UnitedHealth Faces 50-Fold Audit Increase as CMS Expands Scrutiny

UnitedHealth Group and other Medicare Advantage (MA) providers are facing heightened scrutiny as the United States government intensifies its audit efforts to investigate improper claims. The Centers for Medicare and Medicaid Services (CMS) announced on Wednesday evening that it will immediately launch a "major expansion" plan, adding nearly 2,000 new auditors. This initiative will subject all eligible MA contracts for the 2018 to 2024 payment years to audit.

CMS Administrator Seema Verma emphasized the government's commitment to combating fraud, waste, and abuse in federal health care programs. While recognizing the value of MA plans, Verma stated that it is now time for CMS to fulfill its audit responsibilities and ensure accurate reporting of Medicare beneficiary costs to the government.

This development adds to the challenges faced by UnitedHealth investors, who are already dealing with a government criminal investigation, the withdrawal of full-year financial guidance due to deteriorating MA business, and bipartisan pressure to lower drug prices. MA providers receive government funding based on the diagnostic reports of their enrollees, with more severe or chronic conditions resulting in higher reimbursement amounts.

CMS has been conducting audits on the authenticity of diagnoses but acknowledges that the audit process has been delayed for several years. The last large-scale recovery of overpayments to MA plans was in 2007, and the government estimates that MA providers overstate their claims by approximately 17 billion to 43 billion annually.

As part of its "aggressive" audit acceleration strategy, CMS plans to expand its medical coding staff from 40 to 2,000 by September 1, a 50-fold increase. With the application of new technologies, the agency expects to complete audits for all approximately 550 MA plans, significantly increasing the current annual audit rate of about 60 plans.

This move by the Trump administration to expand auditing efforts in a cost-saving area is notable, especially as the government's "efficiency department" aims to streamline government structures. The increased scrutiny on MA providers is expected to have a significant impact on the industry, with UnitedHealth Group and other providers likely to face further challenges in the coming years.