MEDICARE 

ADVANTAGE

CMS Should Fully 

Develop Plans for 

Encounter Data and 

Assess Data Quality 

before Use

Report to the Ranking Member, 

Committee on Ways and Means, 

House of Representatives

July 2014

GAO-14-571

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-14-571, a report to the 

Ranking Member, Committee on Ways and 

Means, House of Representatives

July 2014

MEDICARE ADVANTAGE

CMS Should Fully Develop Plans for Encounter Data 

and Assess Data Quality before Use

Why GAO Did This Study

Medicare Advantage—the private plan 

alternative to the traditional Medicare 

program—provides health care for 

nearly 15.5 million enrollees, about 

30 percent of all Medicare 

beneficiaries. After a multiyear rollout, 

CMS began collecting encounter data 

in January 2012. GAO was asked to 

review CMS’s plans for using MA 

encounter data and its efforts to 

validate the data’s quality. 

This report examines (1) how the 

scope of MA encounter data compare 

with CMS’s current risk adjustment 

data, (2) the extent to which CMS has 

specified plans and time frames to use 

encounter data for risk adjustment and 

other purposes, and (3) the extent to 

which CMS has taken appropriate 

steps to ensure MA encounter data’s 

completeness and accuracy. In 

addition to reviewing laws, regulations, 

and guidance on MA encounter data 

collection and reporting, GAO 

interviewed CMS officials and 

representatives of MAOs. GAO also 

compared CMS’s activities to the 

protocol CMS developed to validate 

Medicaid encounter data—comparable 

data collected and submitted by 

entities similar to MAOs.

What GAO Recommends

CMS should establish specific plans for 

using MA encounter data and 

thoroughly assess data completeness 

and accuracy before using the data to 

risk adjust payments or for other 

purposes. While in general agreement, 

HHS did not specify a date by which 

CMS will develop plans for all 

authorized uses of encounter data and 

did not commit to completing data 

validation before using the data for risk 

adjustment in 2015. 

What GAO Found

The Centers for Medicare & Medicaid Services (CMS) is collecting Medicare 

Advantage (MA) encounter data—information on the services and items 

furnished to enrollees—that are more comprehensive than the beneficiary 

diagnosis data the agency currently uses to risk adjust capitated payments to MA 

organizations (MAO). CMS, an agency within the Department of Health and 

Human Services (HHS), makes these adjustments to reflect the expected health 

care costs of MA enrollees. Encounter data have many more elements—

including procedure codes and provider payments—from a wider range of 

provider types—such as home health agencies and skilled nursing facilities—

thus expanding the scope of sources for diagnosis and other information.

CMS has not fully developed plans for using MA encounter data. The agency 

announced that it will begin using diagnoses from both encounter data and the 

data it currently collects for risk adjustment to determine payments to MAOs in 

2015. However, CMS has not established time frames or specific plans to use 

encounter data for other potential purposes. 

CMS has taken some, but not yet all, appropriate actions to ensure that MA 

encounter data are complete and accurate. (See figure.) The agency has 

established timeliness and frequency requirements for data submission, but has 

not yet developed requirements for completeness and accuracy. Also, the 

agency has certified nearly all MAOs to transmit encounter data. Although CMS 

performs automated checks to determine whether key data elements are 

completed and values are reasonable, it has not yet performed statistical 

analyses that could detect more complex data validity issues. For example, CMS 

has not yet generated basic statistics from the data by demographic group or 

provider type to identify inconsistencies or gaps in the data. Also, it has not yet 

reviewed medical records to verify diagnoses and services listed in encounter 

data or reported what it has learned about data quality to MAOs. Agency officials 

told GAO they intend to perform these additional quality assurance activities but 

have not established time frames to do so.

Status of the Centers for Medicare & Medicaid Services’ Activities to Validate Medicare 

Advantage (MA) Encounter Data, May 2014

View GAO-14-571. For more information, 

contact James Cosgrove at (202) 512-7114 or 

cosgrovej@gao.gov.
Page i GAO-14-571 Medicare Advantage Encounter Data

Letter 1 

Background 6

MA Encounter Data Are More Comprehensive and Are Reported 

More Frequently than Current Risk Adjustment Data 9

With MA Encounter Data at Expected Volume, CMS Will Begin 

Using Some Data for Risk Adjustment in 2015, but Its Plans for 

Other Uses Remain Undeveloped 12

CMS Has Performed Some Steps to Ensure That MA Encounter 

Data Are Complete and Accurate but Has Not Yet Fully 

Validated the Data 16

Conclusions 24

Recommendations for Executive Action 25

Agency Comments and Our Evaluation 25

Appendix I Select Centers for Medicare & Medicaid Services (CMS) Outreach 

Efforts on Medicare Advantage (MA) Encounter Data 28

Appendix II Summary of Automated Reports for Medicare Advantage (MA) 

Encounter Data Submissions 29

Appendix III Comments from the Department of Health and Human Services 30

Appendix IV GAO Contact and Staff Acknowledgments 33

Related GAO Products 34

Table

Table 1: Type and Number of Medicare Advantage (MA) 

Encounter Data Elements 10

Contents
Page ii GAO-14-571 Medicare Advantage Encounter Data

Figures

Figure 1: Number of Medicare Advantage Encounter Data Files 

Submitted, August 2012 through April 2014 13

Figure 2: Status of the Centers for Medicare & Medicaid Services’ 

Actions to Validate Medicare Advantage (MA) Encounter 

Data, May 2014 16

Abbreviations

CMS Centers for Medicare & Medicaid Services

CSSC Customer Service and Support Center

EQRO external quality review organization

FFS fee-for-service 

HHS Department of Health and Human Services

MA Medicare Advantage

MAO Medicare Advantage organization

MCO managed care organization

RAPS Risk Adjustment Processing System

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Page 1 GAO-14-571 Medicare Advantage Encounter Data

441 G St. N.W.

Washington, DC 20548

July 31, 2014

The Honorable Sander M. Levin

Ranking Member

Committee on Ways and Means

House of Representatives

Dear Mr. Levin:

Since 1990, we have designated Medicare as a high-risk program, given 

its size, complexity, and susceptibility to payment errors from various 

causes.1 Medicare’s serious long-term financial challenges heighten the 

need for the Centers for Medicare & Medicaid Services (CMS) to closely 

examine expenditures in the Medicare Advantage (MA) program—the 

private plan alternative to the Medicare fee-for-service (FFS) program.2

For the MA program, CMS contracts with MA organizations (MAO) to 

provide covered services to beneficiaries who enroll in one of their plans.3

As of April 2014, CMS had 571 contracts with MAOs that served nearly 

15.5 million enrollees, accounting for approximately 30 percent of all 

Medicare beneficiaries. The Congressional Budget Office has projected 

that enrollment in MA plans will increase to about 21 million enrollees by 

2023 and that Medicare payments to MAOs will grow from about 

$154 billion in 2014 to about $250 billion in 2023.4

 

1

GAO, High-Risk Series: An Update, 

As the MA program 

expands, setting appropriate payments to MAOs and making Medicare a 

more prudent purchaser of health care services will remain critical.

GAO-13-283 (Washington, D.C.: February 2013).

2

Although names have changed over the years, in this report we refer to the agency within 

the Department of Health and Human Services (HHS) that administers Medicare as CMS 

and the private plan program as MA.

3

An MAO may have multiple contracts that cover different geographic regions or offer 

different types of plans. Each contract may include multiple health plan benefit packages. 

MA plans must cover all Medicare Part A and Part B services except for hospice care. 

Part A includes inpatient care in hospitals and skilled nursing facilities and certain home 

health care services. Part B includes physician services, outpatient care, certain home 

health services, and durable medical equipment. In addition, MA plans usually offer 

prescription drug coverage and may offer extra benefits, such as vision, hearing, and 

dental coverage.

4

Congressional Budget Office, CBO’s May 2013 Medicare Baseline (Washington, D.C.: 

May 14, 2013).
 

