SCAN Health Plan Wins Rulemaking Discrepancy Case Against CMS

SCAN Health Plan won a massive case against the Centers for Medicare and Medicaid Services (CMS) this week when Judge Carl J. Nichols of the U.S. District Court for the District of Columbia ruled that the agency improperly calculated SCAN’s star ratings scores which caused the company to lose out on millions in bonuses.

SCAN will be awarded the $250 million bonus it was denied and other Medicare Advantage plans could also recoup millions after lower than expected star ratings. According to Healthcare Finance, the judge agreed with SCAN that CMS improperly interpreted regulations and set aside SCAN’s 3.5 star rating for 2024, returning it to 4 stars.

STAT News notes that the Medicare Payment Advisory Commission (MedPAC) has pointed out “serious flaws” with the bonus system in the past and criticized the metrics in the system as inefficient for adequately judging quality. Elevance Health has also complained that it lost “hundreds of millions of dollars” from miscalculated scores as well and flagged the SCAN ruling to the judge in its own case.

SCAN Group CEO Sachin Jain told Modern Healthcare that the court’s ruling affirmed the insurer’s suspicion that CMS was acting outside of its own rules. CMS had repeatedly said that it would remove outlier plans through a statistical update that it included in the preamble to the rule in 2020, but left out in 2022 and then added back in months after they were omitted. In the SCAN complaint, the company alleged that the text of the preamble of the rule is not legally binding because it was not included in the rulemaking process. From Jain:

The judge’s ruling asks that CMS recalculate our ratings and we are hopeful that this will lead to a higher star rating and the ability for SCAN to maintain its strong benefits for members in our service areas.