U.S. Department of Health and Human Services 
Office of Inspector General 
 
Medicare 
Advantage Appeal 
Outcomes and 
Audit Findings 
Raise Concerns 
About Service and 
Payment Denials
OEI-09-16-00410 
September 2018 
OEI-00-00-00000 
 
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oig.hhs.gov  Report in Brief  U.S. Department of Health and Human Services 
September 2018 
Office  of Inspector General 
OEI-09-16-00410 
 
 
Why OIG Did This Review 
Medicare Advantage Appeal Outcomes and 
A central concern about the 
Audit Findings Raise Concerns About Service  capitated payment model used in 
Medicare Advantage is the 
and Payment Denials 
potential incentive for MAOs to 
inappropriately deny access to 
What OIG Found  services and payment in an 
Key Takeaway 
When beneficiaries and providers appealed  attempt to increase their profits.  
High numbers of overturned 
preauthorization and payment denials, Medicare  An MAO that inappropriately 
denials upon appeal, and 
Advantage Organizations (MAOs) overturned  denies authorization of services 
persistent performance 
75 percent of their own denials during   for beneficiaries, or payments to 
problems identified by CMS 
201416, overturning approximately  healthcare providers, may 
audits, raise concerns that 
216,000 denials each year.  During the same  contribute to physical or financial 
some beneficiaries and 
period, independent reviewers at higher levels of  harm and also misuses Medicare 
providers may not be getting 
the appeals process overturned additional  Program dollars that CMS paid 
services and payment that 
denials in favor of beneficiaries and providers.   for beneficiary healthcare.  
MAOs are required to provide.   
The high number of overturned denials raises 
Because Medicare Advantage 
concerns that some Medicare Advantage 
covers so many beneficiaries 
beneficiaries and providers were initially denied services and payments that 
(more than 20 million in 2018), 
should have been provided.  This is especially concerning because beneficiaries 
even low rates of inappropriately 
and providers rarely used the appeals process, which is designed to ensure 
denied services or payment can 
access to care and payment.  During 201416, beneficiaries and providers 
create significant problems for 
appealed only 1 percent of denials to the first level of appeal. 
many Medicare beneficiaries and 
Centers for Medicare & Medicaid Services (CMS) audits highlight widespread  their providers. 
and persistent MAO performance problems related to denials of care and 
payment.  For example, in 2015, CMS cited 56 percent of audited contracts for  How OIG Did This Review 
making inappropriate denials.  CMS also cited 45 percent of contracts for  We collected data on denials, 
sending denial letters with incomplete or incorrect information, which may  appeals, and appeal outcomes 
inhibit beneficiaries and providers ability to file a successful appeal.  In  for 201416 at each level of the 
response to these audit findings, CMS took enforcement actions against MAOs,  Medicare Advantage appeals 
including issuing penalties and imposing sanctions.  Because CMS continues to  process.  We calculated the 
see the same types of violations in its audits of different MAOs every year,  volume and rate of appeals and 
however, more action is needed to address these critical issues.  overturned denials at each level.  
To examine CMS oversight, we 
What OIG Recommends and How the Agency Responded  analyzed CMSs 2015 audit results 
We recommend that CMS (1) enhance its oversight of MAO contracts, including  and the resulting enforcement 
those with extremely high overturn rates and/or low appeal rates, and take  actions, including Star Ratings 
corrective action as appropriate; (2) address persistent problems related to  data from 2016 to 2018.   
inappropriate denials and insufficient denial letters in Medicare Advantage; and 
 
(3) provide beneficiaries with clear, easily accessible information about serious 
violations by MAOs.  CMS concurred with all three recommendations.
Full report can be found at oig.hhs.gov/oei/reports/oei-09-16-00410.asp   
TABLE OF CONTENTS 
BACKGROUND  1 
Methodology  5 
   
FINDINGS   
When Medicare Advantage beneficiaries and providers appealed, they were usually successful  7 
in getting denials overturned 
Medicare Advantage beneficiaries and providers rarely used the appeals process designed to  10 
ensure access to services and payment 
CMS audits found widespread and persistent problems related to denials of care and payment  11 
in Medicare Advantage  
CMS has taken action to try to address MAO performance problems   12 
MAO audit violations will no longer affect their contracts quality ratings  14 
   
CONCLUSION AND RECOMMENDATIONS   
Enhance its oversight of MAO contracts, including those with extremely high overturn rates  17 
and/or low appeal rates, and take corrective action as appropriate 
Address persistent problems related to inappropriate denials and insufficient denial letters in  18 
Medicare Advantage 
Provide beneficiaries with clear, easily accessible information about serious violations by MAOs  18 
   
CMS COMMENTS AND OIG RESPONSE  19 
   
APPENDICES   
A: Medicare Advantage Appeals Process  20 
B: Detailed Methodology  22 
C: Volumes and Rates of MAO Appeal Outcomes, 201416  26 
D: Volumes and Rates of Overturned Denials by Independent Reviewers, 201416  27 
E: Volume and Rate of First-Level Appeals, 201416  28 
F: CMS Comments  29 
   
ACKNOWLEDGEMENTS  31 
  BACKGROUND 
Objectives 
1. To determine the extent of appeals and overturns of Medicare
Advantage service and payment denials at each level of the
appeals process during 201416.
2. To assess the Centers for Medicare & Medicaid Services (CMSs)
2015 audit findings and enforcement actions related to denials
and appeals.
A central concern about the capitated payment model used in Medicare 
Advantage (also known as Medicare Part C) is the potential incentive for 
insurers to inappropriately deny access to services and payment in an 
attempt to increase their profits.  Under the capitated payment model, 
beneficiaries enroll in a managed care plan and Medicare pays the insurer 
(called a Medicare Advantage Organization, or MAO) a risk-adjusted 
payment each month for as long as the beneficiary is enrolled.  In exchange 
for the monthly payment, the MAO agrees to authorize, and pay for, all 
medically necessary care for the beneficiary that falls within Medicares 
benefits package.1  MAOs that inappropriately deny the authorization of 
services for beneficiaries, or payments to healthcare providers who care for 
beneficiaries, may not only contribute to physical or financial harm, but they 
also misuse Medicare Program dollars that CMS pays for beneficiary 
healthcare.  Because Medicare Advantage covers so many beneficiaries 
(more than 20 million in 2018),2 even low rates of inappropriately denied 
services or payment can create significant problems for many Medicare 
beneficiaries and their providers. 
Medicare Advantage Appeals Process 
Under managed care, MAOs need to balance managing healthcare costs 
and utilization while ensuring beneficiary access to quality care.  MAOs must 
make millions of decisions each year about which requests for healthcare 
services and payment meet Medicare coverage criteria and, therefore, 
1 At a minimum, MAOs must cover the same services as in fee-for-service Medicare, although 
they may offer supplemental benefits.  42 CFR  422.101(a) and (b); 422.102.  MAOs are not 
responsible for paying hospice care costs for their beneficiariesthese costs are paid by 
Medicare fee-for-service. 
2 CMS, Medicare Part C Contract and Enrollment Data, Monthly Contract and Enrollment 
Summary Report, June 2018. 
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should be authorized and paid for.3  The MAOs that we examined for this 
report collectively received 448 million requests in 2016: 24 million 
preauthorization requests for services that beneficiaries had not yet 
received, and 424 million payment requests for services already provided to 
beneficiaries.  Although they approved the vast majority of these requests, 
the MAOs denied about 1 million preauthorization requests and 36 million 
payment requests, for denial rates of 4 percent and 8 percent, respectively.4   
When beneficiaries or providers receive a notice that their request has been 
denied, they have the right to file an appeal to request that the denial be 
overturned.5  Beneficiaries may submit the appeal themselves, or a 
designated representative may submit the appeal on their behalf.  Although 
there are resources available to help beneficiaries navigate the appeals 
process, advocacy groups report that the process is often confusing and 
overwhelming for beneficiaries, particularly those struggling with critical 
medical issues.6        
The Medicare Advantage appeals process includes four levels of 
administrative review by several entities.  At the first level, most appeals are 
reviewed by the MAO that issued the denial, while appeals for certain types 
of services are independently reviewed by Quality Improvement 
Organizations.  When appeals continue to the higher levels, they are 
reviewed by the Independent Review Entity, administrative law judges, and 
finally, the Medicare Appeals Council.  Exhibit 1 on page 3 shows an 
overview of the Medicare Advantage appeals process.  See appendix A for a 
detailed description of the process and the entities involved. 
At each level of appeal, the denial may be overturned, partially overturned, 
or upheld.  If the denial is overturned, then the MAO must authorize or pay 
for the service.  If the denial is not fully overturnedeither upheld or only 
partially overturnedthe beneficiary or provider may appeal the decision to 
the next higher level.   
 
