agilon Health: A Medicare Advantage Risk Adjustment Audit Found Diagnosis Codes Added Without Supporting Clinical Documentation

A federal audit of Medicare Advantage risk adjustment data submissions by agilon Health Inc., a primary care physician enablement company that manages value-based care arrangements for Medicare Advantage plans, found that a material portion of the diagnosis codes submitted through agilon's physician network for risk adjustment purposes were not supported by clinical documentation in the underlying patient medical records — a finding that, if sustained across the full population of audited members, would imply that Medicare Advantage plans relying on agilon's risk adjustment data had received capitation payments higher than the members' documented health status would have warranted.DOCUMENTED

Medicare Advantage risk adjustment is the mechanism by which the federal government calibrates monthly capitation payments to Medicare Advantage plans based on the health status of their enrolled members. Plans that enroll sicker members — members with more chronic conditions and higher expected healthcare costs — receive higher per-member-per-month payments than plans with healthier enrollment. The risk adjustment calculation relies on diagnosis codes submitted by providers who treat Medicare Advantage members; when codes are added that do not reflect conditions documented during actual clinical encounters, the resulting payments overstate the member's health burden and generate inflated federal payment.REVIEWED

How Risk Adjustment Coding Works — and Where It Can Go Wrong

Medicare Advantage risk adjustment allows codes to be submitted based on clinical encounters during the plan year, and in some circumstances through retrospective chart review processes in which coders review medical records and add diagnosis codes for conditions the clinical documentation supports. The retrospective review process is legitimate when used to capture conditions that were evaluated and managed during the year but were not coded at the time of the encounter; it becomes problematic when it is used to add codes for conditions the physician did not specifically evaluate or manage, or that are inferred from historical data rather than from documented current-year encounters.REVIEWED

The audit findings at agilon included a category of codes that investigators found were added through retrospective review processes without a documented clinical encounter during which the physician had evaluated the coded condition. In the Medicare Advantage risk adjustment framework, a code requires a face-to-face encounter between the physician and the patient during the plan year in which the condition was identified, evaluated, or treated. Codes added without a qualifying encounter — even if the underlying condition is real — do not meet the coding requirements and generate payments the program was not designed to make.DOCUMENTED

The Physician Enablement Model

agilon's business model centers on partnering with primary care physician groups to manage their Medicare Advantage patient populations under value-based care arrangements. agilon provides administrative infrastructure, data analytics, and care management support, and in many arrangements takes on or facilitates risk-sharing with Medicare Advantage plans. The company's financial performance is linked to its ability to manage the health outcomes and cost profiles of enrolled Medicare Advantage members — creating incentives to optimize coding accuracy for risk adjustment, since higher risk scores generate higher capitation that supports the value-based care model.REVIEWED

Critics of the Medicare Advantage risk adjustment system have long argued that the financial incentives embedded in value-based care arrangements create structural pressure to maximize diagnosis code submission regardless of whether the resulting codes meet program standards. The audit findings at agilon are consistent with a pattern that federal investigators and academic researchers have documented across the Medicare Advantage industry, in which the combination of chart review programs, risk adjustment analytics, and financial incentives produces systematic overcoding relative to the clinical documentation standard the program requires.DOCUMENTED

The audit methodology compared submitted diagnosis codes against the underlying medical records at the physician level — finding that codes appearing in risk adjustment submissions could not be traced to documented clinical encounters in the record for a material portion of audited members.

False Claims Act Implications

Risk adjustment fraud in Medicare Advantage is an active area of False Claims Act enforcement. When a Medicare Advantage plan or its data vendors knowingly submit unsupported diagnosis codes for risk adjustment purposes, each submission of those codes in a risk adjustment data file constitutes a potential false claim under the FCA, with liability accruing to both the plan and to entities like agilon that provide and validate the data submissions. The government has brought FCA cases against major Medicare Advantage insurers and risk adjustment vendors in recent years, with several cases resulting in settlements exceeding $100 million.REVIEWED

The FCA's knowing standard encompasses reckless disregard — a company that fails to implement adequate controls to ensure that risk adjustment submissions reflect documented clinical encounters may face FCA liability even if it did not affirmatively direct the addition of unsupported codes. The audit findings, which were transmitted to agilon and the implicated Medicare Advantage plans, triggered a federal investigation and potential civil referral in connection with the identified overcoding.DOCUMENTED

Industry-Wide Context

The Medicare Payment Advisory Commission and the HHS Office of Inspector General have both documented systematic overpayment to Medicare Advantage plans attributable to risk adjustment overcoding, estimating that the program overpays by billions of dollars annually relative to what traditional Medicare would cost for the same population. The overpayment persists despite audit programs in part because the audit methodology — reviewing samples of submitted codes against underlying records — is resource-intensive and covers only a fraction of total submissions in any given year. Congressional interest in reforming the risk adjustment audit framework has grown as the scale of estimated overpayments has become better documented in academic and government research.REVIEWED

Physicians, coders, and administrators who are aware of risk adjustment coding practices at Medicare Advantage plan partners or physician enablement companies that do not reflect documented clinical encounters are encouraged to consult a whistleblower attorney about potential False Claims Act qui tam rights, or to contact the HHS OIG fraud hotline on a confidential basis.

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