Nursing home stakeholders remain cautiously optimistic regarding Medicare Advantage plan audits announced by the Centers for Medicare and Medicaid Services (CMS) last month, but many hope the agency will extend the same scrutiny to prior authorizations, AI usage and internal coverage criteria.

Operators are unlikely to face reimbursement cuts as a result of the audits, said Fred Bentley, managing director with ATI Advisory. Instead, audits could create a more equitable regulatory environment and curb the practice of upcoding by MA plans, he said. Moreover, audits can retrieve money for the sector in exposing overbilling by MA plans.

The agency is several years behind on completing audits of MA plans, the agency said in a memo released late May. The last significant recovery of MA overpayments occurred following the audit of payment year 2007.

MA plans may have overbilled the government by about $17 billion annually, the agency said.

The Medicare Payment Advisory Commission (MedPAC) estimates this figure could be as high as $43 billion per year. Completed federal audits between 2011 and 2013 found overpayments between 5% and 8%.

“It means that CMS would essentially be trying to claw back some of those overpayments, right? There’s a big emphasis in this administration on reducing or eliminating fraud, waste and abuse, and this would be seen as overspending, and so they’re going to want that revenue back,” said Bentley.

CMS will immediately begin auditing all eligible Medicare Advantage contracts each payment year, and add resources to expedite completion of 2018 to 2024 audits, including those related to nursing home payments. CMS called the move a “significant expansion” of its auditing efforts for such plans, aiming to complete audits for this timeframe by early 2026.

The American Health Care Association and National Center for Assisted Living (AHCA/NCAL) continues to assess the impact of the recently announced audits, but hopes CMS will do more. Specifically, to audit MA plans not just on the payment side but also to ensure compliance with the guardrails that were finalized in 2024 and 2025 rules.

That includes oversight on prior authorizations, internal coverage criteria, and MA plans’ use of AI, among other items.

“We look forward to working with CMS and the new administration to ensure Medicare Advantage plans are upholding the promise made to America’s seniors to provide access to timely, medically necessary care,” AHCA/NCAL said in a statement.

A good sign for nursing homes

It’s unclear exactly how much will be clawed back and how that will impact payers, but Bentley said nursing home providers shouldn’t be overly concerned about any sort of downward pressure on reimbursement as a result of the audits.

Bentley expects the audits to have little to no impact on the day to day operations of nursing homes. But, the optics of an administration that takes MA oversight seriously and is going to require plans to adhere to their regulations is a good sign.

“This is an administration that is ostensibly pro Medicare Advantage, but it’s not a blank check for Medicare Advantage,” said Bentley. “They are signaling that they are going to be tracking things very closely. They’re not just going to provide open-ended support for Medicare Advantage. If you’re a provider, that’s a bit encouraging, right? There’s a sense that maybe there will be a more level playing field.”

CMS has noticed MA plans’ upcoding habits, Bentley said, something the agency has been focused on for a while now, and this is just the latest effort to try and tamp that down.

Payments from the government to MA plans for 2026 are expected to increase on average by 5.06% from 2025 to 2026, CMS announced in April.

Inside the audit process

In order to complete all audits by 2026, CMS said it will use enhanced technology, deploying “advanced systems to efficiently review medical records and flag unsupported diagnoses.”

CMS also plans to drastically expand its medical coder workforce from 40 to about 2,000 by Sept. 1. Coders will manually verify flagged diagnoses to ensure accuracy.

Lastly, the agency wants to audit all newly initiated audits, or about 550 MA plans, rather than 60 MA plans per year. CMS said they will be able to do this by “leveraging technology.” The agency said it will also be able to increase auditing records per health plan per year from 35 to between 35 and 200 based on the size of the health plan.

MA plans receive risk-adjusted payments based on the diagnoses they submit, CMS said. That means higher payments for patients with more serious or chronic conditions. CMS conducts Risk Adjustment Data Validation (RADV) audits to confirm diagnoses used for payment are supported by medical records.

“We are committed to crushing fraud, waste and abuse across all federal healthcare programs,” CMS Administrator Dr. Mehmet Oz said in a statement. “While the administration values the work that Medicare Advantage plans do, it is time CMS faithfully executes its duty to audit these plans and ensure they are billing the government accurately for the coverage they provide to Medicare patients.”

CMS will collaborate with the Department of Health and Human Services Office of the Inspector General (HHS-OIG) to recover uncollected overpayments identified in past audits.