3 MAOs may require that certain services receive approval before they are provided (called 
preauthorization). 
4 The numbers in this paragraph are based on our analysis of Medicare Advantage data for 
the 422 contracts that reported validated data for calendar year 2016.  It does not include 
requests or denials processed by the 86 contracts whose data did not meet CMSs validation 
standards.  See the methodology section for more information about our analysis and CMSs 
data validation process. 
5 MAOs review and resolve appeals from in-network and out-of-network providers through 
separate processes.  Appeals from in-network providers are considered contractual disputes 
that are handled by the MAO directly and cannot be appealed to the higher levels of review.  
Appeals from out-of-network providers go through the same appeals process as beneficiary 
appeals. 
6 Medicare Rights Center, 2017 Transformation Ideas for the Medicare Advantage (MA) and 
Part D programs, April 24, 2017.  Kaiser Family Foundation, Medical Debt among People with 
Health Insurance, January 2014.  Office of Inspector General (OIG) interview with the Center 
for Medicare Advocacy, 2016. 
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CMS Oversight of Denials and Appeals 
CMS uses several tools to oversee the denial and appeal process in 
Medicare Advantage and to incentivize MAOs to improve their 
performance.  These tools include program audits, compliance and 
enforcement actions, and quality ratings.  CMS also assigns an account 
manager and lead caseworker for each MAO contract.7  Among other 
duties, account managers monitor complaints from beneficiaries and work 
with MAOs to promote compliance with Medicare Program requirements.   
 
7 MAOs may enter into one or more contracts with CMS, and each contract may include 
multiple plans. 
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Program audits.  Each year, CMS audits a sample of MAOs.8  During the 
audits, CMS evaluates MAOs compliance with requirements related to 
delivery of services and other beneficiary protections required by Medicare.  
CMS requires MAOs to implement corrective action plans to address any 
audit violations and to demonstrate that they have substantially corrected 
deficiencies before the audit is officially closed. 
Enforcement actions.  When CMS identifies noncompliance related to an 
MAOs healthcare delivery, it may take enforcement actions against the 
MAO.9  Such actions may include issuing civil money penalties, imposing 
intermediate sanctions (i.e., suspension of marketing, enrollment, or 
payment), or terminating a contract. 
Quality ratings.  Every year, CMS publishes a quality rating, called a Star 
Rating, for each MAO contract.  CMS bases the ratings on various quality 
measures related to MAOs processes and patient health outcomes, 
experiences, and access to care.  Star Ratings can affect MAOs  
revenuesCMS awards bonus payments for high Star Ratings, while low 
Star Ratings may reduce MAO rebate payments and may deter beneficiaries 
from enrolling with an MAO.   
 
Related Work  A previous OIG study examined the rates of denial, appeal, and appeal 
outcomes for Medicare Advantage preauthorization requests filed in 
2007.10  It also examined CMS audit findings from 2007 and 2008.  OIG 
found that, at the time, beneficiaries appealed very few denials and that, 
upon appeal, MAOs overturned their own denial decisions more than half 
the time.  The report did not contain recommendations.  Over the last 
decade, the number of beneficiaries enrolled in Medicare Advantage has 
increased dramatically from 8 million in 2007 to 21 million in 2018.  In light 
of the increase in the number of beneficiaries participating in Medicare 
Advantage, this report revisits similar issues.   
In a more recent report, OIG examined CMSs validation and use of MAO 
performance data, which CMS collects annually.11  Among other things, the 
annual performance data includes the volume of denials, appeals, and 
appeal outcomes (including overturned denials) that each MAO contract 
issued during the previous year.  OIG recommended that CMS take steps to 
 
8 CMS selects the sample of MAOs based on several factors, including a yearly risk 
assessment, significant changes in enrollment, and whether the MAO has been recently 
audited.  CMS, 2016 Part C and Part D Program Audit and Enforcement Report, p. 5. 
9 42 CFR  422.752. 
10 OIG, Beneficiary Appeals in Medicare Advantage (OEI-01-08-00280), October 2009.  
Although the report was published in 2009, it analyzed data from October 1 to December 31, 
2007.   
11 OIG, CMS Regularly Reviews Part C Reporting Requirements Data, But Its Followup and Use 
of the Data Are Limited (OEI-03-11-00720), March 2014. 
Medicare Advantage Appeal Outcomes and Audit Findings Raise Concerns About Service and Payment Denials  4 
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ensure the accuracy of the data, make better use of the data in its oversight 
of MAO performance, and publicly release the data.  As of October 2017, 
CMS had implemented one of OIGs three recommendationsto publicly 
release the data. 
 
Methodology  To meet the objectives of this study, we analyzed data and documentation 
from CMS, the Office of Medicare Hearings and Appeals, and the 
Departmental Appeals Board.  To ensure our understanding of the 
submitted data and documentation, we followed up in writing with officials 
knowledgeable about the program.  This section provides a brief overview 
of the methodology.  See appendix B for a detailed methodology.  
Determining Volumes and Rates of Appeals and Overturned Denials 
During 201416  
To determine the volumes and calculate the rates of appeals and denials 
overturned upon appeal at the MAO level, we analyzed annual performance 
data that MAOs reported to CMS for each of their contracts for 201416.  
We were unable to include in our analysis contracts that did not meet CMSs 
data validation standards in any one of the fields that we used in our 
calculations in a given year.  Using the annual performance data for 
contracts that met CMSs data validation standards, we determined the total 
number of appealed denials that MAOs fully and partially overturned during 
the 3 years.  To calculate the denial overturn rate, we divided the total 
number of overturned and partially overturned appealed denials by the 
total number of overturned, partially overturned, and upheld appealed 
denials.  To calculate the national first-level appeal rate for the contracts 
with validated data, we divided the number of appeals received by the 
MAOs and the Quality Improvement Organization by the number of denials 
issued by those contracts during the 3 years.  Using the 2016 performance 
data, we calculated contract-specific appeal and overturned denial rates. 
To determine the volumes and calculate the rates of appeals and denials 
overturned upon appeal during 201416 for the independent reviewers, we 
analyzed Quality Improvement Organization and Independent Review Entity 
data from CMS, administrative law judge data from the Office of Medicare 
Hearings and Appeals, and Medicare Appeals Council data from the 
Departmental Appeals Board.  To calculate the volume of denials 
overturned by each reviewer during 201416, we added the number of 
overturned denials to the number of partially overturned denials.  To 
calculate the denial overturn rates for each reviewer, we divided the total 
number of overturned and partially overturned appealed denials by the 
total number of overturned, partially overturned, and upheld appealed 
denials.  
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Assessing CMSs 2015 Audit Findings and Enforcement Actions 
To determine the number of contracts that CMS cited for each type of 
violation, we analyzed the final audit reports that CMS issued to MAOs that 
were audited for Part C Organization Determinations, Appeals, and 
Grievances during 2015.  We reviewed the reports for the 19 audited MAOs 
that collectively administered 140 contracts.   
To determine the amount of civil money penalties that were issued in 
response to the 2015 Medicare Advantage audit findings, and to examine 
the reasons for the penalties, we reviewed agency documentation for the 
nine MAOs that received a penalty.  To describe the violations that led to 
sanctions for two MAOs, we reviewed the Notices of Imposition of 
Immediate Intermediate Sanctions that CMS issued to the MAOs.  To 
examine the impact of the civil money penalties and sanctions on MAOs 
Star Ratings, we reviewed Star Ratings data from 2016 to 2018 and 
requested clarifications from CMS about their process. 
 
