Diving overview:
- Elevance has successfully dodged severe government sanctions related to data submission issues concerning its Medicare Advantage plans to CMS.
- A letter from CMS, sent on Friday, indicated that “no interim sanctions will be imposed at this time” after Elevance resubmitted the necessary data and refunded the estimated overpayments to the government. These potential sanctions, which could have barred Elevance’s MA plans from enrolling new members, posed a serious risk to the company’s reputation and finances and were set to take effect on Saturday.
- However, the company still has significant work ahead to achieve full compliance, or else penalties could be implemented as early as July, according to the regulator.
Dive Insight:
Earlier this year, CMS accused Elevance, a leading player in the privatized MA plan sector, of failing to submit necessary data for risk-adjusted scores via CMS’s electronic systems over the last seven years.
This situation is troubling because it complicates CMS’s ability to verify that Elevance’s risk scores—crucial indicators of a Medicare beneficiary’s health, influencing payment for care—are accurate. It also hampers the ability to identify and retrieve potential overpayments.
CMS initially provided Elevance until the end of March to rectify the issue before sanctions would be imposed. Elevance has denied any wrongdoing while seeking more time to comply. CMS agreed to extend the deadline until the end of May.
According to CMS, Elevance is making headway. In a letter confirming progress, Elevance reportedly resubmitted the risk adjustment data accurately and processed a wire transfer to CMS reflecting the estimated overpayments due to the incorrect data submission.
Though Elevance did not disclose the amount paid to CMS, estimates from financial documents in April placed its debt at around $935 million. This fluctuates between $350 million and $1.5 billion based on various assessments.
That said, there are still unresolved issues. John Scott, director of CMS’s MA Enforcement Group, emphasized that Elevance must address errors identified in the agency’s risk adjustment processing system by the end of June and repay any additional overpayments found by CMS to avoid looming sanctions.
These potential penalties are quite severe. CMS has indicated plans to prohibit Elevance’s MA plans from enrolling new members and halt specific communications aimed at Medicare beneficiaries if the issues are not addressed.
Analysts believe that the consequences could tarnish Elevance’s reputation and hinder future membership growth. As it stands, the company plans to reduce MA membership this year to improve profit margins within the privatized Medicare program, which doesn’t currently position Elevance as a significant threat.
However, analysts warn that achieving future growth may prove tough once profit margins stabilize. An Elevance representative noted that the company maintains an open dialogue with regulators and is hopeful for a resolution.
Some analysts suggest that Friday’s update indicates that Elevance might soon put these challenges behind it, even though more actions are necessary to sidestep sanctions. “Unless unexpected issues arise, we view this as a positive sign,” said TD Cowen analyst Ryan Langston in a note on Sunday, expressing confidence that Elevance would complete the necessary steps to avoid MA admission penalties.
