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The CMS 2020 Audit and Enforcement Report is Out—What the Results Might Mean for 2021

The much-anticipated 2020 CMS Program Audit and Enforcement Report was released on Friday, May 14. CMS readily admits in the report that 2020 was an unusual year, in which the COVID-19 public health emergency (or PHE, in CMS parlance) upended the regular program audit process and resulted in only six health plans undergoing a CMS program audit. Due to the small number of plans audited and the flexibilities CMS allowed due to the COVID emergency, CMS cautions not to read too much into the 2020 data compared to previous years’ data.

However, applying common sense to the data over the past five years does reveal some trends that shouldn’t be ignored, as well as some likely answers to plans’ most burning questions (e.g., How many plans will CMS audit this year? What is the overall target audit score we should aim for? What enforcement actions is CMS likely to impose in 2021)? The primary reason we care about what happened in 2020 is that it suggests what we can expect in 2021.

Who will be audited in 2021?

Given that 2020 was the second year of CMS’ 3-year audit cycle, CMS will be making decisions for 2021 (or has already made them and is now implementing them) to complete the 3-year cycle. In that cycle, CMS typically audits health and drug plans that account for about 95% of total enrollment in those plans nationwide. In 2019, CMS audited 13 plans (about 5% of active plan sponsors), which accounted for about 60% of Part C and Part D enrollment. (Note: CMS only reported on 10 plans audited in 2019 in the 2020 report because three of those plans are no longer unique sponsors). In 2020, CMS audited six plans (about 3% of active plan sponsors), which accounted for only about 1% of Part C and Part D enrollment. For CMS to meet its stated goal of auditing plans within a 3-year timeframe that account for 95% of enrollment, it will need to audit plans that account for about 39% of Part C and Part D enrollees. How many actual Medicare Advantage and standalone Prescription Drug Plans does this represent? Hard to say exactly, due to plan mergers, non-renewals, and other organizational changes that impact the size of the program audit pool, but a basic mathematical approach based on the 2019 and 2020 numbers (i.e., as if there were no organizational changes in the marketplace), tells us that CMS audited only about 8% of active plan sponsors in 2019 and 2020, leaving the remaining 92% of plan sponsors vulnerable to a 2021 program audit. It is unlikely that CMS will meet that goal, but any plan sponsor that wasn’t audited in 2019 or 2020 is now playing Russian roulette, wondering if their 2021 audit notification is just around the corner.

What kind of performance will CMS expect in 2021?

If you do get selected for an audit, what are the benchmarks against which CMS will be judging you? Well, history has shown that each audited plan in a given year is evaluated against all other audited plans from that year. The annual Audit and Enforcement Reports from CMS provide overall audit scores, as well as scores for each individual audited area. The overall audit scores have improved noticeably from year to year (i.e., gone down in actual score, since the lower the audit score, the better the plan is performing). As the chart below illustrates, there has been steady and relatively consistency improvement from 2016 through 2019, with a seemingly larger measure of improvement in 2020 (though, again, that number is likely skewed by the low number of plans audited in 2020 due to the COVID emergency).

If you have conducted a mock CMS audit recently (or had an external entity, such as Integritas Medicare, conduct a mock audit), you know where you stand compared to these numbers. For 2020, the lowest overall audit score was 0.00. Two of the six audited plans had this score, indicating zero audit conditions, a rare feat though not impossible (one plan each in 2017, 2018, and 2019 had zero audit conditions). The highest score in 2020 was 0.42, which is still an admirable audit score. In 2019, the highest score was 1.74; in 2018, it was 2.64; and in 2017, it was 2.44. If one were to ask me, both as a former CMS regulator and as a current consultant working with MA plans and PDPs, what kind of mock audit score would keep me up at night, I’d have to say anything above the 2019 average (0.77) would cause me to lose some winks, and anything above a 2.0 would cause a full-blown panic attack. The industry as a whole has shown a great capacity to improve their operations in the areas that CMS has been auditing that CMS’ expectations have risen and their tolerance for poor-performing plans has decreased.

There are a few notable takeaways in the 2020 report regarding individual audit areas. Most notably is that there were no audit conditions whatsoever in the area of Formulary Administration (FA). Again, only six plans were audited in 2020, but still, that is quite a significant outcome. Pharmacy Benefit Managers (PBMs) have come a long way from the early days of the Part D program when the audit scores in areas traditionally delegated to PBMs were abysmal. The table below shows the gradual improvement in FA audit scores.

Also of note in the 2020 report are the Compliance Program Effectiveness (CPE) scores. Five of the six audited plans had a CPE audit score of 0.00, while the sixth plan had a still admirable CPE score of 0.33 (which indicates there was only one CPE condition cited for that plan). One can see from the chart below that the CPE scores for 2016 through 2018 were significantly higher, but CMS may glean from the dramatic improvement from 2018 to 2019 that plan sponsors have largely mastered the compliance program requirements.

Even the typical bugaboo areas of ODAG and CDAG (Part C Organization Determinations, Appeals and Grievances and Part D Coverage Determinations, Appeals and Grievances) have improved over time, and fared significantly better in 2020.

What will enforcement actions look like?

2020 was an interesting year for CMS enforcement actions. The number of enforcement actions (Civil Monetary Penalties plus intermediate sanctions, such as a freeze in enrollment/marketing) in 2020 remained consistent with the number of enforcement actions in 2018 and 2019, despite far fewer program audits conducted in 2020.

It is bit challenging to make meaningful comparisons among the reasons for enforcement actions between 2016 and 2020, because the Audit and Enforcement Reports for those years did not include a consistent set of causes for enforcement actions. However, by looking at the most common causes for enforcement actions (program audit results, 1/3 financial audits, Medical Loss Ratio (MLR), enrollment issues, and state suspension of enrollment), one can see in the table below that the number of enforcement actions due to poor program audit results has come way down, whereas the number of enforcement actions due to poor 1/3 financial audit results has increased somewhat.

It is not surprising that the number of enforcement actions due to poor program audit outcomes has decreased, given the significant improvement in plan performance across all audit areas over the past five years. Although CMS does compare the performance of each audited plan in a given year against the other plans audited that same year, it is not necessarily the case that CMS imposes enforcement actions on plans with worse than the annual average audit score. CMS evaluates numerous factors when determining whether to impose an enforcement action, and a plan’s overall audit scores, while an important factor, is not the only one. So, for example, in 2020 when the average audit score was 0.15, if the audited plan with the highest score that year was 0.75, it might not be referred for an enforcement action, since 0.75 is still an acceptable overall score. But if the highest score in 2020 was 2.75, one can logically assume that an enforcement action would be quite likely.


If your MA plan or PDP is performing in mock audits comparably to the scores reflected in the past 2-3 years, we can assume that it is unlikely CMS would refer your plan for an enforcement action if audited in 2021. If your score is significantly higher than the trend, now is the time to devote resources to remediating issues quickly and aggressively. There are still many more months in the CMS 2021 program audit season, and thus likely many more plans to be audited. It takes time, effort and commitment to remediate issues. Given that CMS’ audit review period for most areas is a 3-month lookback, it may already be too late for any remediation efforts to affect 2021 audit results. But if you can demonstrate to CMS that you have identified the issues and are actively working to fix them, even if they are not fully fixed by the time of a CMS audit, that is one factor that CMS takes into consideration in its enforcement action evaluation process.

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