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CMS Audits Give View Into How Well Health Plans Deliver Medicare Programs


Program audits are the chief tool used to evaluate how well health plans deliver care to an ever-growing share of Medicare's 60 million beneficiaries.

Ever wondered how CMS keeps tabs on how well health plans deliver care to Medicare beneficiaries? Its chief tool is the program audit, which last year reached 16% of the health plans, and over the last 5-year cycle has reached 93% of all plans that serve those in Medicare Advantage and Part D plans.

Wednesday’s session on what to expect in an audit, held during the Academy of Managed Care Pharmacy Nexus 2018, offered a view that’s increasingly important, as the agency makes no secret of its goal to get more of the nation’s 60 million beneficiaries into private plans. Medicare Advantage has grown rapidly over the past decade, from 9.7 million or 22% of the enrollees in 2008 to 19 million or 33% in 2017, and it grew another 8% this year.

Babette S. Edgar, PharmD, MBA, FAMCP, and Greg Miller, RPh, both of BluePeak Advisors, gave attendees an overview of audit trends and specific advice on how to prepare for 2 major areas of CMS audits: (1) formulary administration and (2) coverage determinations, appeals, and grievances.

As Edgar explained, a new audit cycle is about to start, so health plans should be prepared. She predicted that CMS will start 2019 with at least one of the major national plans and a cross-section of plans from the Blue Cross Blue Shield Association, but there are many ways CMS selects its targets: Poor past performance, low star ratings, or a round of substantial operational changes could put a plan on CMS’ radar. A plan that has switched pharmacy benefit managers (PBMs) may send a red flag.

“It does not matter if you were audited in the last cycle,” she said. “It’s open season. They can come and get you next year.”

The good news, Edgar said, is that most plans are doing a good job in formulary administration. The bad news is that can mean CMS will start looking at different things. And she and Miller have been less than impressed with some of the contractors CMS has tapped for this work, which could mean that a good score in a prior year is not a guarantee of a clean bill of health, because problems may have been missed.

CMS uncovers “conditions” of different levels of magnitude. The most serious merit “immediate corrective action required,” because they pose immediate threats to enrollee safety. “Correction action required” calls for a response but is less serious; “invalid data submission” flags data universe failures, and “observations” are areas that should be addressed but won’t count in a health plan’s score. But Edgar said that as health plans find their own problems or auditors reveal them, prompt action makes a difference. Sometimes the final audit report will be less alarming than what was discussed during initial meetings. Even so, Edgar recommends that if plans have the data to make their case, they should. “But don’t push back for the sake of pushing back,” she said.

Overall civil monetary penalties from program audits have declined: There were 17 penalties for $7.3 million in 2016, compared with 18 civil monetary penalties for $2.6 million in 2017. CMS’ emphasis is shifting. It’s not enough to review rejected claims for mistakes—Edgar is seeing cases where mistakes on co-payments are being flagged, so approved claims need scrutiny, too. She expects claims involving opioids to open a whole new area of compliance.

Fortunately, she said, PBMs are being more proactive and correcting mistakes across that come up in audits across their client base. In the past, “If a plan had a finding, the PBM would fix the issue only for that plan,” Edgar said. In her work for a PBM, she pointed out the obvious flaw with this practice—an error with one health plan was likely repeated elsewhere. “Now, we’ve seen that change over the past 2 to 3 years.”

Miller dove into the details of what CMS wants from plans. In the formulary administration audits, CMS will start with 75 total samples across 3 elements: rejected claims formulary administration, samples from transitions of care, and website samples. He showed how the most common conditions CMS cited in 2017 were quite different from those cited a few years ago; 67% involved improper utilization management practices. The biggest challenges plans have today involve prior authorizations when patients are starting a new medication.

In the coverage determinations, appeals, and grievances audits, CMS seeks (1) timeliness tests of various data universes; (2) 40 samples of different areas of clinical decision making compliance, including 30 denials and 10 approvals; and (3) 20 samples of grievances, including 10 call log samples. The most common problems cited are misclassifications of requests and failure to identify disputes. Exceeding time frames is less common.

In 2017, a new category of complaint appeared: failing to process enrollee complaints and disputes as grievances. Miller sees this as an area that CMS will make a priority. He also expects more attention on how plans handle step therapy—which is expected, since CMS is allowing step therapy in Medicare Part B as a measure to cut premium costs.

Both he and Edgar recommend proactive steps—mock audits, reviewing grievance and denial letters, use of templates to respond to members, and ensuring data integrity.

Before the audit begins, Miller said it’s essential to identify the staff who will take ownership of the process. A key person is the “action item owner,” the person not attending the audit who will immediately start following up on the items identified that are due by the next day.

Getting through an audit means “having a plan,” he said.

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