Understanding Chart Reviews in Medicare Advantage
Insurance companies operating Medicare Advantage plans regularly conduct chart reviews as a standard practice to verify the alignment between medical records and information submitted by healthcare providers. These comprehensive audits serve multiple purposes within the healthcare payment system, creating both legitimate quality assurance mechanisms and potential opportunities for payment optimization.
Chart reviews enable payers to develop a complete understanding of a beneficiary’s health status and care requirements. When properly executed, these reviews help ensure that federal payments accurately reflect the anticipated costs of treating enrollees with specific medical conditions. The risk adjustment model used by the Centers for Medicare & Medicaid Services relies heavily on accurate diagnosis coding to determine appropriate payment levels to insurance plans.
However, the dual nature of chart reviews has raised concerns among healthcare policy experts and government oversight bodies. The Potential for Inappropriate Use becomes apparent when these reviews consistently identify additional billable diagnoses that may not actively influence patient care or treatment decisions.
“Chart reviews can also identify diagnoses that are inaccurate, no longer an active consideration or unrelated to the clinical care enrollees receive, and thus potentially inappropriate to submit to CMS for payment purposes,” according to a November 20 report published by the Kaiser Family Foundation.
The Financial Impact of Diagnosis Coding
The financial stakes surrounding diagnosis coding practices in Medicare Advantage have grown substantially over recent years. Research published in March by the Annals of Internal Medicine quantified the magnitude of this issue, estimating that coding differences resulted in approximately $33 billion in additional payments to Medicare Advantage plans during 2021 alone. This staggering figure represents a significant portion of total Medicare Advantage spending and highlights the economic incentives that insurers face when conducting chart reviews.
Risk Score Adjustments and Payment Calculations play a critical role in determining how much federal funding each Medicare Advantage plan receives for individual enrollees. When chart reviews identify additional diagnoses that add hierarchical condition categories to a patient’s profile, the plan’s risk-adjusted payment increases accordingly. This creates a direct financial incentive for plans to conduct thorough chart reviews and identify every potentially billable condition documented in patient records.
Key Findings from 2022 Encounter Data
The Kaiser Family Foundation’s comprehensive analysis of 2022 Medicare Advantage encounter data revealed several striking patterns regarding chart review practices and their impact on enrollee risk profiles:
Widespread Chart Review Activity: An estimated 62 percent of all Medicare Advantage enrollees, representing approximately 18 million individuals, underwent at least one chart review during 2022. This massive scale demonstrates that chart reviews have become a central operational practice across the Medicare Advantage industry rather than an occasional audit tool.
Diagnosis Additions Outpace Removals: The data shows a significant imbalance between diagnoses added versus removed through chart reviews. One in six Medicare Advantage enrollees had at least one diagnosis added during chart review that contributed a new condition category affecting their risk score calculation. In stark contrast, just over one percent of enrollees had a diagnosis removed that caused a condition category to no longer factor into their risk score.
Direct Payment Impact: Approximately 30 percent of enrollees who underwent at least one chart review had a diagnosis added that directly increased their Medicare Advantage plan’s federal payment amount. This finding suggests that nearly one-third of chart reviews result in upward payment adjustments, raising questions about the baseline accuracy of initial coding practices.
Major Insurers Leading Chart Review Activity
The KFF analysis identified specific insurance companies that conducted chart reviews on particularly large proportions of their Medicare Advantage enrollees. Leading Market Players including CVS Health Corporation, Elevance Health, UnitedHealth Group, and Centene Corporation showed the highest shares of enrollees undergoing chart review processes during the study period.
These major insurers collectively cover tens of millions of Medicare Advantage beneficiaries, meaning their chart review practices have substantial implications for overall Medicare spending and program integrity. The concentration of chart review activity among the largest plans suggests that these practices may be linked to organizational resources, technological capabilities, and strategic priorities surrounding revenue optimization.
Regulatory Concerns and Oversight Implications
The findings from this analysis raise important questions about the appropriate use of chart reviews and the need for enhanced regulatory oversight. While chart reviews serve legitimate purposes in ensuring accurate risk adjustment, the patterns observed in the data suggest potential systematic identification of diagnoses that may not meaningfully impact patient care delivery.
Federal regulators at CMS continue to refine risk adjustment methodologies and audit procedures to address concerns about inappropriate diagnosis coding. As Medicare Advantage enrollment continues to grow, representing more than half of all Medicare beneficiaries, ensuring the integrity of payment systems becomes increasingly critical for program sustainability and taxpayer protection.
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