claims that an MA plan does not remedy even when they ought to have recognized its unsupported nature.

The most common examples of fraudulent risk adjustment healthcare practices include:

• Upcoding and Exaggeration – submitting claims for conditions that a patient doesn’t have, or exaggerating the severity of a patient’s condition to gain higher reimbursements.
• Misrepresentation of Treatment History – presenting claims as if a condition is currently being treated when it’s only a past history, commonly with conditions like stroke or cancer.
• Submission Violations – claims based on ineligible provider types or services that aren’t supported by a record of a face-to-face encounter with the patient.
• Inadequate Documentation – inferring diagnoses from insufficient medical record documentation, such as patient histories or prescription lists, without evidence that the condition influenced the treatment on the visit in question.
• Chart Reviews – conducting reviews of patient charts mainly to find additional risk-adjustment diagnosis, while neglecting to remove unsupported codes.
• Home Visits – sending professionals for home assessments primarily to record more diagnoses rather than to provide genuine patient care.
• Forced Attestations – pressuring providers to complete forms that would support otherwise ineligible diagnosis codes.
• Incentive Structures – incentivizing individuals, vendors, or providers based on increasing risk scores, which can motivate inappropriate upcoding.

These practices are recurrent and problematic, making them the focal points of scrutiny in efforts to combat healthcare fraud.

When whistleblowers suspect such fraudulent practices, they can report under the False Claims Act (FCA) in the following manner:

• Gather Evidence – whistleblowers should collect substantial evidence without infringing any laws or privacy norms. This might encompass internal correspondences, doctored patient records (while maintaining patient confidentiality), billing statements, and any other corroborating documentation.
• Seek Legal Guidance – prior to any disclosure, it’s advisable for whistleblowers to consult an attorney proficient in FCA cases. This ensures they comprehend potential implications and are legally protected.
• Filing Under the FCA – with the aid of legal counsel, whistleblowers can lodge a “qui tam” complaint on the government’s behalf. This remains concealed from public view in its preliminary stages.
• Protection and Compensation – the FCA offers protection against retaliation. If the legal action is fruitful, whistleblowers stand to receive a fraction of the recovered funds, which ranges between 15% and 25% of the amount recovered by the U.S. Government.

Furthermore, both MA plans and providers can face FCA penalties for their involvement in fraudulent risk adjustment practices, solidifying the significance of whistleblower actions.