Page 2 GAO-14-571 Medicare Advantage Encounter Data

Whereas Medicare pays FFS providers who submit claims for 

reimbursement after services have been provided, Medicare pays MAOs 

a fixed monthly amount per enrollee to cover all the services enrollees 

use. CMS adjusts payments to MAOs to reflect enrollees’ expected health 

care costs, with higher payments for enrollees who are predicted to be 

sicker and lower payments for those predicted to be healthier—a process 

known as risk adjustment. MAOs can incur losses if aggregate costs 

exceed payments but can retain savings if aggregate costs are less than 

payments.

Since the 1980s, the methodology for setting MAO payments has 

changed several times to better reflect the expected health care costs of 

plan enrollees and to mitigate the effects of potential favorable selection.5

The Tax Equity and Fiscal Responsibility Act of 1982 authorized payment 

for full-risk Medicare plans on the basis of a fixed per beneficiary rate set 

at 95 percent of the estimated average cost of beneficiaries in Medicare 

FFS.6 We and other researchers criticized the accuracy of the 

adjustment, which resulted in excess payments to plans that enrolled 

healthier beneficiaries with below-average health care costs.7 In an effort 

to refine the payment methodology, the Balanced Budget Act of 1997 

required CMS to use health status measures to adjust plan payments and 

required the agency to collect inpatient hospital data for this purpose.8

 

5

In the MA program, favorable selection can occur if an MAO disproportionately enrolls 

healthier beneficiaries whose costs are generally lower than those of the average 

Medicare FFS beneficiary. If the methodology for setting MAO payments is not refined 

enough to reflect the expected below-average costs of such healthier beneficiaries, 

payments to the MAO in excess of the MAO's expected actuarial costs would result. 

In 

implementing these requirements in 2000, CMS selected a risk 

adjustment method that relied on enrollee demographics augmented with 

hospital inpatient data to measure health status. This risk adjustment 

method more accurately matched MA payments to enrollees’ expected 

total Medicare costs compared with the previous method.

6

Pub L. No. 97-248, § 114, 96 Stat. 324, 341 (1982). CMS estimated average FFS costs 

based on the geographic location of the plans and then adjusted these rates using 

demographic factors such as age, sex, and institutional status.

7

See GAO, Medicare HMOs: HCFA Can Promptly Eliminate Hundreds of Millions in 

Excess Payments, GAO/HEHS-97-16 (Washington, D.C.: Apr. 25, 1997); and Physician 

Payment Review Commission, “Risk Selection and Risk Adjustment in Medicare,” Annual 

Report to Congress (Washington, D.C.: 1996), ch. 15.

8

Pub. L. No. 105-33, § 4001, 111 Stat. 251, 274 (1997).
 

Page 3 GAO-14-571 Medicare Advantage Encounter Data

In 2002, CMS transitioned to collecting a larger set of medical data—via 

the Risk Adjustment Processing System (RAPS)—to risk adjust 

payments. As required by law, the agency began using information on 

enrollee demographics and diagnoses collected from MAOs for services 

provided in physician office, hospital inpatient, and hospital outpatient 

settings to risk adjust payments in 2004.9

In a 2008 final rule, CMS reasserted its authority to collect more detailed 

data, referred to as encounter data.

Using these data in conjunction 

with FFS beneficiaries’ cost and diagnosis information, CMS developed 

the hierarchical condition categories risk adjustment model that uses one 

year’s diagnoses to predict the following year’s health care costs for each 

MA enrollee. Although this model is better than the previous model—

which estimated an MA enrollee’s health status from certain inpatient 

diagnosis and demographic factors—at predicting an enrollee’s costs, it 

has led to overpayments to MAOs because of different diagnostic coding 

patterns between the FFS and MA programs.

10

 

9

The Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 

required that risk adjustment payment models use data from both inpatient and 

ambulatory settings beginning in 2004. Pub. L. No. 106-554, App. F, § 603, 114 Stat. 

2763A-463, 2763A-555 (2000).

Such data include diagnosis and 

treatment information for all medical services and items provided to an 

enrollee, with a level of detail similar to FFS claims. In January 2012, after 

a multiyear rollout, the agency began collecting such data from MAOs via

the Encounter Data System. In the 2008 final rule, CMS stated it would 

use these data for risk adjustment and may also use them for additional 

payment and oversight purposes. The agency plans to discontinue RAPS 

after it begins using MA encounter data for risk adjustment purposes.

10During the implementation of its initial risk assessment model in 2000, CMS had 

required MAOs to submit encounter data. When CMS transitioned to RAPS in 2002, the 

agency relaxed this requirement and allowed MAOs to submit data with fewer data 

elements via RAPS. CMS’s 2008 final rule represents a return to the collection of more 

detailed encounter data. See 73 Fed. Reg. 48434 (Aug. 19, 2008).
 

Page 4 GAO-14-571 Medicare Advantage Encounter Data

Realizing the benefits of encounter data will depend on the quality of the 

data and the data’s suitability for various uses.11

You asked us about CMS’s plans for using MA encounter data and its 

efforts to validate the completeness and accuracy of the data. In this 

report, we examine

CMS has recognized the 

importance of ensuring that the data collected are complete—

representing all encounters for all enrollees—and accurate—representing 

a correct record of all encounters that occurred—given the important 

functions to which the data will be put. Furthermore, CMS has stated that 

the encounter data submitted by MAOs would be used once the agency 

has reviewed and analyzed the submissions to identify and address any 

data issues.

1. how the scope and reporting frequency of MA encounter data 

compare with CMS’s current MA risk adjustment data,

2. the extent to which CMS has gathered MA encounter data and 

specified plans and time frames to use encounter data for risk 

adjusting MA payments and other purposes, and

3. the extent to which CMS has taken appropriate steps to ensure the 

completeness and accuracy of MA encounter data.

For all objectives, we reviewed relevant laws, regulations, and guidance 

pertaining to MA encounter data collection and reporting and RAPS data 

submissions. We also reviewed documents from meetings that CMS has 

held with MAOs and from public presentations on MA encounter data 

collection requirements, the implementation schedule, and specific MAO 

concerns. In addition, we interviewed CMS officials in the Medicare Plan 

Payment Group and other agency components, as well as CMS 

 

11In a review of data that MAOs were required to submit during 2010 and 2011, HHS’s 

Office of Inspector General reported that CMS’s contractor identified 2,134 data issues in 

submissions from 513 of 638 MAOs. The data issues included 1,904 outlier incidents that 

could have reflected either inaccurate reporting or atypical performance. See Department 

of Health and Human Services, Office of Inspector General, CMS Regularly Reviews 

Part C Reporting Requirements Data, but Its Followup and Use of the Data Are Limited, 

OEI-03-11-00720 (March 2014).
 

Page 5 GAO-14-571 Medicare Advantage Encounter Data

contractors. We also interviewed representatives of America’s Health 

Insurance Plans and its member MAOs.12

To determine the extent to which CMS has taken appropriate steps to 

ensure the completeness and accuracy of MA encounter data, we 

compared the agency’s activities to the principal activities identified in its 

2012 protocol for validating Medicaid encounter data that states receive 

from managed care organizations (MCO)—entities that provide Medicaid 

benefits in exchange for a fixed monthly payment. The protocol specifies 

a procedure for assessing the completeness and accuracy of encounter 

data that Medicaid MCOs are required to submit to state agencies.13

Because of the similarities in the type of data—encounter data—and 

entities gathering the data—managed care entities—we refer to the 

protocol in assessing CMS’s actions to ensure MA encounter data 

quality.14

We conducted this performance audit from July 2013 to June 2014 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

To learn about the practical uses of the protocol, we interviewed 

external quality review organizations with experience using the protocol 

and reviewed their documents and other reports on Medicaid encounter 

data validation.

 

12America’s Health Insurance Plans is an industry trade association representing private 

entities that provide health insurance coverage through employers, the individual market, 

and public programs.

13Certain state Medicaid agencies that have relied on MCOs to provide Medicaid services 

have been collecting and using encounter data for over 10 years. State Medicaid agencies 

that contract with MCOs generally must ensure that an independent external quality 

review organization (EQRO) perform a review of each MCO on an annual basis. CMS 

developed protocols for EQROs, including one that can be used to evaluate encounter 

data submissions. See: CMS, EQR Protocol 4: Validation of Encounter Data Reported by 

the MCO (Baltimore, Md.: September 2012).

