Courts Considering Concept of Inflated ‘Risk Adjustment Scores’ Under the False Claims Act

According to a report published by the Center for Public Integrity, as many as six separate whistleblower lawsuits have been filed since 2010 alleging inflated ‘risk adjustment scores’ submitted to the Center for Medicare and Medicaid Services (CMS). This paradigm shift in alleging false claims centers on the notion that healthcare facilities are falsely reporting the costs and expenses necessary to treat patients, thereby resulting in inflated reimbursement calculations and the consequential submission of false claims based on fraudulent valuations of medical services.

In today’s post, we examine the concept of risk adjustment within the Medicare and Medicaid systems. In a follow-up tomorrow, we will cover select cases that are currently ongoing in federal courts that involve this issue from a false claims perspective.

What is a risk adjustment score?

CMS recognizes that there are multiple variables at work when it comes to treating patients and calculating reimbursement rates on a national level. For instance, the cost to treat a patient suffering from diabetes in rural Wyoming is likely vastly different than the cost to treat the identical condition in Manhattan. Accordingly, CMS devised its risk adjustment score system to allow practitioners the opportunity to provide input on the true costs to run their business.

As explained by CMS:

“Risk adjustment allows CMS to pay plans for the risk of the beneficiaries they enroll, instead of an average amount for Medicare beneficiaries. By risk adjusting plan payments, CMS is able to make appropriate and accurate payments for enrollees with differences in expected costs.”

Completing a risk adjustment assessment

In order to calculate the appropriate payment rate for Medicare and Medicaid enrollees, CMS must rely on information provided by healthcare facilities with regard to the various considerable factors involved in the actuarial process. Currently, a risk adjustment analysis may include additional information relating to the patient population and individual patient characteristics:

• Age
• Sex
• Original reason for enrollment in Medicare or Medicaid
• Disability status
• Needs-based financial eligibility status
• History of chronic illness
• General medical history
• Geographic and community location

Each of these factors is given a specific weight and score, depending on the patient’s status and current medical situation. From there, a score is calculated to determine the patient’s risk factor for further treatment and future medical expenses. This figure is calculated accordingly, and the reimbursement rates are thereby determined based on that patient’s subjective risk and demographic factors, as opposed to a general, average-based calculation.

As we will discuss tomorrow, the submission of risk assessment scores has become an emerging area conducive to fraud and inflation, and whistleblowers are beginning to take notice of actuarial “creativity” when submitting risk information on behalf of patients.

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