Contingency-Fee Chart Review: The Contract Pays for a Higher Risk Score

Contingency fee risk adjustment chart review pays a vendor a share of the additional Medicare revenue its work generates. The contract rewards finding more diagnoses. What happens when the same chart shows that Medicare has already paid too much? For vendor staff and plan procurement teams, that is where the fee schedule, the coding instructions and the correction history need to meet.

The sharpest Medicare Advantage fraud allegations follow that question through the business. DxID sold reviews on a percentage of added revenue. Complaints describe a client bypassing its internal reviewers and another rejecting a deletion process because it would interfere with a revenue goal. The contract explains the incentive. The decisions after an error was found explain how the program operated.

A Review Can Move the Payment in Either Direction

Medicare pays Medicare Advantage plans a monthly amount for each member, adjusted for expected health care costs. Diagnoses feed the risk score that helps determine that payment. A retrospective chart review can find a supported diagnosis missed in the original submission, or an unsupported diagnosis that should come out. That is the point at which one-way chart review becomes a business decision: use the findings that increase payment and leave the others alone.

The Department of Health and Human Services Office of Inspector General found that over 99% of the chart reviews in its study added diagnoses. Its December 2019 report estimated $6.7 billion in payments for 2017 from diagnoses reported only on chart reviews, absent from service records.

The Pitch Sold Revenue Before the Review Began

DxID’s pitch to Group Health Cooperative put the return first. The government’s complaint quotes an October 2011 message claiming that similar plans had obtained between $35 and $84 per member per month through its approach. The vendor then explained that it charged nothing up front and would be paid only after the plan was, as a percentage of the recoveries it actually proved.

The complaint quotes a fee of “20% of Actual Net HCC Recoveries” in the resulting contract. The vendor’s income depended on the additional payment its review generated and the codes the client agreed to submit. A chart-review vendor quoting an expected per-member-per-month yield in advance is quoting a number for a process whose output is supposed to be whatever the records happen to say.

That makes client acceptance part of the story. According to the government’s complaint, Group Health’s own coding policies stood in the way of some diagnoses DxID wanted submitted. The vendor pressed the plan to loosen those policies, arguing that its approach was too financially attractive to pass up. The dispute over what the charts supported was also a dispute over what the vendor would earn.

Group Health’s Alleged Concern Was the Vendor’s Bill

The Group Health whistleblower complaint alleges that leadership bypassed internal review by routing DxID’s submissions around the department that normally checked risk-adjustment codes and through finance instead. The complaint describes a subsequent check of 117 charts by the coding department’s director and a physician. According to the complaint, they concluded that 74% of the reviewed codes lacked sufficient documentation, with many resting only on a problem-list entry.

The response makes the audit worth reading. The whistleblower alleged that management’s concern was paying DxID for codes Group Health had already submitted. Management wanted further review to address that vendor overpayment, while taking no action to inform Medicare of the coding errors or broaden the review. According to the complaint, the plan then hired DxID for a more extensive review of the next service year. Taxpayers bear the cost when unsupported diagnoses inflate Medicare payments.

The same complaint alleges that DxID removed some codes it had newly proposed and later found unsupported, but did not recommend removing incorrect diagnoses originally submitted by providers. A vendor can therefore show a correction process for its own additions while leaving an older source of overpayment untouched. The scope of the review matters as much as whether a delete function exists.

Martin’s Point Allegedly Put the Revenue Goal Ahead of Deletes

At Martin’s Point Health Care, the whistleblower alleged that DxID received a percentage of additional Medicare revenue and that contractors had no system for deleting erroneous codes they discovered. The complaint also alleges that the plan evaluated chart reviewers on volume and the accuracy of codes they added, but never on catching provider-coding errors.

The complaint ties that direction to a specific financial target: at least $26 million in chart-review revenue for 2017. Its description of management’s response leaves little to interpret: when staff raised the need to delete erroneous codes to meet Medicare obligations, management rejected it because deletions would put the revenue goal out of reach.