14Because the CMS encounter data protocol was developed for EQROs reviewing the 

quality of Medicaid encounter data, we adapted it to assess activities that Medicare 

officials could take to validate MA encounter data. Specifically, we modified the first step, 

“to review” requirements for collecting and submitting encounter data, to be “to establish” 

such requirements. We also divided the third step calling for analyzing electronic 

encounter data into two activities: performing automated checks and conducting statistical 

analyses.
 

Page 6 GAO-14-571 Medicare Advantage Encounter Data

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

Although MAOs are responsible for collecting and transmitting encounter 

data to CMS, they rely on the cooperation of providers to submit complete 

and accurate data that conform to agency requirements.15 MAOs gather 

encounter data—which originate from the information in an enrollee’s 

medical record—for their own management and payment purposes. While 

Medicare pays MAOs a fixed monthly amount per enrollee, MAOs may 

compensate providers for services rendered to enrollees under different 

contractual arrangements. Providers paid by their plans on a FFS basis 

submit claims for payment that include the amounts to be reimbursed by 

the MAO.16

After collecting and reviewing these data, MAOs transmit the data to 

CMS. CMS adopted the health insurance industry’s standard claims 

format for reporting MA encounter data. MAOs must use the Health 

Insurance Portability and Accountability Act of 1996-compliant Accredited 

Standards Committee X12 Version 5010 format, which all providers and 

private and public health plans are required to use for electronic claim 

submissions.

In contrast, providers paid by their plans on a capitated 

basis—that is, that receive a designated amount to cover all services for 

an assigned enrollee—record a zero if no payment amount information is 

available. MAOs may include provisions in their contracts with providers 

that require submission of complete and accurate encounter data.

17

 

15In addition to MAOs, other types of Medicare plans, such as Programs for All-Inclusive 

Care for the Elderly plans and cost plans, also submit encounter data to CMS.

By using this standard format, CMS generally avoided 

placing a new requirement on MAOs. 

16CMS requires that MAOs submit information only from adjudicated claims—those that 

the MAOs have paid or denied—not those that have been rejected for payment or are 

pending final payment status.

17The Accredited Standards Committee X12 is an organization that develops standards 

for electronic information exchanges and an implementation guide that health insurers, 

including MAOs, and providers use to build their claims processing software. Virtually all 

MAOs submit encounter data electronically.

Background

MA Encounter Data 

Collection Process
 

Page 7 GAO-14-571 Medicare Advantage Encounter Data

In January 2012, CMS began phasing-in MA encounter data collection by 

type of provider. It began by receiving data on professional encounters 

(such as services performed by physicians), then institutional encounters 

(such as services performed during an inpatient hospital stay), and finally 

durable medical equipment (such as hospital beds and wheelchairs). By 

August 2012, MAOs were submitting data from all types of providers. 

Although CMS requires that MAOs submit encounter data for all items 

and services provided to enrollees, the file formats that CMS currently 

uses preclude MAOs from transmitting data on the utilization of certain 

supplemental MA benefits, such as dental and vision services. Agency 

officials told us they are considering how to address this discrepancy.

To risk adjust payments to MAOs, CMS calculates a risk score—the 

expected health care expenditures for an enrollee compared with the 

average health care expenditures of all beneficiaries—for each MA 

enrollee and Medicare FFS beneficiary. CMS calculates risk scores for 

MA enrollees using diagnosis information provided by MAOs along with 

cost and utilization information from Medicare’s FFS claims systems. This 

approach assumes that diagnostic coding practices are the same in MA 

and FFS. Risk scores for beneficiaries with the same diagnoses and 

characteristics should be identical, regardless of whether the beneficiaries 

are in MA or Medicare FFS. However, MAOs have a greater incentive 

than FFS providers to make sure that all diagnoses are coded, as this can 

increase enrollees’ risk scores and ultimately the payments plans receive. 

In part because of this incentive, risk scores for MA enrollees may tend to 

be higher relative to the risk scores of FFS beneficiaries who are in 

similar health and have identical characteristics.

To help ensure that MAOs are not overpaid as a result of these 

differences in diagnostic coding, CMS makes a separate adjustment to 

payments to MAOs. In 2012 and 2013, we reported inaccuracies in 

CMS’s methodology for adjusting MA payments.18

 

18See GAO, Medicare Advantage: CMS Should Improve the Accuracy of Risk Score 

Adjustments for Diagnostic Coding Practices, 

Specifically, we 

estimated in 2013 that MAOs received excess payments of between 

$3.2 billion and $5.1 billion from 2010 through 2012 because CMS’s 

GAO-12-51 (Washington, D.C.: Jan. 12, 

2012) and GAO, Medicare Advantage: Substantial Excess Payments Underscore Need 

for CMS to Improve Accuracy of Risk Score Adjustments, GAO-13-206 (Washington, 

D.C.: Jan. 31, 2013).

Risk Adjustment
 

Page 8 GAO-14-571 Medicare Advantage Encounter Data

adjustment to account for differences in risk scores was too low. We 

recommended that the CMS Administrator take steps to improve the 

accuracy of the adjustment made for differences in diagnostic coding 

practices between MA and Medicare FFS. The agency did not formally 

comment on this recommendation and, as of March 2014, it has not 

improved the accuracy of this adjustment. Consistent with our finding that 

this adjustment was too low, Congress has taken steps to increase the 

statutory minimum annual adjustment.19

State Medicaid agencies that contract with MCOs typically require them to 

report encounter data to the state for various purposes.20

State Medicaid agencies may assess encounter data to determine 

whether MCOs meet requirements for complete and accurate reporting. 

For example, they may calculate the proportion of encounter data files 

denied or examine the rates of services used per enrollee against specific 

benchmarks—target rates. As another example, they may require MCOs 

to list encounter data that were corrected or voided and provide reasons 

for these actions. They may also have the medical records examined to 

verify that the information submitted in encounter data is complete and 

accurate. For example, this review may determine whether services 

As part of 

encounter data collection, the agencies may also establish requirements 

regarding the timeliness, completeness, and accuracy of Medicaid 

encounter data in contracts with MCOs. For example, to encourage timely 

submission and promote data quality, they may require MCOs to submit 

data within a certain time frame and attest that the data submitted are 

complete and accurate. State Medicaid agencies may then use these 

data for a variety of purposes, such as setting payment rates, evaluating 

the performance of MCOs, and providing reports to their legislatures and 

the public.

 

19The American Taxpayer Relief Act of 2012 increased the statutory minimum annual 

adjustment for coding differences beginning in 2014. Pub. L. No. 112-240, § 639, 

126 Stat. 2313, 2357 (2013).

20The Patient Protection and Affordable Care Act of 2010 strengthened the requirement 

for Medicaid managed care organizations to provide encounter data to states and 

permitted the federal government to withhold federal matching payments to states for 

medical care provided to individuals for whom the state does not report encounter data to 

the Medicaid Statistical Information System in a timely manner. Pub. L. No. 111-148, 

§ 6402(c), 124 Stat. 119, 757 (2010).

State Medicaid Agency 

Uses of and Requirements 

for Encounter Data
 

Page 9 GAO-14-571 Medicare Advantage Encounter Data

submitted in encounter data were performed or confirm that enrollees 

have specific diagnoses.

Compared with information available in RAPS data, MA encounter data, 

with more elements reported, provide CMS with more comprehensive 

information on all enrollee diagnoses as well as the cost and types of 

services and items provided to enrollees. Each RAPS data file—an 

electronic record that contains an enrollee’s diagnosis information from 

one or more providers—contains between 1 and 10 diagnosis groupings. 

Although all diagnoses are included in these groupings, not all groupings 

are used in CMS’s risk adjustment model. For each diagnosis grouping, 

there are 9 RAPS data elements, including the “from” and “through” dates 

of service,21 the diagnosis code, and the provider type.22

 

21The “from” and “through” dates of service define when an enrollee received medical 

treatment. For outpatient and physician services, these dates of service may be identical. 