Limitations  For this study, we examined aggregate MAO data on denials, appeals, and 
appealed denials that were overturned.  We did not conduct a medical 
record review to determine whether denials were appropriate according to 
medical or Medicare coverage standards.  Because CMS does not require 
MAOs to report denials or appeals data by appellant type, we were unable 
to examine denial, appeal, or appeal overturn rates for in-network versus 
out-of-network providers.  Additionally, because not all MAO contracts 
data met CMSs data validation standards, we were unable to include some 
MAO contracts in our analysis of appeals and overturned denials at the 
MAO level.  Therefore, the number of MAO denials overturned upon appeal 
presented in this report likely under-represents the actual number of 
overturned denials in the Medicare Advantage program.  
 
Standards  This study was conducted in accordance with the Quality Standards for 
Inspection and Evaluation issued by the Council of the Inspectors General on 
Integrity and Efficiency. 
 
   
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FINDINGS 
High overturn rates of appealed denials, and widespread and persistent CMS audit findings 
about inappropriate denials, raise concerns that some Medicare Advantage beneficiaries and 
providers were denied services and payments that should have been provided.  This is 
especially concerning because beneficiaries and providers rarely used the appeals process 
designed to ensure access to care and payment, appealing only 1 percent of denials during 
201416.  Although CMS takes a variety of compliance and enforcement actions against MAOs 
when it identifies problems, more action is needed to address these critical issues. 
   
When Medicare  When beneficiaries and providers appealed denials for preauthorization or 
payment requests, they were usually successful in getting the denials 
Advantage 
overturned.  During 201416, beneficiaries and providers appealed more 
beneficiaries and 
than 863,000 denials to their MAOs.12  Among the first-level appeals in this 
providers appealed,  3-year period, beneficiaries and providers were fully or partially successful in 
about 649,000 cases, getting approximately 216,000 denials overturned per 
they were usually 
year. The total number of overturned denials was even higher, as 
successful in getting 
independent reviewers overturned additional denials in favor of 
denials overturned 
beneficiaries and providers when they continued to appeal upheld denials 
to the higher levels of review.   
MAOs overturned more than a half million 
preauthorization and payment denials at the 
first level of appeal 
For the contracts we reviewed for 201416, 
beneficiaries and providers filed about 
607,000 appeals for which denials were fully 
overturned and 42,000 appeals for which denials 
were partially overturned at the first level of appeal.  
This represents a 75 percent success rate (see 
exhibit 2).  Most of these overturned denials 
(82 percent) were for payment to providers for 
services that the beneficiary already received.13  The 
remaining overturned denials (18 percent) were for 
the preauthorization of services that the beneficiary 
had not yet received.  See appendix C for the 
volumes and rates of MAO appeal outcomes by 
year. 
 
12 The appeal numbers on this page are rounded to the nearest thousand. 
13 Among all initial requests filed with MAOs during 201416, about 94 percent were requests 
for payment and 6 percent were for preauthorization of services.   
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An MAO may overturn its initial denial upon appeal for several reasons.  In 
some cases, the MAO may determine that its original decision was incorrect, 
and therefore overturn the denial.  In other cases, the MAO may determine 
that it made the correct initial denial decision based on the information 
available at the time, but find that the provider or beneficiary added new 
information in an appeal that demonstrates the denial should be 
overturned.  For example, some MAOs do not pay for care provided out of 
network unless the beneficiary was referred by an in-network provider.  In 
those cases, the MAO may deny the initial request if it did not include 
documentation of the referral, but then overturn the denial upon appeal 
after it receives additional documentation. 
Although overturned denials do not necessarily mean that MAOs 
inappropriately denied the initial request, each overturned denial represents 
a case in which beneficiaries or providers had to file an appeal to receive 
services or payment that are covered by Medicare.  This extra step creates 
friction in the program and may create an administrative burden for 
beneficiaries, providers, and MAOs.  This may be especially burdensome for 
beneficiaries with urgent health conditions.14  Further, although overturned 
payment denials do not affect access to services for the associated 
beneficiaries, the denials may impact future access.  Providers may be 
discouraged from ordering services that are frequently deniedeven when 
medically necessaryto avoid the appeals process. 
In 2016, MAO contract-specific overturn rates varied widely, ranging from 
0 to 100 percent, with a median of 77 percent (see exhibit 3 on page 9).15  
On the high end, 76 MAO contracts overturned more than 90 percent of 
their own denials upon appeal, including 7 contracts that overturned more 
than 98 percent.  Although data analysis alone is not sufficient to determine 
the reasons for this variation, extremely high overturn rates may indicate 
differences in MAO behavior and performance. 
 
14 Beneficiaries and providers may request an expedited review of appeals for urgently 
needed services.  The required timeframes for MAOs to process appeals range from 72 hours 
to 60 days depending on whether the request is expedited or standard and whether it is for 
preauthorization or payment.  42 CFR  422.590.   
15 We calculated the range and median of contract-specific appealed denial overturn rates for 
the 320 MAO contracts that reported validated data in 2016 and received at least 50 appeals. 
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Independent reviewers overturned additional denials in favor of 
beneficiaries and providers at four levels of appeal 
During 201416, independent reviewers overturned an additional 
80,000 denials in favor of beneficiaries and providers, or approximately 
27,000 per year (see exhibit 4).  There are two ways that appeals can get 
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routed to independent reviewers: some first-level appeals are reviewed by 
Quality Improvement Organizations rather than by MAOs,16 and some 
first-level appeals that MAOs uphold are automatically forwarded to the 
Independent Review Entity for second-level review.  If beneficiaries or 
providers decide to continue appealing to the higher levels of administrative 
review, the cases then go to administrative law judges and, finally, the 
Medicare Appeals Council.  These independent reviewers overturned 
between 10 and 27 percent of the appealed denials that they reviewed.  See 
appendix D for the volumes and rates of overturned denials for each of the 
independent reviewers by year. 
 