According to that complaint, an attempted manual process produced a list of wrong or unsupported codes, many of which were never deleted to the whistleblower’s knowledge. The complaint describes people identifying errors, proposing a way to correct them and encountering a revenue target that took priority.

Martin’s Point later agreed to pay $22,485,000 to resolve the government’s allegations that it submitted unsupported diagnoses found through chart reviews. That settlement was smaller than the annual revenue goal alleged in the complaint.

A Deleted Code Can Take Back the Vendor’s Fee

The government’s Independent Health complaint supplies a concrete example of what happens when corrections reach the money. It alleges that Cognisight, the plan’s earlier chart-review vendor, recommended withdrawing chronic kidney disease codes drawn from laboratory results alone. According to the complaint, Independent Health deleted the codes for the affected service year and repaid Medicare nearly $700,000, while Cognisight refunded its commission.

The complaint then alleges that Independent Health kept later years’ codes and continued the same laboratory-based coding practice with DxID. The alleged repayment and fee refund show why the financial reconciliation matters: a correction can change both what a plan keeps and what its vendor earns.

The government also alleged that DxID sent physicians suggestive forms asking them to add diagnoses to medical records up to 12 months after a visit, often without supporting documentation. In that account, the vendor was asking physicians to change the record from which it earned its fee.

The Justice Department’s settlement announcement describes DxID as Independent Health’s wholly owned subsidiary, performing reviews for it and other plans. The False Claims Act case reached both the plan and its chart-review vendor. The plan agreed to fixed payments of $34.5 million and contingent payments of up to $63.5 million on behalf of itself and DxID. The same vendor appearing in different plans’ complaints gives an insider a reason to examine the actual instructions and compensation terms at each client.

The Incentive Reaches Beyond a Contingency Contract

Cigna’s home-visit economics show another way a plan measured diagnosis revenue. The Justice Department’s local Cigna resolution quoted an internal report saying one vendor’s visits produced more than $14 million in additional Medicare payments against approximately $2.13 million in vendor costs during the first nine months of 2014. DxID’s percentage contract puts the vendor’s compensation directly into the same pursuit of additional payment.

The payment incentive also appears in comparisons across plans. In Comparing Diagnostic Coding Intensity for Medicare Advantage and Fee for Service, published by Health Management Policy and Innovation in 2019, researchers compared the diagnosis-based risk measure used for payment with another diagnosis-based measure that was not. The measures produced similar results in traditional Medicare. In Medicare Advantage, the alternative measure substantially reduced the apparent risk, bringing it close to the traditional Medicare population. The study’s finding suggests that coding intensity can change the apparent difference in illness between the populations.

The same decision about negative findings appears in other enforcement cases. The Justice Department alleged that HealthCare Partners, operating as DaVita Medical Holdings, ignored inaccurate codes uncovered in its reviews. It later alleged that Cigna and Aetna used review findings to seek additional payments while ignoring findings indicating overpayment. In each account, the decisive question is what the organization did with information that reduced revenue.

The Contract and the Correction Have to Meet

For healthcare procurement staff, vendor coders and finance teams, we trace how the fee shaped the work: which codes the client accepted, what the vendor billed and what happened after an audit found errors. Whether the reviewer was assigned to examine earlier provider codes matters. So does whether a proposed deletion reached Medicare and changed the vendor’s payment.

Submission history matters too. The Centers for Medicare & Medicaid Services finalized a 2027 payment change excluding diagnoses from chart reviews not linked to a service record, with an exception for beneficiaries switching Medicare Advantage organizations. The contract and correction history show how a particular review business operated.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. Someone who understands why an unsupported code stayed in the submission, or why its removal never reached the invoice, can bring the business decisions into view alongside the medical record.

Your Contract May Explain the Coding

If you work for a chart-review vendor or a plan and know how the fee affected additions, deletions or audit responses, speak with our whistleblower experts about how the fee shaped the coding. We build the case around the decisions behind the codes, bring in Medicare Advantage fraud whistleblower lawyers, and stay beside you through the process.