For inpatient services, these dates are usually different from each other and reflect the 

dates of admission to and discharge from a facility. The diagnosis code is used to identify 

the clinical reason for an enrollee’s treatment.

Each RAPS data 

file also includes 31 other elements that are used for data processing and 

other purposes. Thus, depending on the number of diagnosis groupings, 

each RAPS data file contains between 40 and 121 data elements. In 

contrast, each encounter data file—an electronic record that contains 

detailed information for each medical service and item provided to an 

enrollee—includes approximately 200 data elements. These elements 

include information on the patients, providers, and payers of services and 

items, as well as the dates of service and procedure codes. They also 

include information on the primary and supplemental diagnoses 

associated with the service or item. Whereas RAPS data are limited to 10 

diagnosis groupings, encounter data can include up to 12 diagnoses for 

professional services and 25 diagnoses for institutional services. Table 1 

summarizes the types and number of encounter data elements.

22Diagnosis groupings may also include data obtained from enrollee risk assessments—

visits to all MA enrollees’ homes to obtain diagnostic information. Effective January 1, 

2014, diagnoses obtained from such visits are to be flagged in RAPS data. To perform 

these assessments, MAOs generally contract with health care professionals who are not 

the enrollees’ primary care providers. According to CMS, there appears to be little 

evidence that enrollees’ primary care providers use the information collected in these 

assessments. CMS has expressed concern that these assessments primarily serve as a 

vehicle for reporting additional diagnoses and, as a result, increasing payments to MAOs.

MA Encounter Data 

Are More 

Comprehensive and 

Are Reported More 

Frequently than 

Current Risk 

Adjustment Data
 

Page 10 GAO-14-571 Medicare Advantage Encounter Data

Table 1: Type and Number of Medicare Advantage (MA) Encounter Data Elements

Type of information

Number of 

data elements Examples of data elements

Claim 44 Date and time period, diagnosis codes, related causes, and monetary amount

MA enrollee 44 Name, address, date of birth, and gender

Data processing and submission 39 Creation dates and times and security information

Service 28 Service date, procedure code, and monetary amount

MA organization or other payer 22 Name and address

Provider 14 Name, address, and tax identification number

Ambulance 12 Ambulance pick-up and drop-off addresses

MA organization or third-party submitter 9 Name and identifier

Centers for Medicare & Medicaid Services 5 Name and identifier

Source: GAO analysis of CMS information. | GAO-14-571

Note: Some examples above are a summary of various data elements. For example, an address 

includes four separate data elements: the street, city, state, and zip code.

In addition, MA encounter data are more comprehensive than RAPS data 

because they include information that originates from a wider range of 

provider types. Specifically, only physicians and hospital inpatient and 

outpatient facilities report enrollee diagnoses for RAPS data collection. Of 

these provider types, physicians provide approximately 80 percent of the 

diagnostic information used for risk adjustment, according to one 

estimate.23 As a result, CMS’s current risk adjustment model relies 

primarily on diagnoses that physicians report. In contrast, more provider 

types report encounter data, significantly expanding the scope of sources 

for diagnosis and other information. In addition to physicians and hospital 

inpatient and outpatient facilities, many other provider types—including 

ambulance providers, clinical laboratories, durable medical equipment 

suppliers, home health providers, mental health providers, rehabilitation 

facilities, and skilled nursing facilities—report encounter data.24

 

23The Coding Network, HCC Coding Audits, accessed May 7, 2014, 

http://www.codingnetwork.com/coding-audits-compliance/hcc-audits. 

24CMS officials and industry representatives noted that encounter data collection has 

been challenging for certain types of providers, including home health providers and 

skilled nursing facilities. CMS has taken steps to address specific challenges, such as 

allowing home health providers and skilled nursing facilities to temporarily submit 

encounter data with certain missing information for 7 months more than originally planned.
 

Page 11 GAO-14-571 Medicare Advantage Encounter Data

The fact that CMS has taken a comprehensive approach in collecting 

encounter data has raised concerns for some MAOs. Because MAOs 

generally gather such data from certain providers for payment and plan 

management purposes, the CMS encounter data reporting requirements 

may not have significantly added to their ongoing data gathering 

activities. However, industry representatives noted that submitting 

encounter data from a broad array of provider types may not add to 

information on diagnoses CMS uses for risk adjustment. Agency officials 

acknowledged that many encounter data elements MAOs report will not 

be used for risk adjustment but will allow CMS to more completely identify 

the services furnished to enrollees.

Finally, CMS requires MAOs to submit encounter data more frequently 

than RAPS data. MAOs submit RAPS data at least quarterly to CMS, with 

each submission representing approximately one-fourth of the RAPS data 

an MAO submits during the year. In contrast, CMS requires MAOs to 

submit encounter data weekly, biweekly, or monthly depending on their 

number of enrollees. MAOs with more than 100,000 enrollees must 

submit encounter data on a weekly basis, those with between 50,000 and 

100,000 enrollees on a biweekly basis, and those with fewer than 50,000 

enrollees on a monthly basis. CMS also requires MAOs to submit 

encounter data within 13 months from the date of service.25

Representatives of MAOs noted that they are able to meet CMS’s 

encounter data frequency requirements, and one MAO told us that it 

sometimes chooses to submit encounter data more frequently—three 

times a week rather than once a week—to reduce the size of each 

submission.

 

25CMS officials stated that this requirement is based on the 12-month timely filing 

requirement for Medicare FFS claims and allows an additional month for MAOs to review 

and submit encounter data. CMS has a reconciliation process to account for late data 

submissions, whereby it recalculates the risk factors for affected MA enrollees to 

determine whether adjustments to payments are necessary.
 

Page 12 GAO-14-571 Medicare Advantage Encounter Data

CMS is receiving MA encounter data from nearly all MAOs on all types of 

services at the monthly volume that CMS officials told us they expected. 

After increasing significantly from August 2012—the first month that 

MAOs submitted encounter data on services from all provider types—

through May 2013, the volume of MA encounter data has had some 

fluctuations from month to month. (See fig. 1.) Specifically, the volume of 

encounter data files—electronic records containing detailed information 

for each medical service and item provided to an enrollee—rose sharply 

from 2.0 million data files in August 2012 to 49.6 million data files in May 

2013. From June 2013 through April 2014, the volume has fluctuated 

between 34.2 and 54.2 million data files each month.26 CMS officials told 

us that they expect to continue receiving encounter data files at a rate of 

approximately 40 to 50 million files per month throughout 2014.27

 

26Accounting for the increase in the number of MA enrollees during this time, the volume 

of MA encounter data had a similar pattern of growth. Encounter data files per enrollee 

grew from 0.1 in August 2012 to 3.4 in May 2013 and has remained between 2.3 and 3.5 

from June 2013 through April 2014.

In total, 

MAOs submitted about 497.9 million encounter data files in 2013 

comprising approximately 416.5 million professional encounter data files, 

64.9 million institutional files, and 16.5 million durable medical equipment 

files.

27Since reporting began, CMS has observed a reduction in the amount of time between 

the date of service and the date by which MAOs submit encounter data.

With MA Encounter 

Data at Expected 

Volume, CMS Will 

Begin Using Some 

Data for Risk 

Adjustment in 2015, 

but Its Plans for Other 

Uses Remain 

Undeveloped
 

Page 13 GAO-14-571 Medicare Advantage Encounter Data

Figure 1: Number of Medicare Advantage Encounter Data Files Submitted, August 2012 through April 2014

Note: Encounter data files are electronic records that contain detailed information for each medical 

service and item provided to a Medicare Advantage enrollee. Testing Medicare Advantage encounter 

data transmissions on all types of services was completed in August 2012 following a 7-month period 

of phased implementation. In 2012, the Centers for Medicare & Medicaid Services tested encounter 

data file transmissions for professional services from January 4 through May 31, for institutional 

services from April 30 through August 31, and for durable medical equipment from June 15 through 

August 31.

