On June 3, 2025, The U.S. Department of Health and Human Services Office of Inspector General (OIG) released the results of a compliance audit examining Coventry Health and Life Insurance Company’s submission of diagnosis codes to the Centers for Medicare & Medicaid Services (CMS), with the audit period covering calendar years 2018 to 2019. These codes are used to calculate risk-adjusted payments under the Medicare Advantage program.
Why Did the OIG Perform the Audit?
The OIG audit aimed to determine whether Coventry complied with federal requirements when submitting diagnosis codes that affect CMS payments. Since these payments are adjusted based on the health status of enrollees, any unsupported or inaccurate coding can result in improper payments.
Under the Medicare Advantage Risk Adjustment Program, Medicare Advantage organizations are paid more for enrollees with more serious health conditions. This creates a strong incentive to report all relevant diagnoses—but also a risk of overreporting. The OIG’s role is to ensure that these payments are based on accurate and verifiable data.
What Was the OIG’s Audit Methodology?
The OIG employed a targeted, risk-based approach to identify potential areas of noncompliance:
- Sample Selection: The audit focused on 10 high-risk diagnosis groups that have historically shown high rates of error in previous audits. From Coventry’s submissions for 2018 and 2019, the OIG selected a stratified random sample of 300 enrollee-years.
- Medical Record Review: For each sampled enrollee-year, the OIG obtained and reviewed medical records to verify whether the diagnosis codes submitted to CMS were supported by clinical documentation.
- Compliance Evaluation: The audit assessed whether Coventry’s internal controls were adequate to ensure accurate and compliant coding practices.
What Were the Key Findings of the Audit?
- Unsupported Diagnoses: Of the 300 enrollee-years reviewed, 249 diagnosis codes (83 percent) lacked sufficient medical record documentation to support the conditions reported.
- Financial Impact: These unsupported codes led to $752,587 in net overpayments to Coventry.
- Extrapolated Overpayments: Using statistical sampling and extrapolation techniques, the OIG estimated that Coventry received at least $6.9 million in net overpayments for the two-year audit period.
- Systemic Issues: The audit also found that Coventry’s internal compliance mechanisms were inadequate to prevent or detect these errors, indicating systemic weaknesses in oversight and quality assurance.
What Were the OIG Recommendations?
The OIG issued three primary recommendations based on its audit of Coventry:
- Repay Overpayments: Refund the estimated $6.9 million in net overpayments to the federal government.
- Conduct Further Reviews: Examine diagnosis codes submitted after 2019 to identify and return any additional overpayments.
- Strengthen Compliance Controls: Improve internal policies, training, and auditing procedures to ensure future compliance with CMS requirements.
Coventry’s Response
Coventry disagreed with the audit’s findings and rejected all three recommendations, challenging the OIG audit’s methodology, particularly the extrapolation process and the criteria used to determine medical record sufficiency. Coventry also maintained that its coding practices were consistent with industry standards and CMS guidance.
What Can the Healthcare Industry Learn from the OIG Audit?
Healthcare providers engaging in risk-based contracts with Medicare Advantage plans should take time to thoroughly understand the process, as well as the implications, of vigorous investigations from the OIG, as Coventry isn’t the only example. While not specifically under investigation from the OIG, Seoul Medical Group (SMG) has faced paying $58.74 million to settle false claims allegations over false diagnoses that resulted in substantially higher payments to Medicare Advantage plans, and what would have been a greater profit for SMG. The time to take action is now to address the integrity of how Medicare Advantage organizations and the broader healthcare industry handle risk-based contracts. Such actions include:
- Prioritize Documentation Integrity: Accurate and complete medical documentation is essential. Diagnosis codes must be clearly supported by clinical records to withstand regulatory scrutiny.
- Invest in Compliance Infrastructure: Organizations should implement robust internal controls, including regular audits, coder training and automated checks to detect anomalies in diagnosis submissions.
- Understand Risk Adjustment Rules: A deep understanding of CMS’s risk adjustment model and coding guidelines is critical. Misinterpretation or misapplication can lead to significant financial and reputational consequences.
- Prepare for Increased Oversight: As CMS and the OIG continue to intensify oversight of Medicare Advantage plans, organizations should expect more frequent and detailed audits. Proactive compliance efforts can mitigate risks and reduce the likelihood of adverse findings.
- Respond Constructively to Audits: While Coventry disputed the audit’s findings, engaging constructively with regulators and addressing identified weaknesses can help restore trust and improve long-term performance.
Windham Brannon Can Help
Using a depth of industry expertise, Windham Brannon’s healthcare professionals can help healthcare organizations navigate the complexities of Medicare Advantage compliance. Drawing from our extensive knowledge of CMS regulations, risk adjustment methodologies and audit preparedness, Windham Brannon helps clients strengthen their internal controls, validate diagnosis coding accuracy and implement sustainable compliance programs. We offer tailored services that support and empower healthcare organizations to reduce exposure to regulatory risk and improve accurate reimbursement. For questions or more information, contact your Windham Brannon advisor today, or reach out to Denise Gaulin.
