Health Reform WK-EDGE CMS ordered to reveal documents in 2014 Medicare Advantage overpayment rule challenge
Friday, August 10, 2018

CMS ordered to reveal documents in 2014 Medicare Advantage overpayment rule challenge

By David Yucht, J.D.

A federal district court in Washington, D.C. ruled that documents involving a 2012 CMS rulemaking related to overpayments, which had been already disclosed, were no longer protected by the deliberative processes privilege. The court also found that these documents either were, or likely should have been, considered by CMS when it decided on a later, 2014 overpayment rule. Consequently, the court ordered that CMS include these documents in the 2014 administrative record in a case challenging that rule (UnitedHealthCare Insurance Company v. AzarAugust 1, 2018, Collyer, R.).

Medicare Advantage. Under Medicare Part C, also known as Medicare Advantage (MA) private insurers like UnitedHealthcare, provide Medicare coverage and are reimbursed by CMS in amounts based on by diagnostic codes submitted by providers, as adjusted for demographic variations. CMS is required to pay MA insurers at rates equivalent to those paid directly to traditional Medicare plans. Due to error and fraud, a proportion of diagnosis codes in medical charts are unsupported. Money paid on unsupported diagnosis codes can be actuarially predicted. CMS sets rates for MA insurers based on what Medicare pays directly to providers for the same diagnoses, without regard to the actuarially predicted error rate.

Section 6402 of the Patient Protection and Adordable Care Act (ACA) (P.L. 111-148) required all insurers, including Part C insurers, to return overpayments within 60 days of identification. Failure to comply is a False Claims Act (FCA) (21 U.S.C. § 3729 et seq.) violation which can result in severe sanctions. In 2014, based on this ACA provision, CMS issued a Final rule (79 FR 29844) which required MA insurers to return payments that were based on incorrect diagnostic codes once the insurer discovers, or through reasonable diligence should have discovered, the error. Since a similar no-error standard was not applied to traditional Medicare providers, UnitedHealthcare alleged that MA insurers were not being reimbursed equally as required by statute. UnitedHealthcare sued to vacate the 2014 Overpayment Rule.

UnitedHealthcare’s first hurdle was an HHS dismissal motion, asserting that United did not have standing to sue because it had not first sought administrative review. The court ruled that the 2014 Overpayment rule imposed a novel obligation on Part C insurers, that there was "no viable path" to administrative review, and that the rule placed burdens upon insurers that practicably foreclosed review (see Part C insurers avoid ‘procedural quagmire,’ proceed with Final rule challenge, April 3, 2017).

Supplemented record. In pursuing its case, UnitedHealthcare requested that the administrative record be supplemented with two documents that had been prepared pursuant to a separate 2012 rulemaking, concerning an audit program to determine medical chart accuracy for MA beneficiaries. In these risk adjustment data validation (RADV) audits, CMS samples medical records of an MA insurer’s patients and then extrapolates the error rate to the entire contract to find overpayments. CMS included an adjuster in this audit process: when there is a determination that an MA insurer was overpaid, the repayment owed is adjusted downwards based on an estimated traditional Medicare payment error rate. What troubled United in the present matter was that no such adjuster was adopted for the 2014 Overpayment rule.

Disputed records. United obtained two documents from a third party who requested them via the Freedom of Information Act (FOIA) (5 U.S.C. § 552). These documents were meeting materials of CMS decision makers, explaining the reasons for enacting the adjuster for RADV overpayment determinations. Neither document was included in the Administrative Record submitted by CMS for the 2014 Overpayment Rule. United sought an order requiring that CMS make these documents part the record.

CMS must include documents in record. The court granted the motion to supplement the administrative record. It is necessary to supplement an administrative record with missing documents directly or indirectly considered by the agency in making a determination or to ensure that the agency considered all relevant factors. The court found that either CMS considered its recent analysis of the 2012 adjuster and omitted the documents in error or because they were adverse to its current position, or it failed to consider all relevant factors in adopting the 2014 Overpayment Rule. In either event, these documents properly supplemented the record of the 2014 rule.

Moreover, despite the argument of CMS, these documents were not protected by the deliberative processes privilege, and consequently were not exempt from inclusion in the Administrative Record. The deliberative process privilege allows the government to withhold advisory opinions, recommendations and deliberations comprising part of a process by which governmental decisions are formulated. The court noted that the fact that the deliberations in question related to a previous rulemaking did not preclude application of the privilege for deliberative materials. However, the privilege no longer applied because CMS waived any deliberative process privilege when it released these documents to the public.

The case is No. 1:16-cv-00157-RMC.

Attorneys: Daniel Meron (Latham & Watkins LLP) for UnitedHealthcare Insurance Co., AmeriChoice of New Jersey, Inc. and Arizona Physicians IPA, Inc. James O. Bickford, U.S. Department of Justice, for Centers for Medicare and Medicaid Services and Alex M. Azar, II.

Companies: UnitedHealthcare Insurance Co.; AmeriChoice of New Jersey, Inc.; Arizona Physicians IPA, Inc.; Centers for Medicare and Medicaid Services

Cases: CaseDecisions AgencyNews MedicarePartCNews ProviderPaymentNews DistrictofColumbiaNews NewsFeed

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