Medicare Advantage Organizations (MAOs) are facing an unprecedented shift in the Risk Adjustment Data Validation (RADV) audit landscape in 2025. Following the 2023 CMS Final RADV Rule, CMS has officially begun extrapolated RADV audits, starting with Payment Year 2018 (PY2018).
For the first time, CMS is applying extrapolation to RADV audits, meaning that an error rate found in a small sample of enrollees can be projected across the entire plan population—dramatically increasing financial penalties for even minor documentation mistakes. Compounding this challenge, CMS removed the Fee-For-Service (FFS) Adjuster, which previously acted as a safeguard to account for potential errors in Medicare’s baseline data.
In November 2024, CMS issued its first round of PY2018 RADV audit notices, targeting 60 MA contracts. These audits will require MAOs to submit medical records from 2017 dates of service to support 2018 payments. However, most coders today lack expertise in CMS-HCC Model v22, which was in effect in 2017, further increasing audit risks.
This blog will break down the financial and operational risks posed by these new RADV audits, the impact of extrapolation and compliance challenges, and how RAAPID’s AI-driven prospective risk adjustment solution can help mitigate risk and optimize coding accuracy before an audit occurs.
Understanding the 2023 CMS Final RADV Rule
The 2023 CMS Final RADV Rule, published in February 2023, introduced two key changes:
- Extrapolation Begins With PY2018 Audits: Before 2023, RADV audits only recouped direct overpayments found in sampled enrollees. Now, CMS will apply error rates from the sample across thousands of enrollees in the audited contract.
- Elimination of the FFS Adjuster: CMS will not apply an adjustment for coding discrepancies in traditional Medicare, increasing the financial burden on MAOs.
Impact on MAOs:
Without the FFS Adjuster, every unsupported diagnosis will be treated as an overpayment in full. This significantly increases the potential financial clawbacks. MAOs must now ensure 100% documentation compliance before submission to avoid multi-million-dollar penalties.
CMS’s decision to start extrapolation with PY2018 means that audits for 2011–2017 will remain non-extrapolated, but every year moving forward will be subject to this methodology.
CMS’s First RADV Audit Notices for PY2018
Why PY2018?
CMS chose PY2018 as the first year to apply extrapolation, partly to avoid legal challenges from retroactively enforcing it on older audits.
How It Works:
- CMS selected 60 MA contracts for audit.
- MAOs must submit medical records from 2017 dates of service for sampled enrollees.
- CMS will validate that each risk-adjusting diagnosis was properly documented under CMS-HCC v22.
- If unsupported, the error rate is extrapolated across the contract’s entire membership.
Timeline:
- Nov 14, 2024: CMS issued audit notices.
- April 21, 2025: Deadline for MAOs to submit medical records.
- Mid-2026: CMS issues audit findings.
The High Financial Risks of RADV Audits in 2025
Extrapolation’s Impact on Financial Clawbacks
Extrapolation transforms modest coding errors into massive repayment demands. If an MAO’s sample shows $100,000 in coding errors, CMS applies that error rate to the entire plan population, turning a six-figure issue into a multi-million-dollar liability.
CMS estimates $479 million in recoverable overpayments from the PY2018 RADV audit alone. Over the next decade (2023–2032), total recoupments could reach $4.7 billion.
Compliance Burdens
The biggest challenge is that coders must validate 2017 data using CMS-HCC v22, a version that many current staff are unfamiliar with. Even experienced coders face difficulties interpreting six-year-old documentation to meet today’s stricter audit standards.
How RAAPID’s Prospective Risk Adjustment Solution Helps MAOs
RAAPID offers an AI-driven risk adjustment solution that helps MAOs identify potential compliance issues before submission, reducing RADV risks.
AI-Powered Risk Identification
RAAPID’s system scans EHRs and claims data to detect:
- Unsupported diagnoses that could trigger an audit.
- Missed HCCs that could impact risk scores.
- Documentation gaps that fail to meet CMS compliance standards.
Proactive Documentation Accuracy
By integrating into EHR workflows, RAAPID ensures that providers and coders:
- Capture diagnoses correctly at the point of care.
- Resolve compliance risks before CMS audits them.
- Reduce coder workload by automating suspect condition detection.
Financial Protection from Extrapolation
RAAPID’s solution:
- Prevents avoidable overpayments by ensuring complete and accurate coding.
- Reduces risk of extrapolated clawbacks, safeguarding MAOs from unexpected financial liabilities.
- Increases coding efficiency, cutting review time by 60% while maintaining 95%+ accuracy.
What MAOs Must Do Now
Given the high-risk RADV environment in 2025, MAOs cannot afford to rely on outdated compliance strategies. Instead, they must:
- Conduct Internal Audits: MAOs should audit 2017 documentation now to identify compliance risks before CMS does.
- Train Coders on CMS-HCC v22: Educate teams on 2017-era coding rules to avoid preventable audit errors.
- Leverage AI for Audit Readiness: Solutions like RAAPID automate risk detection and documentation validation, reducing both financial and operational exposure.
Protect Your MAO from RADV Risks
CMS’s Final RADV Rule and extrapolated audits are here. The risk of financial penalties has never been higher—but proactive strategies can help your organization avoid costly mistakes.
KNOW HOW TO RUN A PROFITABLE & COMPLIANT RISK ADJUSTMENT PROGRAM FOR MAOs
