Home 5 Lab Industry Advisor 5 Essential 5 OIG Calls Out MA Plans for Wrongfully Denying Reimbursement

OIG Calls Out MA Plans for Wrongfully Denying Reimbursement

by | Jul 15, 2022 | Essential, National Lab Reporter, Reimbursement-nir

The new report could be a turning point in the battle to curb payor abuse of preauthorization requirements.

If you feel like Medicare Advantage plans have been stiffing your lab on reimbursement, you may be right. Medicare Advantage Organizations (MAOs) wrongfully deny physician requests for reimbursement of medically necessary care that meets Medicare coverage rules in nearly one of five cases, according to an April report from the U.S. Department of Health and Human Services Office of Inspector General (OIG).

The OIG Medicare Advantage Audit

Medicare Advantage (MA) is a capitated payment model in which labs and other providers are paid a fixed amount per beneficiary. While it’s designed to promote more cost-effective utilization of medical resources, this reimbursement model also creates an incentive for MAOs to deny patients access to and withhold payment for medically necessary services. For these same reasons, it landed on the OIG’s enforcement and auditing radar.

The agency audited a stratified random sample of 250 denials of prior authorization requests and 250 payment denials issued by 15 of the largest MAOs from June 1 to 7, 2019. Of the prior authorization request denials reviewed, 13 percent met Medicare coverage rules; and of the physician reimbursement requests denied, 18 percent complied with Medicare coverage requirements. Advanced imaging services, such as MRIs, and stays in post-acute care facilities were among the types of medical services wrongfully denied, according to the report. Reasons for the wrongful denials cited:

  • Use of clinical criteria not contained in Medicare coverage rules;
  • Requesting unnecessary documentation; and
  • Genuine error.

“(Although MAOs) approve the vast majority of requests for services and payment, they issue millions of denials each year,” the OIG report notes. “CMS's annual audits of MAOs have highlighted widespread and persistent problems related to inappropriate denials of services and payments.”

AHA Wants DOJ to Investigate

Of course, none of this is lost on the industry. For many years, physicians, labs, and other providers, led by the American Medical Association (AMA), have been making the case that MAOs and commercial payors abuse preauthorization requirements to routinely deny access to and reimbursement for medically necessary health services. The OIG report lends credence to their concerns. And now they’re stepping up the pressure.

On May 19, the American Hospital Association (AHA) wrote a letter asking the U.S. Department of Justice (DOJ) to take action. “It is time for the [DOJ] to exercise its False Claims Act authority to both punish those MAOs that have denied Medicare beneficiaries and their providers their rightful coverage and to deter future misdeeds,” wrote AHA general counsel Melinda Hatton. Given how deep the problem has grown—and how long it has lasted—the prospect of civil and criminal penalties is the only thing that will prevent certain MAOs from perpetrating this “widespread fraud…against sick and elderly patients across the country.”

Strong stuff. And there was more. The AHA sent an even more detailed letter to CMS Administrator Chiquita Brooks-LaSure urging the agency to do more to crack down on MAO prior authorization abuses, including:

  • Working with Congress to streamline prior authorization processes;
  • Establishing standardized reporting on metrics for coverage denials, appeals, and grievances and making the reported data publicly available;
  • Performing more frequent audits targeting specific service types, e.g., post-acute care services, and plans with a history of inappropriate denials;
  • Creating a complaint process for providers who end up on the wrong end of improper denials;
  • Aligning MA medical necessity rules with traditional Medicare medical necessity criteria;
  • Echoing its request to the DOJ, enforcing existing rules and imposing penalties on plans for inappropriate care delays and denials;
  • Clarifying the role of states in MA oversight by addressing the current confusion created by federal preemption division of responsibilities; and
  • Reworking MA plans so they don’t incentivize MAOs to deny access to and payment for medically necessary services for financial gain.


While the battle with insurers over preauthorization rules has been going on for a number of years, the OIG report could mark a crucial turning point. For the past several years, it’s fallen to the AMA and other provider groups to make the case documenting the harms inflicted by preauthorization delays and denials. Now, for the first time, the OIG is making that same case. The end result may be to deliver the impetus government agencies and Congress need to finally address the problem.

Subscribe to view Essential

Start a Free Trial for immediate access to this article