Last month, the U.S. Department of Health and Human Services Office of Inspector (“OIG”) released a report that studied prior authorization denials and payment denials by Medicare Advantage Organizations (“MAOs”) (the “Report”). While the Report found that the “vast majority” of prior authorizations and payment requests were approved, the Report focused on the finding that MAOs “sometimes” denied prior authorization and payment requests that met Medicare coverage rules claiming that the denials delayed or denied beneficiaries’ access to medically necessary services.
The Report is another example of the OIG fanning the fire of criticism of MAOs by ignoring the overwhelming evidence that MAOs provide access to medically necessary services and also minimized the program requirements and guidance from the Centers for Medicare and Medicaid Services (“CMS”), with which MAOs must comply.
The OIG Report
The study randomly selected 250 denials of prior authorization requests and 250 payment denials issued by 15 of the largest MAOs between June 1-7, 2019. The final study was based 247 prior authorization and 183 payment cases once ineligible cases were excluded. Health care coding experts reviewed case files for all cases and physician reviewers examined medical records for a subset of the cases.
The Report included four key findings.
- Thirteen percent of denied prior authorization requests met Medicare coverage rules.
According to the Report, these services likely would have been approved under original Medicare coverage rules. There were two common reasons for these denials. First, MAOs denied the requests by applying MAO clinical criteria that are not required by Medicare. Second, MAOs denied requests when providers did not respond to requests for “unnecessary” documentation (e.g., additional test results). According to the Report, in some cases, MAOs found a prior authorization request did not have sufficient documentation for approval even when the beneficiaries’ clinical information case file was sufficient to support the medical necessity of the services.
- Eighteen percent of payment denials were for claims that met Medicare coverage rules and MAO billing rules.
Denial of payment requests delayed or prevented payments for services that providers had already delivered. According to the Report, the majority of these payment denials were caused by human error during manual claims-processing reviews or by inaccurate programming of claims processing systems.
- Three of the most prominent service types among the denials that met Medicare coverage rules were: imaging services (e.g., MRIs and CT scans), stays in post-acute facilities, and injections.
Regarding denials of imaging services, the Report indicated that MAOs often stated that a more basic imaging service or conservative treatment must be performed first. Denials of transfers to post-acute care facilities, such as inpatient rehabilitation facilities or skilling nursing facilities, from hospitals were due to the claimed intensive therapy or skilled care not being needed and a lower level of care, such as home health services, would suffice. According to the Report, the physician panel engaged by the OIG found that in these cases, patients would have benefitted from the higher level of care and the alternative services offered by the MAOs were clinically insufficient.
- Some prior authorization and payment requests denials which met Medicare coverage rules and MAO billing rules were later reversed.
Most reversals of prior authorization request denials occurred because beneficiaries or their providers filed appeals. Payment request denials were later reversed when physicians presented evidence that the MAO should have approved payment, such as a previous approval, or prompted the MAO to acknowledge system or manual errors.
The Report included recommendations for CMS, which administers the Medicare Advantage program: CMS should issue new guidance on the appropriate use of MAO clinical criteria in medical necessity reviews that are not contained in Medicare coverage rules. The Medicare Managed Care Manual instructs that MAO internal policies for medical necessity determinations must use “coverage criteria no more restrictive than Medicare’s national and local coverage policies.” However, CMS has not shed light on what types of clinical criteria would be considered “more restrictive.” Per the Report, additional guidance would help ensure beneficiaries receive all medically necessary and covered services as well as promote MAO compliance with Medicare coverage rules.
The Report cites only one obligation imposed on MAOs with respect to medical necessity determinations, failing to mention that MAOs must:
- Must have policies and procedures, that is, coverage rules, practice guidelines, payment policies, and utilization management, that allow for individual medical necessity determinations (42 CFR §422.112(a)(6)(ii)).
- Must employ a licensed physician as a medical director who is responsible for ensuring the clinical accuracy of all organization determinations and reconsiderations involving medical necessity.
- If the MAO expects to issue a partially or fully adverse medical necessity decision based on the initial review of the request, the organization determination must be reviewed by a physician or other appropriate health care professional with sufficient medical and other expertise, including knowledge of Medicare coverage criteria, before the MAO issues the organization determination decision.
- Must make determinations based on: (1) the medical necessity of plan-covered services – including emergency, urgent care and post-stabilization – based on internal policies (including coverage criteria no more restrictive than original Medicare’s national and local coverage policies) reviewed and approved by the medical director; (2) where appropriate, involvement of the organization’s medical director per 42 CFR §422.562(a)(4); and (3) the enrollee’s medical history (e.g., diagnoses, conditions, functional status), physician recommendations, and clinical notes.
- Must accept and process appeals consistent with the rules set forth at 42 CFR Part 422, Subpart M, and chapter 13 of the Medicare Managed Care Manual.
Another recommendation of the Report is CMS should also update its audit protocols to address the issues identified in the Report. For example, auditors could examine whether MAOs requested unnecessary documentation. Audits can target specific service types with a history of inappropriate denials, including the three identified in the Report. Additionally, CMS should consider additional enforcement actions for MAOs with a pattern of inappropriate payment denials.
Finally, the Report recommends that CMS should direct MAOs to examine their processes for manual review and system programming errors. MAOs can also be directed to provide additional staff training on the documentation that should be verified before a denial is issued and the level of documentation that is required.
While CMS concurred with the Report’s recommendations, CMS also noted notes “that the overall Medicare Advantage payment request denial rate cited by OIG for 2018 (9.5 percent) is comparable to the original Medicare denial rate during the same time period.” (emphasis added)
In an article published on April 29, 2022, America’s Health Insurance Plans (“AHIP”) blasted the Report claiming that, “[w]hen looked at properly, the data actually tell a compelling story of value and access.” AHIP noted that the OIG’s sample was ”extraordinarily small,” looking at 247 prior authorization requests during one week in June 2019, and raising concerns with only 33 of them.
The article also pointed out the role of prior authorization as “an important patient safety, cost-saving, and waste-prevention tool.”
One thing the Report and AHIP agree on is Medicare Advantage is very popular with Medicare beneficiaries. The Report noted that, in 2021, 42 percent or 26.4 million Medicare beneficiaries were enrolled in a Medicare Advantage plan, and that 51 percent of all Medicare beneficiaries will be enrolled in Medicare Advantage by 2030.
 CMS, Medicare Managed Care Manual, Ch. 4, Sec. 10.16.
 The Medicare Managed Care Manual also instructs MAOs that “[m]edical records from providers also may be used by MAOs for [a]dvance determinations of coverage … “[m]edical necessity”. Id. at Sec.10.5.4.
 Id. at Sec. 10.16.
 Medicare Advantage in 2021: Enrollment Update and Key Trends | KFF.