In April 2014, CMS announced that it will use MA encounter data as part 

of risk adjustment and no longer rely solely on RAPS data. The agency 

will start using the diagnosis information from MA encounter data as well 

as the diagnoses in RAPS data from 2014 dates of service when 

calculating 2015 enrollee risk scores.28

 

28Under CMS’s data submission requirements, plans have up to 13 months from the 

original date of service to amend their encounter data. Therefore, MAOs would have until 

2016 to correct diagnosis codes from certain encounters with 2014 dates of service even if 

encounter data were used to risk adjust payments in 2015.

Specifically, CMS intends to use 

both data sources to obtain diagnoses reported from hospital inpatient 

and outpatient facilities and physicians. Further, the agency announced 
 

Page 14 GAO-14-571 Medicare Advantage Encounter Data

that it will use all diagnoses equally, whether they came from RAPS data 

or MA encounter data, when calculating risk scores. CMS officials said 

that RAPS data generally have all MA enrollees’ diagnoses, so they do 

not anticipate receiving a significant amount of additional diagnoses from 

MA encounter data. CMS officials described these efforts to begin using 

diagnoses from MA encounter data as a key step in making full use of the 

data in risk adjusting payments. Furthermore, officials stated that 2015—

and perhaps subsequent years—will serve as a time to transition from 

using RAPS data to using MA encounter data to calculate risk scores. 

Once MA encounter data are deemed sufficiently complete and accurate 

for use in risk adjusting payments, CMS plans to discontinue RAPS data 

collection and transition entirely to using MA encounter data.29

Although CMS identified a number of other potential uses for MA 

encounter data in the 2008 final rule,30 the agency has yet to determine 

how it would use the data for any of these additional purposes. 

Adequately developing plans for encounter data, and communicating 

them to MAOs, may improve CMS’s efforts to manage aspects of the 

Medicare program.31

• Revise CMS’s risk adjustment model for MA payments. CMS 

intends to improve its model for risk adjustment using MA enrollee 

cost, diagnoses, and utilization information. However, agency officials 

noted that developing such a model is an involved process and would 

take a number of years to complete.

Agency officials told us that they have deferred 

planning efforts to use MA encounter data for any purposes besides using 

it as a different way to collect diagnosis information for the current risk 

adjustment model. Accordingly, CMS’s plans remain undeveloped and it 

has not established specific time frames for any of the following potential 

uses outlined in 2008:

 

29MAOs we spoke with indicated their desire that CMS clarify which data are considered 

usable for risk adjustment purposes. Agency officials stated that its proposal responds to 

MAOs’ concerns about how and when the data will be used for risk adjustment.

30In the 2008 final rule, CMS listed the following potential data uses without further 

explanation: (i) updating risk adjustment models, (ii) calculating Medicare disproportionate 

share percentages, (iii) conducting quality review and improvement activities, and (iv) 

Medicare coverage purposes. 73 Fed. Reg. 48434 (Aug. 19, 2008).

31GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1

(Washington, D.C.: November 1999).
 

Page 15 GAO-14-571 Medicare Advantage Encounter Data

• Conduct quality review and improvement activities. Such activities 

refer to assessing the performance of providers and MAOs in 

delivering care. For example, CMS could use encounter data to 

develop new MA quality measures.

• Calculate Medicare disproportionate share hospital percentages. 

CMS increases payments to hospitals serving a disproportionate 

number of low-income patients through the disproportionate share 

hospital adjustment. The agency currently incorporates the number of 

hospital days for MA enrollees in its calculation of disproportionate 

share hospital percentages. CMS officials have not specified how the 

agency could use MA encounter data to modify how it calculates the 

disproportionate share hospital percentages.

• Monitor Medicare coverage. Such monitoring may refer to using 

encounter data to determine whether an MA enrollee has reached the 

maximum out-of-pocket limit for an enrollee’s cost sharing each year.

Without developing plans for these additional uses of encounter data, 

CMS cannot determine whether it is gathering the proper amount and 

types of information required for these purposes. Additionally, the agency 

would not be able to establish management priorities, and therefore 

cannot ensure that it is using the data to their full potential.

In a May 2014 proposed rule, CMS identified a number of additional uses 

of encounter data designed to strengthen program management and 

increase transparency in the MA program.32

• Conduct program evaluations. CMS noted that it may use 

encounter data to assess the MA program and demonstration 

designs. The data could also be used for government-sponsored 

public health initiatives and academic health care research.

These were the following:

• Support program integrity efforts. CMS indicated that encounter 

data could be used to conduct audits, investigations, and other efforts 

to combat waste, fraud, and abuse undertaken by the Office of 

Inspector General or CMS.

• Aid program administration. CMS stated that it may use encounter 

data in reviewing the validity of MAO bid submissions—projected 

revenue for providing standard Medicare services to an average 

 

3279 Fed. Reg. 27978 (May 15, 2014).
 

Page 16 GAO-14-571 Medicare Advantage Encounter Data

enrollee in an MAOs’ service area. It may also use the data to verify 

MAO information on medical loss-ratios—the percentage of revenue 

used for patient care, quality improving activities, and reduced 

premiums—to determine whether MAOs have met minimum 

requirements.

As of May 2014, CMS had taken some, but not yet all, appropriate 

actions—as outlined in its Medicaid encounter data validation protocol—

to ensure that MA encounter data are complete and accurate before they 

are used. (See fig. 2.) CMS’s actions to date have focused on 

communicating with MAOs about data submission requirements, 

certifying MAOs’ capability to transmit the data, and conducting 

automated checks for completeness and accuracy of the data. However, 

the agency has not yet conducted statistical analyses, reviewed medical 

records, and provided MAOs with summary reports on data quality 

referenced in its Medicaid encounter data validation protocol. Although 

CMS intends to perform these additional quality assurance activities, 

CMS officials have not specified a time frame for doing so.

Figure 2: Status of the Centers for Medicare & Medicaid Services’ Actions to 

Validate Medicare Advantage (MA) Encounter Data, May 2014

CMS Has Performed 

Some Steps to 

Ensure That MA 

Encounter Data Are 

Complete and 

Accurate but Has Not 

Yet Fully Validated 

the Data
 

Page 17 GAO-14-571 Medicare Advantage Encounter Data

CMS has established certain requirements for the MAOs’ collection and 

submission of encounter data. The initial step in CMS’s Medicaid 

encounter data validation protocol is to establish such features as the 

data submission format, the data elements to be reported, the time 

frames for data submission, and the benchmarks—target rates—for 

completeness and accuracy of the data. CMS required that MAOs use the 

reporting format that is standard in the health insurance industry, and 

MAOs began submitting files in that format in January 2012. CMS also 

required that MAOs submit encounter data—including any corrections to 

the data—within specified time frames and at intervals determined by 

their size.33

To enhance compliance with its encounter data requirements and thus 

promote complete and accurate data submissions, CMS has engaged in 

regular and open communication with MAOs since 2010. Agency officials 

have regularly held meetings with MAOs to discuss encounter data 

system enhancements, changes in data submission requirements, and 

concerns on specific encounter data topics. Although MAOs noted that 

they would like to continue receiving detailed information frequently—

particularly on the more complex aspects of the encounter data 

submission process—CMS reduced the frequency of the encounter data 

user group meetings during the summer of 2013. According to CMS 

officials, MAOs’ increased familiarity with data submission requirements 

reduced the need for ongoing guidance. Other outreach methods the 

agency has used include newsletters and bulletins with information such 

as the most common data errors, a technical assistance support desk to 

address specific reporting circumstances, and a website for posting 

summaries and questions from meetings with MAOs. To maintain detailed 

guidance on data submission requirements, CMS produced and updates 

an encounter data manual. (See app. I for more information about CMS’s 

outreach efforts with MAOs.)

While it has focused its efforts on educating plans about reporting 

requirements, CMS has not yet established benchmarks for encounter 

data completeness and accuracy and does not have a timeline for 

developing such benchmarks. As stated in the Medicaid encounter data 

validation protocol, each data field submitted for each encounter type 

 

33CMS has proposed monitoring MAOs for timely submission of MA encounter data. 

Specifically, CMS intends to contact MAOs that are not submitting encounter data at the 

required frequency associated with the number of MA enrollees.

