News: Inability to identify denied claims in Medicare Advantage inhibits fraud oversight, report states

Requiring Medicare Advantage (MA) organizations (MAO) to definitively identify payment denials on encounter records submitted for MA would enhance program oversight and help combat fraud, according to a new report submitted by the Office of Inspector General (OIG). Although most 2019 MA encounter records analyzed contained a payment adjustment, identifying whether these adjustments are payment denials is challenging and imprecise. Adjustment codes were not a definitive method for identifying denied claims in the MA encounter data, the researchers found.

For the report, the OIG analyzed 2019 MA encounter records, reviewing adjustment code descriptions and MAO payment amounts to identify records that may contain payment denials. They also interviewed and sent questionnaires to CMS staff regarding the methods used to identify payment denials in the Medicare and Medicaid data, as well as interviewed staff from oversight entities tasked with safeguarding MA program integrity and staff from CMS’ Medicare Plan Payment Group, trying to determine the reasons CMS doesn’t require MAOs to submit a denied-claim indicator on MA encounter records.

In their findings, the OIG determined that descriptions for some adjustment codes are too vague to clearly identify whether or not the MAO denied payment for a service. They used the example of adjustment code 261, “The procedure or service is inconsistent with the patient's history,” which doesn’t specify if payment was denied. The researchers also found that most 2019 MA encounter records contained at least one adjustment code and 55 million of these records contained codes that may indicate the denial of payments by MAOs, whether or not they actually were.

“Without an indicator, oversight entities must make separate requests to MAOs asking them to identify denied claims in a subset of their data, which adds time and burden to investigations,” the report stated. “The lack of an indicator limits the scope of efforts to determine the full impact of potential fraud activities in MA.”

To strengthen MA program oversight and combat fraud, the OIG concluded with a recommendation that CMS require MAOs to definitively indicate on MA encounter data records when they have denied payment for a service on a claim. CMS has not concurred or non-concurred with this recommendation.

Editor’s note: To read the complete OIG report, click here.