AJPB

Hurdles for Medicare Plans Posed by 2014 Audit Requirements

Published Online: June 20, 2014
Stephen Altenburger, PharmD; and Maureen Miller, MPH, BSN
Background: One of the audit areas causing the most difficulty for Medicare Part D plans is coverage determinations and appeals. The recent changes, including the addition of a new “timeliness test,” will continue to pose challenges for Medicare Part D plans.

Objectives: To outline the potential areas of risk for Medicare Part D plans as a result of the 2014 Coverage Determination and Appeals (CDA) audit changes, in addition to defining the resultant implications to plans and describing the cascading effect of a poor CDA audit.

Description: Medicare Part D plan managers will need to be aware of the new changes to the CDA audit protocols and prepare accordingly to handle the challenges with data collection, data integrity, case timeliness, and appropriate clinical decision making. Failure of an audit could result in numerous short- and long-term implications for a plan including, but not limited to, corrective and other oversight actions, civil monetary penalties, and increased remediation costs.

Conclusions: Medicare Part D plans need to be prepared for the new hurdles and raised stakes that the 2014 CDA audit protocols pose. Failure to do so could result in a much larger, cascading impact than audit failure alone.

Am J Pharm Benefits. 2014;6(3):119-123
The Centers for Medicare & Medicaid Services (CMS) conducts performance audits on a significant proportion of its Medicare Part C and Part D plans routinely, and each year releases its Audit Process and Protocols for the calendar year. The methodology for the current year was released on March 5, 2014.1 Of particular interest to prescription drug plans (PDPs), Medicare Advantage plans offering prescription drug benefits (MAPDs), and prescription benefit management companies (PBMs) providing Part D services are the changes in the coverage determination and appeals area, which are consistently audited each year.2

According to Part D claims data from 2011, approximately 92% of Medicare enrollees filled at least 1 prescription that year, with an average of 4.3 prescriptions filled per month.3 In an effort to manage an ever-increasing drug spend, plan sponsors are judicious in the selection of drugs for formulary inclusion, and are increasing the use of utilization management (UM) tools such as step therapy, prior authorization, and quantity limits. In 2014, 6 of the 9 largest stand-alone PDPs employ UM on more than one-third of drugs listed on their formularies, with about 20% requiring prior authorization.3 As the volume and significance of decisions requiring prior approval— which CMS calls coverage determinations—and related appeals continue to grow, it is critical for plans to be ready for this year’s performance audits. Although the changes to the audit methodology are few, the impact is substantial, including the addition of a “timeliness test.”

Coverage Determinations and Appeals Background

A coverage determination is the formal decision issued by a Part D plan in response to a request from a Medicare enrollee, an enrollee’s representative, or enrollee’s prescriber to obtain Part D benefits.4 Most often, such determinations involve coverage of a non-formulary drug, or a formulary drug with UM restrictions. These decisions are made by PDPs, MAPDs, and PBMs to manage prescription drug costs, control overand underutilization of formulary drugs, and meet other Medicare Part D requirements. For example, to ensure that Medicare beneficiaries have access to non-formulary drugs when medically necessary, plans must process formulary exception requests, which are a type of coverage determination. Also of note, any claim submitted by an enrollee for reimbursement when a prescription was paid for out of pocket at the pharmacy is classified as a coverage determination.4

Types of Coverage Determinations4:
  • Prior authorizations
  • Step therapy
  • Quantity limits
  • Formulary exceptions
  • Tiering exceptions
  • Member reimbursements


Appeals are a critical protection to ensure that beneficiaries have access to the medically necessary drugs to which they are entitled. The beneficiary appeal process starts with a redetermination by the Part D plan and, if the plan upholds its initial denial, an appeal may move to higher levels outside the plan, such as a reconsideration by CMS’ Independent Review Entity (IRE).4

