When it comes to Risk Adjustment Data Validation (RADV), many assume the overpayment calculation is an annual lump sum exercise. In reality, CMS takes a more granular approach—errors are measured monthly, for each member, before being rolled up into a final total.

A Month-by-Month, Member-Specific View

According to CMS’s RADV Payment Error Calculation Methodology, the process begins at the individual enrollee level. For each sampled member, CMS determines whether submitted diagnosis codes were supported by medical records. When discrepancies are found—such as missing or invalid documentation—those unsubstantiated diagnoses are removed from the risk score calculation.

Rather than stopping at a revised annual score, CMS does the following:

Recalculates monthly risk payments based on a revised enrollee risk score for each month the member was enrolled.
Compares those amounts against the original payments that were made during the same period.
Calculates the monthly difference—positive (overpayment), negative (potential underpayment), or zero—and sums those to determine the member’s total annual payment error.

This member-level, month-specific accounting ensures that only the portions of the year where risk payments were overstated contribute to the overpayment determination. If a diagnosis was only invalid for part of the year, the adjustment reflects that.

Why This Matters

This methodology matters because it provides a fair and precise accounting of risk payments. It ensures that MAOs are only held responsible for overpayments tied directly to unsupported diagnoses and only for the timeframes in which they were paid.

The level of precision used by CMS in RADV calculations also underscores the need for airtight documentation practices. Every claim, every diagnosis, and every medical record entry must be auditable and defensible—month after month.

Key Takeaway

CMS isn’t just looking at whether a member’s diagnoses were supported—it’s examining when they were supported and how long they affected payment. Understanding and planning for this month-by-month approach to RADV audits is essential for compliance and financial accuracy in Medicare Advantage risk adjustment.

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