CMS Has Established and 

Publicized MA Encounter 

Data Submission 

Requirements but Has Not 

Developed Benchmarks 

for Completeness and 

Accuracy
 

Page 18 GAO-14-571 Medicare Advantage Encounter Data

should have an acceptable rate of completeness and accuracy.34 The 

protocol states that each plan’s target error rate should be below 

5 percent, composed of the percentage of missing, duplicate, or incorrect 

records. In 2012, CMS stated it would develop error frequency 

benchmarks but has yet to do so. In May 2014, agency officials told us 

that as they gain more experience with the data submissions they will use 

that information to develop such performance benchmarks. In contrast, 

state Medicaid agencies have established various benchmarks for 

Medicaid encounter data, which could help inform the development of 

similar benchmarks for MA encounter data. For example, New Jersey 

permits MCOs to have no more than 2 percent of encounter data 

submissions denied each month. Alternatively, Arizona does not allow the 

payment information in MCOs’ encounter data submissions to vary from 

the financial reports submitted by MCOs by more than 3 to 5 percent.35

Without benchmarks, as suggested by the protocol, the agency has no 

objective standards against which it could hold MAOs accountable for 

complete and accurate data reporting.

CMS has certified nearly all MAOs to verify their capability for collecting 

and submitting encounter data.36

 

34According to the protocol, the threshold of completeness and accuracy may depend on 

the intended use of the data. For example, using MA encounter data for payment may 

require a higher threshold of completeness and accuracy than using the data for research.

Under CMS’s protocol for validating 

Medicaid encounter data, each MCO’s information system should be 

assessed to see whether it is likely to successfully capture and transmit 

the encounter data. Such a review would determine where the plan’s 

information system may be vulnerable to incomplete or inaccurate data 

capture, storage, or reporting. To become certified for submitting 

encounter data, CMS requires an MAOs’ information system undergo

35These states employ financial incentives to encourage MCOs to submit timely, 

complete, and accurate encounter data. New Jersey requires MCOs to meet specific data 

completeness benchmarks and imposes fines for missed benchmarks. Arizona charges 

plans $5 per institutional omission error and $2 per professional omission error over an 

allowed error rate of 5 percent. See Vivian Byrd, Jessica Nysenbaum, and Debra Lipson, 

Encounter Data Toolkit (Washington, D.C.: Mathematica Policy Research, November 

2013).

36According to CMS, approximately 99 percent of MA enrollees were enrolled in plans 

certified by the August 31, 2012 certification deadline.

CMS Has Certified MAOs 

to Ensure Their Capability 

to Successfully Transmit 

Encounter Data
 

Page 19 GAO-14-571 Medicare Advantage Encounter Data

complete end-to-end testing.37 MAOs needed to separately demonstrate 

that they can successfully transmit encounter data collected from 

institutional, professional, and durable medical equipment providers. 

During official testing, MAOs had to achieve at least a 95 percent 

acceptance rate for each type of encounter. Also, MAOs were required to 

sign an agreement with CMS attesting that they will ensure that data in 

every submission can be supported by a medical record and that the data 

are complete and accurate.38

CMS performs automated checks to determine encounter data quality 

and identify submission issues, such as whether certain data elements 

are missing, and sends automated notifications to MAOs. According to 

CMS’s protocol for validating Medicaid encounter data, performing 

electronic checks on encounter data is a key step in verifying data quality. 

Such a data review should include basic checks of the data files by 

provider type and for each of the data elements in the files. Under the 

protocol, the standard data review process should be automated to verify 

that, among other things,

• critical data elements are not missing and are in the correct format,

• data values are consistent across data elements and are within 

required ranges, and

• the volume of data aligns with enrollment figures.

CMS performs over 1,000 automated checks to verify that data elements 

are present, the values of data elements are reasonable, and the data are 

not duplicated. According to CMS, the number of errors returned to MAOs 

and the number of duplicate data files submitted per MAO can illustrate, 

at least in part, the completeness and accuracy of the encounter data 

submitted. For example, CMS performs automated checks to flag missing 

data elements—such as a contract ID number or a date of service—in 

encounter data files and returns files with missing elements to MAOs. 

CMS also determines whether encounter data elements have the correct 

 

37End-to-end testing verifies whether the entire data flow—from collection through 

storage—functions as intended.

38If encounter data are collected and submitted by an MAO’s contractor, that entity must 

similarly attest to the truthfulness of the data.

CMS Performs Automated 

Checks for Completeness 

and Accuracy of MA 

Encounter Data
 

Page 20 GAO-14-571 Medicare Advantage Encounter Data

alphanumeric values (e.g., that zip codes contain only numeric 

characters) and verifies whether the values are consistent across data 

elements (e.g., the date of service is before the date of data submission). 

In addition, CMS ensures that the same data file is not accepted into the 

Encounter Data System more than once, which would result in duplicate 

data files.39

After performing these automated checks, CMS sends MAOs up to five 

types of automated reports with details about the encounter data 

submission, including information on the data received. These reports 

provide information on whether errors occurred and whether encounter 

data processing can continue so that MAOs can identify problems with 

their data. CMS may provide additional reports if MAOs need to resubmit 

the data to meet CMS’s requirements. (See app. II for a summary of 

CMS’s automated reports for MAOs.) Although representatives from 

MAOs noted that CMS has not always produced the automated reports 

on a timely basis, CMS officials told us that they now produce the reports 

within 1 week of encounter data submission. According to the MAO 

representatives, the reports are generally useful, straightforward, and 

easy to understand.

CMS plans to develop four other automated reports related to data 

submission and processing but has not established a time frame for doing 

so. These reports are expected to

• determine the number of encounter data files accepted and rejected 

per submission,

• identify encounter data submission errors and summarize the type of 

errors found,

• provide additional details on rejected encounter data submissions, 

and

• ascertain diagnoses that CMS accepted and will use to calculate risk 

scores.

 

39CMS officials noted that an increase in the number of duplicate encounter data files 

resulted from MAOs submitting the same encounter data file multiple times because of 

discrepancies that arose during the process for reconciling previous data submissions.
 

Page 21 GAO-14-571 Medicare Advantage Encounter Data

Although CMS has had plans since at least October 2010 to develop a 

report that identifies those diagnoses that it will use to calculate risk 

scores, it still has not produced the report. MAOs we interviewed 

expressed concern that CMS has not developed this report, which could 

help them understand how encounter data will be incorporated into 

CMS’s risk score calculation.

Although CMS is aware of the need to perform statistical analyses of MA 

encounter data, the agency has not yet conducted these analyses. 

According to CMS’s protocol for validating Medicaid encounter data, 

analyzing values in specific data elements, generating basic statistics on 

the volume and consistency of data elements, and periodically compiling 

and reviewing statistics on utilization rates can help detect data validity 

issues. In March 2014, CMS officials told us that they were able to only 

summarize the volume of encounter data files by MA plan. The officials 

stated that they would like to be able to determine the frequency of 

diagnoses per encounter data file, examine the dates of service on 

encounter data files, and compare MA encounter data with FFS claims 

data by the summer of 2014. However, the officials noted that they have 

not developed a specific time frame for performing statistical analyses 

and that determining which analyses to perform will be an iterative 

process over the next year or two. It appears that CMS will use encounter 

data to calculate 2015 risk scores and pay MAOs before it performs 

statistical analyses of the data.

As CMS begins to analyze the quality of MA encounter data, several 

types of statistical analyses outlined in its Medicaid validation protocol 

may help detect potentially inaccurate or unreliable data. Such analyses 

include the following:

• Determining whether the frequency of values within an 

encounter data element is reasonable. For example, a frequency 

distribution for the place of service variable would be expected to 

include a reasonable distribution between inpatient hospital, 

outpatient hospital, and physician office visits. This type of analysis 

can help detect whether a value is missing, underreported, or 

overreported.

