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In a detailed report issued Thursday, the Office of Inspector General accused Medicare Advantage organizations (MAOs) of denying or delaying services to beneficiaries covered under Medicare rules. It also asserted that the plans denied payments to providers for services that met Medicare coverage rules and MA billing rules. The report follows persistent industry criticisms of MA plans, including their low payments to home care firms.  

In a random sampling of denials during nine consecutive days in 2019, the OIG found 13% of prior authorization requests that MA plans denied met Medicare coverage rules. It also determined that 18% of payment requests that were denied met Medicare coverage and billing rules. Many of those denials were the result of human error in claims processing.

“Denying requests that meet Medicare coverage rules may prevent or delay beneficiaries from receiving medically necessary care and can burden providers,” OIG investigators stated in the report. 

The OIG urged the Centers for Medicare & Medicaid Services to issue new guidance on appropriate use of MA clinical criteria in medical necessity reviews, update its audit protocols in MAOs and direct MAOs to take steps addressing vulnerabilities that can lead to review and system errors. 

Symptom of system challenges?

The report’s findings rippled through the home care and healthcare community on Thursday, prompting reaction and analysis. ATI Advisory CEO Anne Tumlinson told McKnight’s Home Care Daily Pulse the report reflects a broader set of system challenges and misaligned financial incentives.

“Risk-based care (including Medicare Advantage) allows for innovations and efficiencies, but it also invites processes like prior authorization and a rightsizing of service delivery.” Tumlinson said. “The challenge is figuring out the right size, which is different for each individual healthcare consumer.”

Home care critique

The OIG report coincides with increasing concerns about the growth of MA plans — which comprise 45% of the Medicare insurance market — and their impact on the Medicare system. While traditional fee-for-service Medicare plans pay providers for each service, MA plans receive a fixed amount of money from CMS for each beneficiary. That gives MA plans more flexibility in how they spend CMS dollars and encourages them to seek the most cost-effective services and settings. 

But not everyone, including large home health firms, are happy with how MA plans are spending the government funds. During a conference call with analysts Thursday, Encompass Health executives said the plans aren’t adequately compensating them for home health services. 

“We don’t want to deprioritize their members, but they are going to force us to if we aren’t being paid the fair rate that we need to turn around and pay our clinicians,” Encompass Home Health and Hospice CEO Barb Jacobsmeyer said.

Encompass CFO Doug Coltharp said the company will be devoting substantial time and resources discussing payment rates with MA plans, especially in light of the 8.5% payment increase CMS authorized for 2023.

Home care giant Amedisys has also been critical of MA plan payment rates, but President and CEO Chris Gerard expressed the need to work with MAOs during an earnings call on Thursday. Gerard told Wall Street analysts the company is working on “striking a relationship with plans that actually satisfies both sides.”