High rates of overturned denials upon appeal are especially concerning 
Medicare Advantage 
because beneficiaries and providers appealed relatively few of the total 
beneficiaries and 
number of denials issued each year.  The appeals process is one of the 
providers rarely 
safeguards against inappropriate denials in Medicare Advantage and gives 
used the appeals  beneficiaries and providers the ability to appeal denials that they believe 
should be overturned.  However, patient advocates have raised concerns 
process designed to 
that the appeals process can be confusing and overwhelming, particularly 
ensure access to 
for critically ill beneficiaries.  This may be one reason why beneficiaries and 
services and  providers appealed only 1 percent of denials to the first level of  
payment   appealreconsideration by their MAO or the Quality Improvement 
Organizationduring 201416.17  (See appendix E for the volume and rate 
of first-level appeals by year.)  When beneficiaries and providers chose not 
to appeal denials, the beneficiary may have gone without the requested 
service, the beneficiary may have paid for the service out of pocket, or the 
provider may not have been paid for the service.18   
In 2016, contract-specific appeal rates varied widely, ranging from 0 to 
40.5 percent, with a median of 0.9 percent.19  On the low end, 18 contracts 
had appeal rates lower than 0.1 percent.  Those 18 contracts denied a 
combined 2.4 million preauthorization or payment requests in 2016, yet 
received only 1,838 appeals.  Although data analysis alone is not sufficient to 
determine the reasons for variation in appeal rates, extremely low appeal 
rates may indicate differences in MAO behavior and performance, or 
 
16 Quality Improvement Organizations review and determine the outcome of appeals related 
to discharge and discontinuation notices from inpatient acute care, comprehensive 
outpatient rehab, home health, or skilled nursing facilities. 
17 During 201416, among the contracts in our review, beneficiaries and providers appealed 
1.1 million out of the 101.1 million denials made by MAOs for a 1.1 percent appeal rate. 
18 In-network providers typically cannot bill beneficiaries when an MAO denies a payment 
request, but out-of-network providers can.  However, if an out-of-network provider appeals 
the payment denial, they must agree to waive their right to bill the beneficiary. 
19 We calculated the range and median of contract-specific appeal rates for the 417 MAO 
contracts that reported validated data in 2016 and issued at least 50 denials. 
Medicare Advantage Appeal Outcomes and Audit Findings Raise Concerns About Service and Payment Denials  10 
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differences in communication with beneficiaries and providers about the 
appeals process. 
 
CMS audits found  Despite CMS efforts to educate MAOs about persistent problems in 
Medicare Advantage, each year during its audits of different MAOs, CMS 
widespread and 
finds many of the same violations as in previous years.  Among these 
persistent problems 
violations, CMS audits have identified persistent problems related to denials 
related to denials of  of care and payment.  Exhibit 5 shows three types of audit violations related 
to denials and the number of times they were among the five most 
care and payment in 
common audit violations that CMS cited each year during 201216.20  In 
Medicare Advantage 
2015, the year we examined, of the 140 MAO contracts that CMS audited, it 
cited 56 percent for inappropriately denying requests and 45 percent for 
 
sending insufficient denial letters.  
 
CMS cited more than half of audited MAO contracts for 
inappropriately denying requests for services or payment 
In 2015, CMS cited 79 of the 140 audited MAO contracts (56 percent) for 
two types of violations related to inappropriately denying requests for 
preauthorization of services and/or payment.  CMS cited some contracts for 
making the wrong clinical decision based on the information submitted by 
the provider or beneficiary.  CMS also cited contracts for not conducting 
appropriate outreach before making clinical decisions, meaning that the 
MAO did not have all of the information needed to make a decision and did 
not take appropriate steps to gather information from the provider or 
 
20 Exhibit 5 presents the number of times that three types of audit violations were among the 
five most common for the Organization Determinations, Appeals, and Grievances audit 
program area, which is one of five program areas that CMS audits in Medicare Parts C and D.  
Medicare Advantage Appeal Outcomes and Audit Findings Raise Concerns About Service and Payment Denials  11 
OEI-09-16-00410   
beneficiary.21  Failure by an MAO to make correct clinical decisions based on 
the information that it has, or failure to reach out to providers and 
beneficiaries for more information when needed, can result in beneficiary 
harm, financial hardship for beneficiaries and/or providers, and unnecessary 
use of the appeals process. 
CMS cited nearly half of audited MAO contracts for sending 
incorrect or incomplete denial letters, which may inhibit 
beneficiaries and providers ability to appeal 
In 2015, CMS cited 63 of the 140 audited MAO contracts (45 percent) for 
sending denial letters that did not contain important required information.  
MAOs must issue denial letters that clearly explain why requests were 
denied and how the beneficiary or provider can file an appeal.  However, 
CMS found that some MAO denial letters did not clearly explain why a 
request was denied, contained incorrect or incomplete information, did not 
use approved language, and/or were written in a manner not easily 
understandable to beneficiaries.  Failure to issue sufficient denial letters can 
impair a beneficiarys or providers ability to mount a successful appeal and 
can result in delayed access to care, and/or financial hardship.  Insufficient 
denial letters may be one reason that the appeal rate is so low in Medicare 
Advantage, especially when these letters go to beneficiaries who may be 
overwhelmed with medical issues or out-of-network providers who may be 
unfamiliar with the MAOs appeals process. 
 
CMS has taken  When CMS identifies that an MAO has performance problems, it uses 
several compliance and enforcement tools to address the problems.  As part 
action to try to 
of these efforts, CMS requires every MAO cited for an audit violation to 
address MAO 
develop and implement a corrective action plan.  CMS does not officially 
performance  close audits until MAOs demonstrate that violations are substantially 
problems  corrected.  CMS may also impose enforcement actions on MAOs that 
significantly fail to comply with program requirements.  CMS has continued 
  to make changes to its compliance and enforcement actions.  Since 2014, 
CMS has fined MAOs additional penalty amounts for aggravating factors 
such as a history of prior offense, or if a violation had been previously 
identified in public audit reports as a common problem.  For the 
2017 audits, CMS raised the maximum possible penalty for a single violation 
for MAOs with more than 500,000 beneficiaries enrolled in their contracts.22 
 
21 Of the 79 contracts, 12 were cited for making the wrong clinical decision, 21 for not 
conducting appropriate outreach, and 46 for both violations. 
22 CMS, Medicare Parts C and D Oversight and Enforcement Group, Civil Money Penalty 
Methodology, December 15, 2016. 
Medicare Advantage Appeal Outcomes and Audit Findings Raise Concerns About Service and Payment Denials  12 
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CMS suspended new enrollment for two MAOs because of serious 
threats to the health and safety of their beneficiaries; one of the 
MAOs had a longstanding history of noncompliance 
After the 2015 audits, CMS imposed intermediate sanctions against two 
MAOs for violations that it deemed so systemic and harmful to beneficiaries 
that the MAOs should not market to or enroll any new beneficiaries until the 
problems were corrected.23  CMS may impose sanctions when it identifies a 
substantial failure to comply with CMS requirements to provide medically 
necessary services, and it is the most serious enforcement action before 
contract termination.24  CMS stated that the conduct of the MAOs, with a 
combined 22 contracts and nearly a half million beneficiaries, posed a 
serious threat to the health and safety of Medicare beneficiaries.  Among 
other problems, CMS stated that MAO violations led to inappropriate delay 
and denial of services and increased out-of-pocket costs for beneficiaries.25  
CMS noted that one of the MAOs had a longstanding history of not 
meeting program requirements.  In the several years leading up to the 
audit, CMS issued numerous notices of noncompliance, warning letters, and 
corrective action plans to the MAO.  A number of the notices were for the 
same violations discovered during the audit, indicating that the MAO had 
not made changes to address the violations. 
CMS fined nine MAOs a total of $1.9 million for violations related to 
denials and appeals; CMS had previously identified some of the 
violations as common problems 
After the 2015 audits, CMS issued $1.9 million in civil money penalties to 
nine MAOs for violations related to processing requests for services and 
payment, appeals, and grievances.26  CMS determined that these violations 
may have led to unnecessary delay or denial of services for beneficiaries, 
financial harm to beneficiaries, or preventing beneficiaries and providers 
from appealing. 
CMS determines penalty amounts for each violation using a formula that 
takes into account the number of beneficiaries or contracts affected, and 
adjusts the amount for any aggravating or mitigating factors related to the 
violation.27  For example, CMS fined one MAO $314,100 for inappropriately 
 