• Generating basic statistics from the encounter data. For example, 

analyzing the rates of outpatient services by provider zip code could 

help discover that encounter data files are missing certain zip codes, 

indicating a certain amount of underreporting. To examine the 

completeness of Medicaid encounter data, a CMS contractor 

CMS Has Not Yet 

Conducted Statistical 

Analyses Using MA 

Encounter Data
 

Page 22 GAO-14-571 Medicare Advantage Encounter Data

assessed the average number of encounter data files per enrollee and 

the percentage of enrollees with data files.40

• Analyzing encounter data elements by demographic group, 

provider type, and service type. For example, analyzing encounter 

data by enrollees’ gender would enable CMS to verify that data files 

for gender-specific diagnoses and procedures are logical. Analyzing 

encounter data by provider type helps identify missing or erroneous 

data for specific provider types or discover fluctuations in enrollee 

visits. For example, dramatic changes in utilization from one time 

period to another may indicate erroneous data. Finally, analyzing 

encounter data by service type also helps to examine the relationship 

between (1) ancillary services (e.g., laboratory tests and x-rays) 

and enrollee visits, (2) primary care and specialty care visits, or 

(3) outpatient services and inpatient admissions.

As another example, 

MAOs reporting an unexpectedly large number of a particular service 

may suggest overreporting.

• Comparing encounter data with other Medicare data sources, 

MAOs’ financial reports, or other benchmarks.

41 Comparing MA 

encounter data with Medicare FFS data may help determine whether 

differences exist in hospital admission rates between the MA and FFS 

programs. In addition, comparing the volume of encounter data to 

financial reports helps reveal gaps in the data.42

 

40Mathematica Policy Research, Assessing the Usability of Encounter Data for Enrollees 

in Comprehensive Managed Care Across MAX 2007-2009 (Princeton, N.J.: December 

2012).

Furthermore, 

monitoring MAOs’ encounter data volumes for various service types 

against established benchmarks helps identify data submission 

problems, according to an actuarial firm that assessed Medicaid 

41For a previous report, we spoke with state officials who reported having information on, 

and efforts intended to ensure, the quality of the data used to set payment rates. New 

Jersey officials told us that the state tested the reliability and accuracy of the health plan 

financial data used to set rates against encounter data and required health plans to have 

an independent auditor review selected portions of the financial data. See GAO, Medicaid 

Managed Care: CMS’s Oversight of States’ Rate Setting Needs Improvement, 

GAO-10-810 (Washington, D.C.: Aug. 4, 2010).

42Arizona requires MCOs to submit quarterly reports on the number of claims and paid 

amounts submitted in the encounter data. Arizona then performs quarterly and annual 

studies comparing the organizations’ encounter data to their financial statements to 

ensure the completeness of the data.
 

Page 23 GAO-14-571 Medicare Advantage Encounter Data

encounter data for California.43 Moreover, New Jersey examines the 

rate of services used per 1,000 MCO enrollees against benchmarks 

for 28 service categories, such as laboratory services, to assess data 

completeness.

CMS has not yet performed MA enrollees’ medical record reviews, which 

typically involve comparing a sample of encounter data with the clinical 

information contained in enrollees’ medical records. According to CMS’s 

protocol for validating Medicaid encounter data, medical record reviews 

can help confirm the findings generated in the encounter data analyses.

Use of Medical Record Reviews in a Medicaid Encounter Data Validation Study

In a 2010 Medicaid encounter data validation study for Georgia, the Health Services 

Advisory Group examined the extent to which services documented in enrollees’ medical 

records were absent in their encounter data and the extent to which services 

documented in enrollees’ encounter data were absent from their medical records. It also 

evaluated the accuracy of the diagnosis and procedure codes in encounter data by 

comparing them with documentation in enrollees’ medical records. The findings showed 

that enrollees’ medical records generally supported encounter data files in Georgia. 

Specifically, 93.9 percent of the dates of service, 86.7 percent of the diagnosis codes, 

and 78.5 percent of the procedure codes from the encounter data had supporting 

evidence in the medical records. However, not all services documented in the medical 

records were found in encounter data files. Specifically, 20.5 percent of the dates of 

service, 49.3 percent of the diagnosis codes, and 40.1 percent of the procedure codes 

documented in enrollees’ medical records were omitted from encounter data files.

Source: GAO analysis of Health Services Advisory Group documents. I GAO-14-571

Acknowledging the necessity of medical record reviews, CMS officials 

noted that the agency plans to review medical records as part of its MA 

risk adjustment data validation auditing process when it begins using 

encounter data for risk adjustment purposes. However, as of May 2014, 

the agency has not developed specific plans or time frames to include 

these data in this auditing process. CMS currently uses this auditing 

process to validate the accuracy of RAPS data. Specifically, CMS 

requires MAOs to provide medical records to substantiate the information 

in a selected sample of MA enrollees’ RAPS data. On the basis of the 

clinical information contained in enrollees’ medical records that 

substantiates the information in their RAPS data, CMS calculates 

corrected risk scores and calculates payment errors—which can 

 

43Mercer Government Human Services Consulting, Capitation Rate Development Base 

Data Review and Assessment: California Department of Health Services (Phoenix, Ariz.: 

September 2006).

CMS Has Not Yet 

Reviewed Medical 

Records to Verify MA 

Encounter Data
 

Page 24 GAO-14-571 Medicare Advantage Encounter Data

represent a net overpayment or underpayment. Some MAOs may have 

been overpaid and may need to refund Medicare payments when 

enrollees’ medical records do not provide evidence for the risk-adjusted 

payment they had received from CMS.

Because CMS has not yet conducted statistical analyses and reviewed

medical records, it cannot report information from these activities to each 

MA plan. CMS’s protocol for validating Medicaid encounter data highlights 

the importance of summarizing information, reporting findings, and 

providing recommendations to plans for improving the completeness and 

accuracy of encounter data. Once the data are validated, MAOs could 

use summary reports from CMS in several ways, such as monitoring 

quality improvement and service utilization and managing their enrollees 

and providers. For example, the Health Services Advisory Group’s 2010 

encounter data validation study for Georgia evaluated the completeness 

and accuracy of encounter data submitted by three MCOs. The study 

included plan-specific tables on the number and percentage of encounter 

files by place of service with statewide comparisons, the number and 

percentage of valid encounter files for age- and gender-appropriate 

diagnoses and services, and the number of encounter files by month of 

service. Without this type of information, CMS and MAOs cannot ensure 

the completeness and accuracy of MA encounter data.

The collection of MA encounter data provides CMS with the opportunity to 

improve the accuracy of Medicare payments to MAOs and to monitor 

specific health care services used by enrollees. For MA encounter data to 

reach its full potential, it is critical that CMS develop a clearly defined 

strategy—which includes specific actions, priorities, and milestones—for 

using the information and validating the completeness and accuracy of 

the data. Deciding how the data are to be used influences which data 

elements need to be collected and, in turn, the extent of data reporting. 

However, CMS has yet to develop specifics on how or when it will use 

encounter data for a variety of program management purposes.

Although CMS has decided to use MA encounter data to supplement 

RAPS data in calculating risk scores in 2015, this use may inappropriately 

increase payments to MAOs. Using diagnoses from both sources can 

only increase the number of diagnoses reported for MA enrollees. This 

has the potential to widen the existing discrepancy between FFS and MA 

in the coding of diagnoses. As we previously recommended, CMS should 

take steps to improve the accuracy of the adjustment made for 

CMS Has Not Yet 

Provided MAOs with 

Summary Reports on the 

Completeness and 

Accuracy of Encounter 

Data

Conclusions
 

Page 25 GAO-14-571 Medicare Advantage Encounter Data

differences in diagnostic coding practices between FFS and MA to help 

ensure appropriate payments to MAOs. As of March 2014, CMS has not 

acted on our recommendation. To the extent that CMS continues to pay 

MAOs under its current risk adjustment system and not adequately 

account for diagnostic coding differences, excess payments to MAOs 

could grow.

Furthermore, CMS’s decision to use MA encounter data in 2015 may be 

premature because the agency has not yet fully validated the data. CMS 

has taken steps to validate the data, such as establishing certain 

reporting requirements and performing automated data checks. However, 

the agency has not yet completed other steps in assessing whether the 

data are suitable for use, such as performing statistical analyses, 

reviewing medical records, and providing MAOs with summary reports of 

its findings. Without fully validating the completeness and accuracy of MA 

encounter data, CMS and MAOs would be unable to confidently use 

these data for risk adjustment or any other program management or 

policy purposes. Until CMS determines that encounter data are 

sufficiently complete and accurate to be used for risk adjustment and 

other intended purposes, the potential benefits of using these data will be 

delayed.

