Extrapolation Policies Apply to RAD-V Audits

by  Aimee L. Wilcox, CPMA, CCS-P, CST, MA, MT
Jun 17th, 2019

Risk Adjustment is a program that was implemented to identify and support Medicare beneficiaries with health conditions, illnesses, or injuries that put them at risk of death or organ system/bodily function failure. Through Risk Adjustment (RA), Medicare ensures their beneficiaries are being followed at least annually for any healthcare conditions or issues they may have and chronic health risks are being evaluated, monitored, and treated properly. 

To summarize a complex process, commercial insurance companies offer Medicare Advantage (MA) plans to Original Medicare beneficiaries. They also offer additional benefits to these beneficiaries, not offered through Original Medicare, such as vision and dental benefits for a low monthly premium.

Medicare pays the commercial payers to manage the beneficiaries who sign up for a Medicare Advantage plan. The amount of money they are paid, per beneficiary, is determined through a complex process of Risk Adjustment reporting. Risk Adjustment is the process of identifying through a series of complex documentation and coding processes how healthy a Medicare beneficiary is and how much money the MA payer may need to manage their care properly for the year. 

To simplify the process, when the beneficiary seeks medical care from a provider, the provider documents the service(s) provided along with the reason the patient was seen (diagnosis). Diagnoses are assigned using the ICD-10-CM code set and services are reported using CPT or HCPCS codes.

ICD-10-CM codes are converted by the payer into a Hierarchical Condition Category (HHC) codes that represent a group of similar conditions with similar risk. Each HCC code carries a specific point value that represents how much it may cost to manage that beneficiary condition. These scores are totaled for the year per beneficiary and verified and submitted by the payer to Medicare for funding to care for each beneficiary during the year. 

The process is:

• Beneficiary seeks healthcare services
• Provider thoroughly documents conditions, illnesses, injuries and assigns ICD-10-CM codes that accurately reflect them and submits them on insurance claims to the Medicare Advantage payer
• Medicare Advantage payers review notes and verify accurate ICD-10-CM code selection and convert ICD-10-CM codes into HCC codes. These are reported to Medicare at specific times and deadlines throughout the year
• Medicare determines capitation (funding) for each beneficiary based on the submitted HCC codes, patient demographics, and additional, complex actuarial processes to assess an overall beneficiary risk adjustment score
• Based on the risk adjustment, capitation payment is sent to the MA payer
• Medicare audits the information submitted by the payer for accuracy and determines whether a payer is compliant or fraudulent in their reporting processes through a series of Risk Adjustment Data Validation Audits (RADV Audits)
• RADV audits are usually performed within three years of each capitation payment period for each payer to ensure compliance

Prior to 2019, the process used in the RADV audit was called the Fee-For-Service (FFS) Adjuster process and was used to determine any overpayments for possible recovery. In 2019, the Medicare Final Rule retired the FFS Adjuster process and implemented extrapolation policies in its place. This is a retroactive ruling go back to 2011. 

Extrapolation is the process of auditing a smaller number of records to identify a common error rate and then applying that error rate across the entire body similar services to determine an overall (and obviously larger) amount of overpayment. CMS is applying this rule to RADV audits retroactively to collect on the overpayments to payers from miscalculated capitation rates. The fundamental process of ICD-10-CM code assignment is vital to assigning proper HCC codes and identifying the beneficiary's risk score. 

Find-A-Code provides important tools for coders of every type and specialty, including Risk Adjustment coding to assist with accurate code assignment. One of the benefits of using Find-A-Code for Risk Adjustment coding is easy-to-access ICD-10-CM coding guidelines, instructions notations, and chapter-specific guidelines. With the click of a button, you can locate the most important information you need and it is linked directly to the code you are looking at.

To learn more about the tools specific to accurate ICD-10-CM and HCC code assignment contact one of our Customer Success Managers at 801-770-4203 or at findacode.com Chat.

About Aimee L. Wilcox, CPMA, CCS-P, CST, MA, MT

Aimee L. Wilcox is a medical coding, billing, and auditing consultant, author, and educator with more than 30 years of clinical and administrative experience in healthcare, coding, billing, and auditing. Medicine, including coding and billing, is a constantly changing field full of challenges and learning and she loves both. Aimee believes there are talented medical professionals who, with proper training and excellent information, can continue to practice the art of healing while feeling secure in their billing and reimbursement for such care.