CMS announced today a further extension until February 1, 2023, of the deadline for its publication of the long-awaited final rule on the use of extrapolation and the application of a fee-for-service adjuster (FFS Adjuster) in risk adjustment data validation (RADV) audits of Medicare Advantage organizations (MAOs).
On November 1, 2018, CMS issued a proposed rule that, among other changes, would use extrapolation in RADV contract-level audits of MAOs starting with payment year 2011 contract-level audits and would not apply a FFS Adjuster to such audit findings. The proposed rule back tracked CMS’s 2012 decision to apply to a FFS Adjuster to extrapolated contract-level RADV audits. Under the 2012 announcement, the FFS adjuster was intended to account for any effect of erroneous diagnosis codes in the data from Medicare Parts A and B that are used to calibrate the MA risk adjustment model. The FFS Adjuster would calculate a permissible level of payment error (for example, a percentage of the total payments made on an MA contract in a given year) and limit RADV audit recovery to payment errors above that level.
Subsequent to its 2012 announcement, CMS conducted a study on the presence and impact of diagnosis error in FFS claims data, which suggested that errors in FFS claims data do not have any systematic effect on the risk scores calculated by the risk adjustment model, and therefore do not have any systematic effect on the payments made to MAOs. Since, based on its study, it appeared that diagnosis error in FFS claims data does not lead to systematic payment error in the MA program, CMS proposed not to include an FFS Adjuster in any final RADV payment error methodology.
CMS’s study was widely criticized for, among other reasons, failing to ensure actuarial equivalence as required by the Medicare Advantage statute, and having various design flaws and other errors. In response, CMS extended the comment period on its proposed RADV changes and did not finalize the RADV provisions when it issued the final rule on April 16, 2019. Since then, the industry has been waiting for a decision by CMS on extrapolation and a FFS Adjuster.
Generally, the Social Security Act (the Act) requires CMS to publish a Medicare final rule no later than three years after the publication date of the proposed rule. See 42 U.S.C. § 1395hh(a)((3)(B). However, the Act provides for an extension of this timeline because of exceptional circumstances. The original proposed rule was published on November 1, 2018, four years ago today. Previously on October 21, 2021, CMS published a notice of a one year extension of the timeline for publication to today, November 1, 2022. The stated reason for the current extension is delays resulting from CMS’s focus on the COVID–19 public health emergency.
 Even though CMS has not issued a final rule on extrapolation or a FFS Adjuster, the Department of Health and Human Services office of Inspector General uses extrapolation in its RADV audits of MAOs and does not apply any FFS Adjuster.