Part D plans are required to review CDA requests, make a determination, provide notification, and when applicable, effectuate (provide payment or provision of a benefit) within CMS-defined time frames.4 When a plan intends to deny a coverage determination involving medical necessity, the review must be conducted by a physician or other appropriate healthcare professional with sufficient medical and other expertise (a pharmacist is generally considered appropriate), including knowledge of Medicare coverage criteria. For redeterminations, the Part D plan must designate someone other than the person involved in making the initial coverage determination. If the original denial was based on a lack of medical necessity, the redetermination must be performed by a physician with expertise in the field of medicine that is appropriate for the drug benefits at issue.4

Audit Selection

The CMS Medicare Part C and D Oversight and Enforcement Group (MOEG) is responsible for conducting the performance audits. It states: “It is MOEG’s goal to audit every sponsor in the Part C and D programs within a reasonable time period.” By the end of 2013, MOEG anticipated that 93% of Part C and Medicare Part D beneficiaries would be enrolled in sponsors audited by CMS.5 In 2014, sponsors will be selected for a performance audit from the following groups:

  • High-risk plans: as defined by MOEG’s Proprietary Risk Assessment


  • Lower-risk plans: for purposes of testing the level of correlation between audit result and MOEG Risk Assessment


  • Plans with low performing icons: contracts with fewer than 3 Stars over 3 years and not recently audited


  • Sponsors not audited in the previous 4 years and not in the above 3 categories


  • CMS regional office referrals: based upon concerns or trends identified by CMS regional offices


  • Ad hoc audits: using an oversight tool to promptly act when there is reason to believe a sponsor is noncompliant.6


Coverage Determination and Appeals Audit Process

The audit process begins with offsite analyses by CMS auditors, followed by an interactive audit over a 1-week period via webinar. There are 2 focal points of the Coverage Determination and Appeals (CDA) audit: Effectuation Timeliness (ET) and Clinical Decision Making (CDM). The audit process can be broken down into the 4 key components as shown below.7

1. Universe Submission

To begin the process, CMS will request a universe for ET and a separate universe for CDM. The data collected are compiled from coverage determinations and appeals (including member reimbursement claims) for the 3-month to expand the review period to ensure sufficient universe size. Plans will have 10 business days to provide the universes to CMS using the model template provided with the March protocol release. The ET universe includes all decisions that were approved (ie, favorable to the beneficiary) at any level (coverage determination, redetermination, IRE, and higher levels of appeal) during the audit review period. The CDM universe contains all decisions that were denied (ie, unfavorable to the beneficiary) at the coverage determination or redetermination level, including those that were untimely and those that were auto-forwarded to the IRE. In addition, all IRE decisions that reversed the Part D plan’s denial during the appropriate time period are included in the CDM universe.7 While most data elements on CMS’ universe templates remain the same from previous years, both universes have increased in size by 30% or more.8-10

2. Timeliness Test

The addition of a timeliness test is one of the most significant changes for 2014. Previously, CMS would conduct a brief check of the data and proceed to the selection of samples.11 Now, after receipt of the universe, and prior to the selection of samples, CMS will conduct a new, more comprehensive analysis to determine whether the regulatory standards for completing within time frames are met. This includes assessing the timeliness of all cases within the universe to ensure the plan made a timely determination, notified all appropriate parties of the decision, and provided payment or authorization of the benefit (effectuated) when applicable. In addition, any requests that were untimely and sent to the IRE will be reviewed to ensure that the plan forwarded the case file within applicable time frames. The percentage of cases considered timely for each metric will be recorded and scored against new thresholds set by CMS:

  • First Threshold: Sponsors above this threshold will generally not be cited an audit finding, or “condition.”


  • Second Threshold: Sponsors falling below this threshold will receive a “corrective action required,” or CAR.


  • Third Threshold: Sponsors falling below this threshold will be cited an “immediate corrective action required,” or ICAR. 7


3. Sample Review

Following the timeliness test, the webinar portion begins with CMS selecting a sample of cases from different case types (eg, processed under standard and expedited timing) from the universes. Using sampling techniques as well as experience from previous audits to target certain cases for review, CMS will select 10 samples for ET, while selecting 30 samples for CDM.7 When choosing the samples for CDM, CMS will ensure that half of the samples selected are for drugs that are classified as “protected class drugs.” 7,12

PDF is available on the last page.

Issue: May/June 2014
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