Judge Overturns 2023 RADV Audit Rule

A federal court has sided with the plaintiffs in Humana Inc. v. Xavier Becerra, which challenged the Centers for Medicare and Medicaid Services (CMS) 2023 final rule for risk adjustment data validation (RADV) audits.

Judge Reed O’Connor for the Northern District of Texas granted Humana’s motion for summary judgement challenging the rule that would have increased RADV audits of Medicare Advantage plans (MA) which verify that diagnoses submitted are supported by medical records. According to STAT, the ruling disrupts the Trump administration’s plans to build off of the rule and expand the plan to audit every Medicare Advantage plan each year. The goal of the increased audits would be to curb a problem that costs the government tens of billions of dollars each year.

The rule would have allowed CMS to conduct extrapolated audits using a methodology that would sample plan enrollees and extrapolate the results across a sampling frame to recoup overpayments. It also would have thrown out the Fee-for-Service adjuster, wherein the differences between traditional Medicare FFS data and Medicare Advantage (MA) data would be reconciled. JDSupra notes that the adjuster was meant to apply parity to the model.

When the rule was initially finalized, CMS estimated that the reviews would result in returning nearly $5 billion to the agency over a nine year period. Modern Healthcare reports that O’Connor ruled that CMS did not properly notify the industry that the adjuster would no longer apply and blocked the rule. From the order:

Because there was no meaningful notice of defendants’ ultimate finding that actuarial equivalence does not apply to RADV audits, there was no meaningful dialogue regarding the costs and benefits of the surprise changes.

Milliman explains that the court’s order requires that the rule be immediately vacated and nullified. This means that MAOs do not have to worry about the audit framework for now, as the statistical extrapolation no longer applies and the audit system will revert back to the 2018 standard. CMS can appeal, issue a new rule correcting the errors in the former rule, or begin a completely new rulemaking process.