23 The sanctions for the two MAOs remained in place for 717 months until the MAOs 
submitted the results of an independent audit demonstrating that the violations were 
corrected. 
24 See 42 CFR  422.752(a)(1). 
25 CMS also cited these MAOs for violations related to their delivery of the Medicare 
prescription drug benefit (Medicare Part D). 
26 This total does not include penalties issued to these MAOs for any Part D violations 
identified during the 2015 audits. 
27 CMS, Medicare Parts C and D Oversight and Enforcement Group, Civil Money Penalty 
Methodology, December 15, 2016. 
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denying 2,094 payment requests.  CMS noted that because the MAO issued 
these inappropriate payment denials to out-of-network providers, the 
providers may have billed the beneficiaries for services that should have 
been paid by the MAO.  Five MAOs each had one violation that CMS had 
previously warned MAOs about in its public audit reports, and so received 
an aggravating factor penalty for not correcting the problem.  Including 
these added penalties, total civil money penalties for Medicare Advantage 
audit violations for the nine MAOs ranged from $3,300 to $1 million each.28  
 
MAO audit  Although Medicare Advantage program audits are one of CMSs most direct 
methods for oversight of MAOs, at the time of our review, they had only a 
violations will no 
minimal and delayed impact on MAO quality ratings, called Star Ratings.  
longer affect their 
Additionally, beginning in 2019, audit violations will no longer directly 
contracts quality  impact MAO Star Ratings.  CMS posts MAOs Star Ratings on the Medicare 
ratings  Plan Finder website, which allows beneficiaries to evaluate differences in 
MAO performance when deciding which plan to enroll in.  Star Ratings are 
  also intended to incentivize good MAO performanceMAOs that receive 
high Star Ratings receive bonus payments and higher rebates from CMS 
and may increase the number of beneficiaries enrolled in their plans.  The 
lack of a strong relationship between performance problems revealed by 
CMS audits and MAO Star Ratings may diminish the usefulness of the Star 
Ratings system as a tool for beneficiaries to compare MAOs and a tool to 
incentivize good MAO performance. 
At the time of our review, audit violations had only a minimal and 
delayed impact on Star Ratings  
The 2015 MAO audit violations discussed in this report had very little, if any, 
impact on their contracts 2017 and 2018 Star Ratings.29  MAOs that received 
civil money penalties or sanctions following the 2015 audits also received a 
deduction on the Beneficiary Access and Performance Problems measure 
that fed into the Star Ratings for each of their contracts.30  The measure was 
worth only about 3 percent of the Medicare Advantage (Part C) summary 
Star Rating, so even MAOs that received the maximum deduction were 
unlikely to see a change in their contracts Star Ratings. 
Another weakness of the Star Ratings deductions was a significant delay 
between when CMS discovered violations during an audit and any change 
in the Star Ratings (see exhibit 6 on page 15).  Because there was not an 
 
28 The amounts of the nine MAO civil money penalties for Part C violations found during the 
2015 audits, from lowest to highest, were $3,300, $15,000, $22,400, $30,000, $120,950, 
$125,450, $258,550, $329,350, and $1,000,000. 
29 Of the 11 MAOs that received an enforcement action following the 2015 audits, 3 received 
a deduction on their 2017 Star Ratings and 8 received a deduction on their 2018 Star Ratings. 
30 At the time, the Beneficiary Access and Performance Problems measure was 1 of 34 quality 
measures that made up the Medicare Advantage (Part C) summary Star Rating. 
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immediate impact on MAOs Star Ratings, by the time the Star Ratings 
deductions went into effect, one-third of the contracts operated by MAOs 
that received an enforcement action because of 2015 audit results were no 
longer operational.  Therefore, these contracts never received a Star Ratings 
deduction in response to the audit violations. 
Exhibit 6: MAO violations discovered during program audits did not impact their Star Ratings 
until an average of 2 years later. 
 
Beginning in 2019, audit violations will no longer directly impact 
MAOs Star Ratings 
CMS will remove the direct link between audit results and Star Ratings 
beginning in 2019.  CMS stated that it received mixed reactions to the 
removal of the Beneficiary Access and Performance Problem measure from 
the Star Ratings.31  Beneficiary advocates strongly opposed the removal of 
the measure, stating that it will mask MAO behaviors that could pose a 
serious threat to the health and safety of beneficiaries.  On the other hand, 
most MAOs supported the removal of the measure, in part because CMS 
does not have audit information for each contract each year.   
Instead of having audits directly impact Star Ratings, CMS added an 
indicator on the Medicare Plan Finder website to alert beneficiaries if 
contracts are under sanction.  The indicator links to the MAOs sanction 
notice, which outlines the violations that CMS identified.  Contracts under 
sanction are also unable to enroll new beneficiaries.  However, other 
performance problems revealed by CMS audits will not be reflected in the 
Star Rating of an MAO, which diminishes the usefulness of the Star Ratings 
system as a tool for beneficiaries to compare MAO performance.   
The lack of a strong link between audit results and Star Ratings also means 
that MAOs that receive serious enforcement actions (including sanctions) 
 
