Update: CMS to Annually Audit All Medicare Advantage Plans and Accelerate Completion of Prior Payment Year RADV Audits

On May 21, 2025, the Centers for Medicare & Medicaid Services (“CMS”) introduced a considerable enlargement of its Risk Adjustment Data Validation (“RADV”) audit program for all Medicare Advantage (“MA”) plans. Effective instantly, CMS will audit all eligible MA plans yearly and goals to full excellent audits for prior cost years (“PY”) 2018-2024 by early 2026. These adjustments comply with CMS’s 2023 remaining rule permitting extrapolation of RADV overpayments and sign an period of heightened scrutiny of MA billing practices beneath the present administration.

Background

CMS’s latest announcement aligns with broader federal efforts to curb fraud, waste and abuse in federally funded packages. The elevated oversight of MA isn’t a surprise given this system’s measurement and evolving federal priorities. The MA program enrolled over 31 million beneficiaries, accounting for $455 billion in federal spending (excluding Medicare Part D). CMS estimates that roughly 5% of expenditures are attributed to improper funds.

CMS depends on RADV audits to deal with improper funds within the MA program by figuring out overpayments stemming from unsupported or inaccurate risk-adjusted prognosis codes. CMS estimates that MA plans overbill the federal authorities by roughly $17 billion yearly, whereas the Medicare Advisory Commission (“MedPAC”) suggests this determine could possibly be considerably larger. In response, CMS finalized a 2013 rule revising its RADV audit methodology. Beginning with PY 2018, CMS was to extrapolate audit findings throughout the total audit inhabitants of a given MA plan, reasonably than limiting overpayment restoration to solely these funds recognized within the pattern measurement (35 affected person information). This shift considerably elevated potential monetary legal responsibility for MA plans and risk-bearing suppliers. However, CMS has not formally launched its new extrapolation methodology and has beforehand said that findings for PY 2018-2024 shall be issued in early 2026.

Policy Changes and Implications

1. Annual Audits for All MA Plans

In earlier years, CMS audited round 60 MA plans yearly based mostly on danger indicators and analyses that indicated billing abnormalities. However, with this latest announcement, CMS will audit all eligible MA plans yearly, leading to roughly 550 audits for every cost 12 months. This shift introduces new burdens and dangers for MA plans, together with:

1. Significantly elevated administrative effort to reply to audit requests;
2. Greater probability of extrapolated overpayment recoupments; and
3. Heightened authorized publicity via administrative and judicial challenges.

Beyond MA plans, downstream suppliers with appreciable MA affected person panels taking part in risk-sharing agreements could also be uncovered to claw-backs for overpayments from prior PYs. This further publicity additionally extends to a discount in future revenue for PYs the place a remaining plan reconciliation has not but occurred. As CMS’s new RADV audit plans are carried out, MA plans are possible to change into extra assertive in requiring suppliers to agree, via amendments or adjustments in different MA plan insurance policies, to compensation for losses tied to errors in medical information that CMS might discover throughout an audit or apply to extrapolation.

2. CMS expects to full present PY audits by early 2026.

In addition to annual RADV audits, the company additionally expects to finalize PYs 2018-2024 audits by early 2026. Audits usually take a number of years to full due to their complexity. Should CMS efficiently operationalize this announcement, MA plans could also be topic to audit-related requests and recoupments on a considerably compressed timeline.

3. To facilitate these adjustments, CMS will improve personnel and implement enhanced expertise.

CMS has introduced plans to implement “enhanced expertise” that streamlines the method for figuring out unsupported diagnoses in medical information. Given the dimensions of this announcement, CMS might make the most of synthetic intelligence (“AI”), as required for Medicare Parts A and B within the 2025 Federal Budget Reconciliation Bill, which can probably require the Department of Health and Human Services to deploy AI instruments for auditing improper Medicare funds. Regardless of whether or not the Reconciliation Bill passes, elevated reliance on AI is probably going to generate authorized challenges over transparency, mannequin coaching and due course of.

Practical Takeaways

• If carried out, these adjustments will possible introduce substantial monetary and logistical burdens for MA plans, risk-bearing suppliers and distributors.
• MA plans could also be topic to audit-related requests and recoupments on a considerably compressed timeline.
• This expanded audit exercise can also improve False Claims Act (“FCA”) publicity and DOJ referrals for FCA investigations.
• Consider taking the next steps to mitigate danger:

1. 1. Conduct expedited, proactive inner and provider-facing audits to assess potential deficiencies and danger.
   2. Continuously replace company compliance packages to embrace MA.
   3. Amend supplier agreements to deal with recognized deficiencies earlier than RADV audit timelines impose stricter deadlines and improve operational burden.
   4. Establish and reaffirm workflows for environment friendly medical file assortment, evaluate and submission.
   5. Train employees on CMS RADV documentation requirements and response protocols.
   6. Familiarize compliance groups with RADV attraction timelines and procedures.
   7. For taking part suppliers, MA plans are anticipated to improve their scrutiny of billing practices and establish avenues for passing on RADV recoupment danger. Participating suppliers ought to contemplate reviewing indemnification, claw-back, RADV recoupment and arbitration clauses in present and future supplier agreements to mitigate this danger.
   8. When disputes over extrapolation methodologies come up, contemplate requiring the MA plans to conduct an impartial actuarial evaluate.

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Special thanks to Summer Associate, Nick Baker, for his help with the preparation of this alert.

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