To ensure that MA encounter data are of sufficient quality for their 

intended purposes, the Administrator of CMS should

• establish specific plans and time frames for using the data for all 

intended purposes in addition to risk adjusting payments to MAOs and

• complete all the steps necessary to validate the data, including 

performing statistical analyses, reviewing medical records, and 

providing MAOs with summary reports on CMS’s findings, before 

using the data to risk adjust payments or for other intended purposes.

We provided a draft of this report to HHS for comment. In its written 

response, HHS agreed that establishing plans for using encounter data 

and performing steps to validate the data are important activities. 

However, it did not address the specific recommendations we made. (See 

app. III.) 

Recommendations for 

Executive Action

Agency Comments 

and Our Evaluation
 

Page 26 GAO-14-571 Medicare Advantage Encounter Data

Regarding our first recommendation—to establish specific plans and time 

frames for all uses of MA encounter data—HHS stated that it agreed that 

the agency should establish plans for using the data. HHS noted that it 

has developed lists of the purposes for which it intends to use the data. 

Current regulations authorize four purposes—risk adjustment, quality 

improvement, Medicare disproportionate share percentages, and 

Medicare coverage monitoring. HHS recently published a proposed rule 

that outlines several additional purposes—program evaluation, program 

integrity, program administration, and others. HHS stated that once the 

proposed rule is finalized, CMS will be in a position to establish specific 

plans and time frames for the list of additional permissible uses of MA 

encounter data. However, CMS has had the authority since 2008 to use 

MA encounter data for the initial four purposes, thus it remains unclear if 

and when CMS will develop detailed plans for these earlier authorized 

uses.

Regarding our second recommendation—to fully validate MA encounter 

data before use for any purpose—HHS stated that it will continue its data 

validation activities while it uses the data for risk adjusting payments to 

MAOs. HHS agreed that performing statistical analyses and providing 

summary reports are important elements of data validation. HHS stated 

that it will undertake medical record reviews—which are used to verify 

encounter data—through its ongoing risk adjustment validation audits of 

RAPS data. We remain concerned, however, that CMS intends to use 

2014 MA encounter data to support its risk score calculations for 2015 

before it completes all data validation activities suggested by the 

Medicaid protocol. Furthermore, CMS’s reliance on risk adjustment 

validation audits of RAPS data may not be adequate to confirm the 

completeness and accuracy of encounter data given significant 

differences—in the volume and breadth of data elements—between the 

two data collection efforts.

As agreed with your office, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies to the Administrator of CMS, 

interested congressional committees, and others. In addition, the report 

will be available at no charge on the GAO website at http://www.gao.gov. 
 

Page 27 GAO-14-571 Medicare Advantage Encounter Data

If you or your staff have any questions about this report, please contact 

me at (202) 512-7114 or cosgrovej@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

the last page of this report. GAO staff who made key contributions to this 

report are listed in appendix IV. 

Sincerely yours,

James Cosgrove

Director, Health Care
Appendix I: Select Centers for Medicare & 

Medicaid Services (CMS) Outreach Efforts on 

Medicare Advantage (MA) Encounter Data

Page 28 GAO-14-571 Medicare Advantage Encounter Data

Outreach effort Date Description

National Encounter Data Meeting October 2010 CMS organized this meeting with Medicare Advantage 

organizations (MAO) to disseminate information on the 

requirements for encounter data submission, the transition 

to submitting encounter data, and the schedule for

encounter data implementation.

Regional Technical Assistance 

Participant Guide

August 2012 CMS prepared this reference guide to provide MAOs with 

information about collecting encounter data from health 

care providers and submitting encounter data to CMS. The 

reference guide also includes information about encounter 

data processing that CMS performs.

Encounter Data System 

Companion Guides

September 2011 to present CMS prepared these guides, which it regularly updates, to 

provide technical assistance on conducting Health 

Insurance Portability and Accountability Act of 1996-

compliant electronic transactions.a

Encounter data work groups December 2010 through March 2011 CMS organized these meetings between CMS and MAOs 

to discuss specific MA encounter data topics and 

concerns.b CMS also published questions and answers 

from these meetings.

Encounter data system user groups January 2012 through April 2014 CMS organized these meetings to provide MAOs with 

continued guidance on submitting encounter data. CMS 

also published questions and answers from these 

meetings.

Industry update sessions 2011 and 2012 CMS organized these meetings to provide updates 

regarding decisions the agency made regarding encounter 

data implementation.

Bulletins and newsletters 2010 to present CMS prepares bulletins with updated information on 

encounter data processing, such as the most common 

errors in submitting encounter data. CMS also prepares 

newsletters with information on policy updates.

Customer Service and Support 

Center (CSSC) help linec 2010 to present The CSSC help line provides encounter data assistance to 

MAOs by a toll-free telephone number.

CSSC website 2010 to present MAOs receive updated information about encounter data 

submission through the CSSC website.

Source: GAO summary of select CMS outreach efforts. | GAO-14-571

a

Health Insurance Portability and Accountability Act of 1996-compliant refers to using the appropriate 

format to submit data electronically.

b

Topics for data work groups included medical record reviews (MAOs examining medical records to 

add or delete diagnosis codes to supplement data from original encounters), automated checks—

routine electronic reviews that certain data elements are completed and have reasonable values—

used in processing claims, and issues specific to MAOs using intermediaries to collect encounter data 

from providers and submit them to CMS.

c

Palmetto GBA is CMS’s contractor that manages the collection of MA encounter data and the CSSC 

help line.

Appendix I: Select Centers for Medicare &

Medicaid Services (CMS) Outreach Efforts on 

Medicare Advantage (MA) Encounter Data
Appendix II: Summary of Automated Reports 

for Medicare Advantage (MA) Encounter Data 

Submissions

Page 29 GAO-14-571 Medicare Advantage Encounter Data

Report developer Report purpose Example

The Accredited Standards Committee X12 Notify MA plans about problems with the 

submission of encounter data files.

The Centers for Medicare & Medicaid 

Services (CMS) rejects an encounter data 

file that contains an error in a processingrelated data element.

Determine the syntactical accuracy of 

encounter data elements.

CMS alerts an MA plan that letters appear 

in a numeric-only data element.

Acknowledge the acceptance or rejection of 

encounter data files.

CMS notifies an MA plan about a problem 

with an encounter data submission.

CMS Provide information on whether encounter 

data files and service-related data elements 

have been accepted or rejected for further 

processing. 

CMS informs an MA plan that an encounter 

data file was rejected for further processing 

while another one was accepted. 

Notify MA plans about duplicate encounter 

data files and service-related data elements.

CMS tells an MA plan that an encounter 

data file includes duplicate services or is 

the duplicate of another data file.

Source: GAO summary of CMS information. | GAO-14-571

Appendix II: Summary of Automated Reports 

for Medicare Advantage (MA) Encounter 

Data Submissions
Appendix III: Comments from the Department 

of Health and Human Services

Page 30 GAO-14-571 Medicare Advantage Encounter Data

Appendix III: Comments from the 

Department of Health and Human Services
Appendix III: Comments from the Department 

of Health and Human Services

Page 31 GAO-14-571 Medicare Advantage Encounter Data
Appendix III: Comments from the Department 

of Health and Human Services

Page 32 GAO-14-571 Medicare Advantage Encounter Data
Appendix IV: GAO Contact and Staff 

Acknowledgments

Page 33 GAO-14-571 Medicare Advantage Encounter Data

James Cosgrove, (202) 512-7114 or cosgrovej@gao.gov

In addition to the contact named above, Rosamond Katz, Assistant 

Director; Manuel Buentello; David Grossman; Elizabeth T. Morrison; and 

Hemi Tewarson made key contributions to this report.

Appendix IV: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments
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but Higher for Plans with Specific Eligibility Requirements. GAO-14-148. 

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