31 CMS, Announcement of Calendar Year (CY) 2019 Medicare Advantage Capitation Rates and 
Medicare Advantage and Part D Payment Policies and Final Call Letter, p. 127, April 2, 2018. 
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can still receive high Star Ratingsand quality bonus paymentsin the 
same year.  Of the 22 contracts that were sanctioned in 2016 for 2015 audit 
violations, 6 contracts received overall Star Ratings of 4 or higher for 2016.   
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CONCLUSION AND RECOMMENDATIONS 
MAOs may have an incentive to deny preauthorization of services for 
beneficiaries, and payments to providers, in order to increase profits.  High 
overturn rates when beneficiaries and providers appeal denials, and CMS 
audit findings about inappropriate denials, raise concerns that some 
beneficiaries and providers may not be getting services and payment that 
MAOs are required to provide.  These findings are particularly concerning 
because beneficiaries and providers rarely use the appeals process designed 
to ensure access to care and payment, and CMS has repeatedly cited MAOs 
for issuing incorrect or incomplete denials letters, which can impair a 
beneficiarys or providers ability to mount a successful appeal.  Additionally, 
because audit violations will no longer be reflected in Star Ratings, 
beneficiaries may be unaware of MAO performance problems when 
selecting a plan.  Although CMS uses several compliance and enforcement 
tools to address MAO performance problems, more action is needed to 
address these widespread and persistent problems in Medicare Advantage. 
We recommend that CMS:  
Enhance its oversight of MAO contracts, including those with 
extremely high overturn rates and/or low appeal rates, and 
take corrective action as appropriate 
Given the persistent audit findings related to inappropriate denials and 
insufficient denial letters, CMS should conduct additional oversight of 
MAOs, including those with extremely high overturn rates or extremely low 
appeal rates.  This report identified such MAO contracts for 2016, which we 
will provide to CMS in a separate memorandum.  CMS should conduct a 
similar analysis for the 2017 annual performance data to identify additional 
MAOs that warrant enhanced oversight.  In addition, CMS may want to 
analyze the annual performance data to identify other indicators of 
potential problems that go beyond this analysis, such as high denial rates or 
low rates of preauthorization requests. 
Because there may be many reasons why these MAOs had extreme rates, 
CMS should engage with the MAOs to determine whether they are meeting 
program requirements and take corrective action as appropriate.  
Engagement could include having account managers meet with MAOs to 
determine why they had extreme rates, conducting a small probe review of 
denial or appeal cases, or other steps to determine the root causes of the 
rates.  If through these efforts CMS identifies that an MAO is not meeting 
program requirements, it should take appropriate corrective action to 
improve compliance.  These actions could include providing technical 
assistance, ongoing monitoring, or conducting additional audits.  If this 
Medicare Advantage Appeal Outcomes and Audit Findings Raise Concerns About Service and Payment Denials  17 
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analysis and enhanced oversight achieves positive results, CMS should 
continue it in future years.   
Address persistent problems related to inappropriate denials 
and insufficient denial letters in Medicare Advantage 
CMS audit results demonstrate that there are persistent problems related to 
denials of care and payment in Medicare Advantage, including 
(1) insufficient denial letters issued to beneficiaries and providers, 
(2) insufficient outreach before issuing denials, and (3) incorrect clinical 
decisions.  Although CMS takes steps to address individual poor-performing 
MAOs, CMS should take program-level action to address these persistent 
problems.  Actions could include a combination of technical assistance, 
training, education, and increased monitoring or enforcement actions for 
MAOs that exhibit these persistent problems.  For example, CMS could 
apply additional aggravating factors to civil money penalties for these 
violations on top of the existing factors.  CMS also could require individual 
MAOs with repeated violations to hire independent auditors to perform 
program audits more frequently than CMS is able to.  
Provide beneficiaries with clear, easily accessible information 
about serious violations by MAOs 
Because audit results no longer impact Star Ratings, CMS should develop 
another method for informing beneficiaries of serious violations identified 
by audits, including those that lead to civil money penalties.  This 
information should be clear, meaningful, and easily accessible to 
beneficiaries in places where beneficiaries typically access information, such 
as on the Medicare Plan Finder website.  CMS already includes information 
about MAO sanctions on the Medicare Plan Finder website, and could 
expand this effort to include civil money penalties, as it proposed in the 
2019 draft call letter.32  CMS could also consider including information about 
audit violations in addition to enforcement actions.   
CMS could also revisit policy options for adjusting Star Ratings in response 
to audits and enforcement actions, such as adding a new Star Ratings 
measure that takes enforcement actions into account, or by directly 
adjusting an MAOs overall and summary Star Ratings in response to 
enforcement actions.  This would help to ensure that Star Ratings serve as a 
one-stop shop for beneficiaries to evaluate differences in performance 
among MAOs. 
 
32 CMS, Advance Notice of Methodological Changes for Calendar Year (CY) 2019 for Medicare 
Advantage (MA) Capitation Rates, Part C and Part D Payment Policies and 2019 draft Call 
Letter, February 1, 2018. 
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CMS COMMENTS AND OIG RESPONSE 
In response to the draft report, CMS stated that it is strongly committed to 
oversight and enforcement of the Medicare Advantage program and it 
concurred with all three recommendations. 
CMS concurred with the first recommendation to enhance its oversight of 
MAO contracts, including those with extremely high overturn rates and/or 
low appeal rates, and take corrective action as appropriate.  Although CMS 
noted that its current oversight and audit process already applies many of 
the oversight elements that we mentioned, it did not indicate how it 
planned to enhance oversight of MAOs with extremely high overturn rates 
or extremely low appeal rates. 
CMS also concurred with the second recommendation to address persistent 
problems related to inappropriate denials and insufficient denial letters in 
Medicare Advantage.  CMS noted that its audit process addresses individual 
poor-performing MAOs, but it did not indicate the actions that it plans at 
the program-level to address these persistent problems. 
Lastly, CMS concurred with the third recommendation to provide 
beneficiaries with clear, easily accessible information about serious 
violations by MAOs.  CMS noted that it is testing options to provide 
beneficiaries with clear, meaningful, and accessible information on MAO 
performance that will help them make the best decisions about their care. 
For the full text of CMSs comments, see appendix F. 
 
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APPENDIX A: Medicare Advantage Appeals 
Process   
The Medicare Advantage appeals process includes four levels of 
administrative review by several entities.  At each level of review, the denial 
may be overturned, partially overturned, or upheld.  If the denial is 
overturned, then the MAO must authorize or pay for the service.33  If the 
denial is not fully overturnedeither upheld or partially overturnedthe 
beneficiary or provider may appeal the decision to the next higher level of 
review.   
First-level appeals: MAO and Quality Improvement Organization.  For 
most first-level appeals, the MAO itself must reconsider its decision to deny 
authorization or payment for a service.  The MAO must review the evidence 
that led to the original decision and any additional evidence the beneficiary 
or provider may submit as part of the appeal.  MAOs maintain separate 
processes to review and resolve appeals from in-network and 
out-of-network providers.  Appeals from in-network providers generally are 
considered contractual disputes that are handled by the MAO directly and 
cannot be appealed to the higher levels of administrative review.  Appeals 
from out-of-network providers who formally waive their right to bill a 
beneficiary for the service under appeal may go through the same appeal 
process as beneficiaries.  If the MAO upholds its denial for appeals filed by 
beneficiaries, in-network providers filing on behalf of a beneficiary, or 
out-of-network providers, it must forward the appeal to the Independent 
Review Entity for review. 
Beneficiary and Family Centered Care Quality Improvement Organizations 
review first-level appeals of discharge from a hospital or the discontinuation 
of certain types of services.34  These Quality Improvement Organizations 
work under the direction of CMS and are staffed by doctors and other 
healthcare professionals trained to review medical care and help 
beneficiaries with complaints about the quality of care.  If the Quality 
Improvement Organization upholds the MAOs decision to discharge the 
beneficiary or to discontinue services, beneficiaries may request that the 
Quality Improvement Organization reconsider its decision.  If the Quality 
 
33 MAOs may also appeal overturned denials at the third and fourth levels of appeal. 
34 Beneficiary and Family Centered Care Quality Improvement Organizations review and 
determine the outcome of appeals related to discharge and discontinuation notices from 
inpatient acute care, comprehensive outpatient rehab, home health, or skilled nursing 
facilities. 
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Improvement Organization upholds its decision again, the beneficiary may 
appeal to administrative law judges at the third level of appeal.35 
Second-level appeals: Independent Review Entity.  The Independent 
Review Entity reviews appealed denials that MAOs uphold to determine 
whether MAOs made the correct decision.  The Independent Review Entity 
is a CMS contractor that employs physicians and other consultants to review 
the denials and determine whether MAOs complied with relevant Medicare 
requirements.  If the Independent Review Entity upholds or partially 
overturns the MAOs denial, beneficiaries and providers may choose to 
appeal to the next level. 
Third-level appeals: administrative law judge.  Administrative law judges, 
within the Office of Medicare Hearings and Appeals, review appeals of 
Independent Review Entity or Quality Improvement Organization 
decisions.36  If the beneficiary, provider, or MAO is dissatisfied with the 
decision of the administrative law judge, they may choose to appeal to the 
next level.  
Fourth-level appeals: Medicare Appeals Council.  The Medicare Appeals 
Council, within the Departmental Appeals Board, reviews beneficiary, 
provider, and MAO appeals of decisions by an administrative law judge.  
The Council provides the last level of review within the Department of 
Health and Human Services Medicare Advantage appeals process.  If 
beneficiaries, providers, or MAOs are dissatisfied with the decision of the 
Council, they may appeal to Federal district court by filing a civil action.  
 
