Decoding RADV Audits: A Comprehensive Guide for Health Plans in 2025

The landscape of Risk Adjustment Data Validation (RADV) audits is shifting rapidly. With CMS doubling the number of audits and eliminating past leniencies, health plans must be proactive, not reactive. Here’s a deep dive into what’s happening, why it matters, and how to prepare. 

The Risk Adjustment Data Validation (RADV) audit process has become a significant compliance and financial challenge for Medicare Advantage Organizations (MAOs). The Centers for Medicare & Medicaid Services (CMS) has intensified its audit efforts, doubled the number of audited health plans and removed previous leniencies such as the Fee-for-Service (FFS) Adjuster. 

In 2024, sixty Medicare Advantage contracts have been selected for RADV audits, up from the usual thirty contracts. With extrapolated error rates leading to multi-million-dollar clawbacks, health plans must now take a proactive, strategic approach to RADV audit readiness. This guide provides an in-depth look at the RADV audit process, recent regulatory updates, key challenges, and best practices for mitigating risks. 

What Is a RADV Audit and Why Does It Matter? 

A RADV audit is conducted to verify that Hierarchical Condition Categories (HCCs) reported by health plans are accurate, properly documented, and supported by medical records. Since CMS adjusts capitation payments based on risk scores, the accuracy of submitted diagnoses directly affects plan revenue and regulatory compliance. 

The purpose of RADV audits is to: 

• Ensure health plans are not overpaid due to unsupported diagnoses. 

• Detect and prevent fraudulent or erroneous coding practices. 

• Recover overpayments from health plans that cannot provide sufficient medical record evidence. 

Health plans must recognize that CMS's enforcement has intensified, and non-compliance can result in massive financial recoveries through extrapolated penalties. 

How the RADV Audit Process Works 

1. Contract Selection: How CMS Chooses Which Health Plans to Audit 

Each year, CMS selects a subset of Medicare Advantage contracts for RADV audits through two primary methods: 

• Random RADV Audits – A selection of plans chosen without specific risk-based criteria to evaluate compliance across the industry. 

• Targeted RADV Audits – Plans with suspicious coding patterns or unusual increases in risk scores are chosen based on statistical analysis and predictive modeling. 

2. Health Plan Notification and Medical Record Request 

When a health plan is selected for an audit, CMS issues a notification and provides: 

• A list of specific HCCs from a sample of 211 plan members (though in some cases, CMS may request a smaller sample of 10-20 HCCs). 
• A deadline (typically 20 weeks) for the health plan to retrieve and submit medical records supporting each reported HCC. 

Key challenge: CMS is currently auditing 2018 dates of service, meaning health plans must retrieve medical records from over six years ago, which creates record retrieval and documentation challenges. 

3. Medical Record Retrieval and Documentation Review 

For each requested HCC, the health plan must provide a comprehensive medical record that meets strict CMS documentation criteria, including: 

• A face-to-face visit with a qualified provider. 

• The patient’s name, date of service, and provider’s credentials. 

• A definitive diagnosis (CMS does not accept "probable" or "suspected" conditions). 

• A signed and dated provider attestation (within six months of the visit), if needed. 

4. CMS Review and Determination of Errors 

CMS contracts third-party coding experts to review each submitted medical record. If an HCC is deemed unsupported, it is flagged as an error. 

Key issue: Due to frequent documentation errors, health plans often face high error rates, even when medical conditions are accurately reported. 

5. Error Extrapolation and Financial Clawbacks 

One of the most controversial aspects of RADV audits is extrapolated penalties. CMS does not just recover overpayments on individual errors; instead, it applies the error rate to the entire plan population, which can result in multi-million-dollar recoupments. 

Example: 

• If an audit finds a 2% error rate in a sample of 211 HCCs, CMS will extrapolate that 2% error rate across the entire 2018 plan population. 
• This can lead to massive financial penalties far exceeding the actual overpayments identified in the sample.

6. Appeals Process (Limited Success Rates) 

Health plans can appeal RADV audit findings, but historically, appeals have rarely succeeded. The appeals process includes: 

1. Administrative reconsideration of the audit findings. 
2. A hearing before an independent review panel. 
3. Escalation to a federal administrative law judge. 

However, courts have ruled in favor of CMS, affirming its right to apply extrapolated error rates. 

Recent Developments in RADV Audits 

1. CMS Eliminates the Fee-for-Service (FFS) Adjuster 

• In previous years, CMS applied an FFS Adjuster to account for inconsistencies between traditional Medicare and MA plans. 
• In 2024, this adjustment was eliminated, making health plans fully accountable for unsupported diagnoses. 

2. Increase in Audit Volume (60 Contracts in 2024) 

• CMS doubled the number of audited contracts from 30 to 60 in 2024. 
• This signals greater scrutiny and more aggressive enforcement in future audits. 

3. Legal Rulings Favor CMS on Extrapolation 

• MAOs previously challenged extrapolation methods in court. 

• Courts ruled in favor of CMS, affirming its authority to apply error rates across entire populations. 

4. Future RADV Audits Likely to Target 2019 and 2020 Data 

• CMS aims to clear its backlog by 2026. 

• Future audits will likely focus on 2019 and 2020 dates of service. 

How Health Plans Can Prepare for RADV Audits 

1. Conduct Mock RADV Audits - Mock audits simulate CMS’s audit process, allowing health plans to identify documentation weaknesses before an official audit, improve medical record retrieval efficiency, and reduce financial exposure from extrapolated penalties.  
2. Strengthen Provider Documentation Compliance - Ensuring providers adhere to RADV audit requirements is crucial. Health plans should educate providers on compliance standards, verify proper provider signatures and credentialing on all records, and train coders on CMS’s latest risk adjustment guidelines to reduce documentation errors. 
3. Use AI and Data Analytics to Detect Errors Early - AI-driven audits can help identify missing HCCs or unsupported diagnoses, while predictive analytics can flag high-risk records before an official CMS audit. These technologies enhance accuracy and reduce compliance risks. 
4. Optimize Concurrent and Prospective Coding - Prospective coding ensures HCCs are properly documented at the point of care, while concurrent coding provides real-time validation of provider documentation. These strategies improve coding accuracy and strengthen compliance. 
5. Prepare for Appeals (But Don’t Rely on Them) - While appeals can be pursued, success rates are generally low. The best approach is to prioritize preemptive compliance, ensuring that documentation is accurate and audit-ready to minimize financial risks associated with RADV findings. 

Conclusion: The Future of RADV Audits and the Need for Proactive Compliance 

RADV audits have become a high-stakes regulatory challenge for Medicare Advantage plans. With stricter CMS oversight, higher audit volumes, and aggressive extrapolation methods, health plans must act before an audit occurs. 

Key Takeaways: 

• RADV audits are expanding CMS has doubled its enforcement efforts. 

• Error extrapolation can lead to massive financial penalties. 

• Health plans must invest in RADV preparation strategies to mitigate risks. 

Next Steps: Are You Ready for a RADV Audit? 

If your health plan wants to stay ahead of RADV audits, proactive preparation is critical. Contact Annova Solutions today to discuss mock RADV audits, risk adjustment coding, and compliance strategies to ensure your plan is audit-ready before CMS comes knocking.