35 Under some circumstances, beneficiaries may appeal directly to administrative law judges 
when the Quality Improvement Organization upholds an MAOs decision.  For additional 
details on Quality Improvement Organization appeals, see 42 CFR  422.622 and CMS, 
Medicare Managed Care Manual, Chapter 13, sections 90.2 and 160. 
36 Beginning in March 2017, appeals at the third level of the administrative appeals process 
may be decided by an administrative law judge or, if a hearing is not necessary, by an 
attorney adjudicator.  See 82 Fed. Reg. 4974, 4981-92 (2017). 
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APPENDIX B: Detailed Methodology 
For this study, we analyzed data to examine (1) the volumes and rates of 
denied services and payments that were appealed and overturned at each 
level of review in Medicare Advantage during 201416, and (2) CMSs 2015 
audit findings and enforcement actions related to denials and appeals in 
Medicare Advantage.  To ensure our understanding of the submitted data 
and documentation, we followed up in writing with officials knowledgeable 
about the program.   
Determining Volumes and Rates of Appeals and Overturned Denials 
During 201416  
To determine the volumes and calculate the rates of appeals and 
overturned denials at each level of the Medicare Advantage appeals process 
for 201416, we analyzed data from CMS, the Office of Medicare Hearings 
and Appeals, and the Departmental Appeals Board.   
MAOs.  To calculate the volumes and rates of appeals and denials 
overturned upon appeal at the MAO level, we collected annual performance 
data from CMS for each MAO contract for 201416.  CMS requires MAOs to 
report annual performance-related data for each contract that they 
administer.37  Among other data, MAOs must report the numbers of 
determinations and their outcomes (i.e., the numbers of requests for 
preauthorization of services and payment that the MAO approved and 
denied) and the numbers of appeals and their outcomes.38  These data go 
through two external reviews to verify the validity of the reported data.39 
In the data sets that CMS provided to OIG, contract-specific data was 
missing from fields where the contract did not meet CMSs data validation 
standards.  For example, some contracts passed data validation standards 
for the number of preauthorization denials overturned upon appeal, but not 
for the number of preauthorization denials upheld.  This prevented us from 
calculating an overturn rate for those contracts.  Therefore, we could not 
include in our analyses any contracts that had missing values in any fields 
that we used in our calculations in a given year.  We analyzed data from a 
total of 581 contracts that submitted validated data in 1 or more of the 
3 years.  The numbers of contracts that were and were not included in our 
analysis for each year, and the numbers of beneficiaries associated with 
those contracts, are outlined in exhibit 7 on page 21.  The contracts that we 
 
37 42 CFR  422.516(a). 
38 These data include requests and appeals received from in-network and out-of-network 
providers. 
39 For more information on CMSs data validation process, see CMSs Part C and Part D data 
validation website. 
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included in our analysis covered between 83 and 89 percent of beneficiaries 
each year. 
Exhibit 7: OIG could not include between 86 and 106 contracts in each year of analysis  
because some of the data for those contracts did not meet CMSs validation standards. 
Year  Contracts  Beneficiaries enrolled  Contracts not included  Beneficiaries enrolled 
included in  in contracts included  because of data  in contracts not 
OIG analysis  in analysis  validation issues  included in analysis 
2014  409  12,612,173  106  1,992,547 
2015  419  12,831,596  95  2,627,704 
2016  422  15,083,075  86  1,825,944 
Source: OIG analysis of 201416 Medicare Advantage annual performance data, 2018. 
 
Using the annual performance data for contracts with validated data, we 
examined the outcomes of the 1.3 billion initial preauthorization and 
payment decisions and the 863,217 appeal decisions that MAOs issued 
during 201416.  We calculated the total number of initial requests that 
MAOs denied during the 3 years.  We also calculated the total number of 
appealed denials that MAOs fully and partially overturned during the 
3 years.  To calculate the overall overturn rate, we divided the total number 
of fully and partially overturned appealed denials by the total number of 
overturned, partially overturned, and upheld denials.  See appendix C for 
the volumes and rates of MAO appeal outcomes by year. 
Because first-level appeals are filed with either the MAO or the Quality 
Improvement Organization, to calculate the total number of first-level 
appeals and the overall appeal rate for the contracts with validated data, we 
analyzed appeals data from both sources.  To calculate the total number of 
first-level appeals for contracts with validated data, we added the 
863,217 first-level appeals filed with MAOs to the 257,852 appeals filed with 
the Quality Improvement Organization for those same contracts during 
201416.  To calculate the first-level appeal rate for the contracts in our 
analysis, we divided the total number of first-level appeals by the total 
number of denials issued by the contracts during 201416.  This calculation 
did not include dismissed appeals because CMS did not require MAOs to 
report that data during 201415.  See appendix E for the volume and rate of 
first-level appeals by year.  
In the annual performance data, MAOs report the number of appeal 
decisions that they issued in each year, but not the dates the appeals were 
filed or denials were issued.  Therefore, some of the appeal decisions made 
early in 2014 were likely for denials issued in 2013, which were not captured 
in our data.  Similarly, some of the denials issued at the end of 2016 were 
likely not appealed until 2017, so those appeal decisions were also not 
captured in our data.  We could not adjust the appeal rate based on when 
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denials were issued and appeals filed, so we calculated the first-level appeal 
rate by dividing the total number of appeal decisions issued during the 
3 years by the number of denials issued during the same period. 
To examine the contract-specific first-level appeal rates and the 
contract-specific MAO denial overturn rates, we analyzed the 2016 annual 
performance data for the 422 contracts that reported validated data.  We 
calculated the ranges and medians and reviewed the distributions of the 
contract-specific rates.  Because contract-specific rates can be skewed by 
low volumes, we did not include low-volume contracts in this analysis.  For 
the contract-specific appeal rate, we analyzed data only for the 
417 contracts that issued at least 50 denials.  Similarly, for the 
contract-specific MAO overturn rate, we analyzed data only for the 
320 contracts that received at least 50 MAO appeals. 
Independent Reviewers.  To calculate the volumes and rates of overturned 
denials for the independent reviewers, we collected data on appeals 
received by each entity during 201416 from CMS, the Office of Medicare 
Hearings and Appeals, or the Departmental Appeals Board.  Because 
independent reviewers reported their own appeals data, we were able to 
examine higher level appeals for all MAO contracts, including contracts that 
we could not examine at the MAO-level because of data validation issues.   
To calculate the volume of denials overturned by each reviewer during 
201416, we added the number of overturned denials to the number of 
partially overturned denials.  To calculate the denial overturn rates, we 
divided the number of overturned and partially overturned denials by the 
number of denials that were overturned, partially overturned, or upheld by 
the reviewer.  We did not examine appeals for which the entity did not issue 
a decision based on the merits of the case, such as appeals that were 
dismissed, withdrawn, or still pending a decision.  For appeals to the 
Medicare Appeals Council, we calculated the volumes and rates of 
overturned denials for cases filed by beneficiaries and providers only, and 
did not examine cases filed by MAOs.  See appendix D for the volume and 
rate of overturned denials for each independent reviewer by year. 
Assessing CMSs 2015 Audit Findings and Enforcement Actions 
To determine the number of contracts that CMS cited for each type of 
violation, we analyzed the final audit reports that CMS issued to MAOs that 
were audited for Medicare Advantage Organization Determinations, 
Appeals, and Grievances during 2015.  We reviewed the reports for the 
19 audited MAOs that collectively administered 140 contracts.   
To determine the amount of civil money penalties that were issued in 
response to the 2015 Medicare Advantage audit findings, and to examine 
the reasons for the penalties, we reviewed agency documentation for the 
nine MAOs that received a penalty.  To describe the violations that led to 
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sanctions for two MAOs, we reviewed the Notices of Imposition of 
Immediate Intermediate Sanctions that CMS issued to the MAOs.  To 
examine the impact of the civil money penalties and sanctions on MAOs 
Star Ratings, we reviewed Star Ratings data from 2016 to 2018 and 
requested clarifications from CMS about their process. 
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APPENDIX C: Volumes and Rates of MAO Appeal 
Outcomes, 201416 
  2014  2015  2016  Total 
MAO contracts included in this analysis  409  419  422  581* 
Number of appeals filed with MAOs   277,098  279,824  306,295  863,217 
Number of fully overturned denials   186,883  192,041  228,031  606,955 
Number of partially overturned denials   20,495  18,858  2,594  41,947 
Number of denials upheld   69,720  68,925  75,670  214,315 
         
Rate of successful appeal (fully or partially  74.84%  75.37%  75.30%  75.17% 
overturned denials)  
Rate of fully overturned denials  67.44%  68.63%  74.45%  70.31% 
Rate of partially overturned denials  7.40%  6.74%  0.85%  4.86% 
Rate of upheld denials  25.16%  24.63%  24.70%  24.83% 
*This represents the total number of unique contracts included in our analyses. 
Source: OIG analysis of 201416 annual performance data for contracts that reported validated data, 2018.  
 
 
 
 
 
 
 
 
 
 
 
 
 
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APPENDIX D: Volumes and Rates of Overturned 
Denials by Independent Reviewers, 201416 
  2014  2015  2016  Total 
Level 1: Quality Improvement Organization 
Number of appeal decisions issued  77,023  88,423  94,480  259,926 
Number of denials overturned or   23,339  22,334  21,356  67,029 
partially overturned 
Rate of denials overturned  30.30%  25.26%  22.60%  25.79% 
 
Level 2: Independent Review Entity 
Number of appeal decisions issued  33,734  36,457  45,796  115,987 
Number of denials overturned or   3,718  3,530  4,208  11,456 
partially overturned 
Rate of denials overturned  11.02%  9.68%  9.19%  9.88% 
 
Level 3: Administrative Law Judge 
Number of appeal decisions issued  1,145  1,515  1,632  4,292 
Number of denials overturned or   251  481  430  1,162 
partially overturned 
Rate of denials overturned  21.92%  31.75%  26.35%  27.07% 
 
Level 4: Medicare Appeals Council 
Number of appeal decisions issued  139  97  30  266 
for cases brought by beneficiaries and 
providers 
Number of denials overturned or  38  18  6  62 
partially overturned for these cases 
Rate of denials overturned in  27.34%  18.56%  20.00%  23.31% 
favor of beneficiaries and 
providers 
Source: OIG analysis of 201416 data from CMS, the Office of Medicare Hearings and Appeals, and the Departmental Appeals Board, 2018. 
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APPENDIX E: Volume and Rate of FirstLevel 
Appeals, 201416 
  2014  2015  2016  Total 
MAO contracts included in this analysis  409  419  422  581* 
Number of denials issued (full and partial)  28,907,329  35,662,934  36,565,990  101,136,253 
Total number of first-level appeals  348,058  365,016  407,995  1,121,069 
Number of appeals filed with MAOs for these  277,098  279,824  306,295  863,217 
contracts  
Number of appeals filed with the Quality  70,960  85,192  101,700  257,852 
Improvement Organization for these contracts  
Rate of first-level appeal   1.20%  1.02%  1.12%  1.11% 
*This represents the total number of unique contracts included in our analyses. 
Source: OIG analysis of 201416 annual performance data and Quality Improvement Organization data for contracts that reported validated data, 
2018.  
 
 
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APPENDIX F:  CMS Comments 
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ACKNOWLEDGMENTS 
Rosemary Rawlins served as the team leader for this study, and Ivy Ngo 
served as the lead analyst.  Others in the Office of Evaluation and 
Inspections who conducted the study include Sarah Ambrose.  Office of 
Evaluation and Inspections staff who provided support include Clarence 
Arnold, Joe Chiarenzelli, Evan Godfrey, and Michael Novello.  Other Office 
of Inspector General staff who provided support include Jessica Swanstrom.  
This report was prepared under the direction of Blaine Collins, Regional 
Inspector General for Evaluation and Inspections in the San Francisco 
regional office, and Abby Amoroso and Michael Henry, Deputy Regional 
Inspectors General.  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
To obtain additional information concerning this report or to obtain copies, 
contact the Office of Public Affairs at Public.Affairs@oig.hhs.gov.  
Medicare Advantage Appeal Outcomes and Audit Findings Raise Concerns About Service and Payment Denials  31 
OEI-09-16-00410   
ABOUT THE OFFICE OF INSPECTOR GENERAL 
The mission of the Office of Inspector General (OIG), as mandated by Public 
Law 95-452, as amended, is to protect the integrity of the Department of 
Health and Human Services (HHS) programs, as well as the health and 
welfare of beneficiaries served by those programs.  This statutory mission is 
carried out through a nationwide network of audits, investigations, and 
inspections conducted by the following operating components: 
Office of Audit  The Office of Audit Services (OAS) provides auditing services for HHS, either 
by conducting audits with its own audit resources or by overseeing audit 
Services 
work done by others.  Audits examine the performance of HHS programs 
and/or its grantees and contractors in carrying out their respective 
responsibilities and are intended to provide independent assessments of 
HHS programs and operations.  These assessments help reduce waste, 
abuse, and mismanagement and promote economy and efficiency 
throughout HHS. 
Office of Evaluation  The Office of Evaluation and Inspections (OEI) conducts national evaluations 
to provide HHS, Congress, and the public with timely, useful, and reliable 
and Inspections 
information on significant issues.  These evaluations focus on preventing 
fraud, waste, or abuse and promoting economy, efficiency, and 
effectiveness of departmental programs.  To promote impact, OEI reports 
also present practical recommendations for improving program operations.   
Office of  The Office of Investigations (OI) conducts criminal, civil, and administrative 
investigations of fraud and misconduct related to HHS programs, 
Investigations 
operations, and beneficiaries.  With investigators working in all 50 States 
and the District of Columbia, OI utilizes its resources by actively 
coordinating with the Department of Justice and other Federal, State, and 
local law enforcement authorities.  The investigative efforts of OI often lead 
to criminal convictions, administrative sanctions, and/or civil monetary 
penalties. 
Office of Counsel to  The Office of Counsel to the Inspector General (OCIG) provides general 
legal services to OIG, rendering advice and opinions on HHS programs and 
the Inspector 
operations and providing all legal support for OIGs internal operations.  
General 
OCIG represents OIG in all civil and administrative fraud and abuse cases 
involving HHS programs, including False Claims Act, program exclusion, and 
civil monetary penalty cases.  In connection with these cases, OCIG also 
negotiates and monitors corporate integrity agreements.  OCIG renders 
advisory opinions, issues compliance program guidance, publishes fraud 
alerts, and provides other guidance to the healthcare industry concerning 
the anti-kickback statute and other OIG enforcement authorities.