CMS Appeals Court Ruling on Medicare Advantage RADV: Key Impacts for Payers
Written by: Lesley Weir, Senior Director, Solutions Strategy, Veradigm, and Cheryl Reifsnyder, PhD
The Centers for Medicare & Medicaid Services’ (CMS’s) Risk Adjustment and Data Validation (RADV) audit policy was a frequent news topic in 2025.
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May 2025: CMS released a press release announcing an “aggressive strategy” for increasing oversight of Medicare Advantage plans.
This strategy included a road map to audit all eligible Medicare Advantage contracts in upcoming payment years, a significant change from the previous approach of selecting only a subset of contracts. The strategy also included an accelerated RADV audit schedule for remaining audit years (Payment Years [PY] 2018 through 2024) by early 2026.
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September 25, 2025: A Texas federal district court ruled to vacate the CMS Medicare Advantage RADV Final Rule (CMS-4185-F2) that would govern these audits.
The Medicare Advantage Final Rule was vacated based on procedural grounds in the case of Humana Inc. et al. v. Becerra et al. The ruling could, in theory, result in the suspension of RADV audits for PY 2018 and subsequent years (those affected by the Final Rule).
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November 21, 2025: CMS gave notice of its intent to appeal the ruling.
Notably, this notice of intent to appeal came only 3 days before the submission deadline for PY 2019 RADV audits.
These events have created significant uncertainty for Medicare Advantage plans. In this article, we summarize the current status of Medicare Advantage RADV audits—and share how Veradigm can help payers stay on top of changing CMS requirements.
The RADV Final Rule: A timeline
CMS pays Medicare Advantage organizations a monthly amount for each enrollee, adjusted to reflect differences in enrollees’ health status. These risk-adjustment payments are determined based on enrollee medical diagnoses submitted by Medicare Advantage organizations. Diagnoses must be documented in enrollees’ medical records to ensure payment accuracy.
However, studies and audits performed by CMS and the Department of Health and Human Services Office of the Inspector General (OIG) have shown that enrollees’ medical records don’t always support reported diagnoses. This has resulted in billions of dollars in overpayments to health plans—and prompted CMS to improve oversight of Medicare Advantage contracts.
RADV audits have been CMS’s primary means of addressing potential overpayments.
The RADV Final Rule
The Final Rule was initially proposed in 2018 to expand the RADV audit program. CMS published the RADV Final Rule (CMS-4185-F2) January 30, 2023, more than 4 years after its introduction. The final version included 2 major changes from the proposed rule, with revised justifications for these changes:
Elimination of the Fee-for-Service (FFS) adjuster in RADV audits
The FFS adjuster was initially used to calculate permissible error levels during RADV audits. However, in 2018, CMS reported internal research showing the FFS adjuster was not required. CMS opted to remove the FFS adjuster based on its findings, despite criticisms of design flaws, inaccurate assumptions, and other errors in CMS’s study.
Ability to extrapolate audit findings beginning with PY 2018
By enabling extrapolation of audit findings, the Final Rule would allow CMS to audit a small sample of plans’ enrollees’ medical records to confirm sufficient documentation of diagnoses reported for risk-adjustment payments. These results could then be extrapolated across entire Medicare Advantage contracts. Extrapolation would have significantly increased CMS’s recovery amounts. CMS estimated changes would result in about $4.7 billion in recovered overpayments within about 10 years.
The September 25th court ruling
Humana sued to invalidate the Final Rule in Humana Inc. v. Becerra, claiming CMS had eliminated the FFS adjuster without adequate explanation or notice. In the September 25, 2025, ruling, the court sided with Humana, vacating the RADV Final Rule.
The court’s ruling was based on procedural grounds. They reported that the Final Rule violated the Administrative Procedure Act by failing to:
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Provide adequate public notice of changes made when moving from the 2018 proposed version to the Final Rule released in 2023, and
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Provide opportunity for stakeholders to comment on these changes.
It is worth noting that the court did not rule on the lawfulness of the changes in question (extrapolation and removal of the FFS adjuster).
CMS’s appeal
On November 21, 2025, CMS announced its intent to appeal the ruling, without providing details of the arguments it intends to make in the appeal. The government is expected to file a brief clarifying its position early in 2026.
Notice of CMS’s intent to appeal the ruling came only 3 days before the submission deadline for the second batch of RADV audits for PY 2019. Audits for PY 2020 and subsequent years have not yet been initiated. If CMS plans to follow the May schedule, the agency will need to set submission deadlines for the remaining years to be audited in the near future.
What this means
The Final Rule was key to CMS’s more aggressive approach for increased oversight of Medicare Advantage contracts. As a result, the court’s decision has created some ambiguity about the standards governing ongoing and future RADV audits. According to some legal sources, the 2023 RADV Final Rule framework is currently unenforceable, and RADV audits for PY 2018 and beyond (those that would have had their findings extrapolated based on the RADV Final Rule) could be suspended, at least temporarily.
CMS began auditing PY 2018 in 2024, and the OIG (which is also impacted by the court’s ruling) initiated PY 2018 audits even earlier. Some audits that applied extrapolation have been completed for both PY 2018 and 2019. However, based on the Humana decision, Medicare Advantage organizations that repaid extrapolated amounts under these audits complied with a rule that has since been vacated.
It is unclear whether CMS plans to issue a new notice-and-comment opportunity to address the court’s procedural objections. However, on January 27, 2026, CMS issued a memorandum providing Medicare Advantage Organizations with additional information on the status of contract-specific RADV audits. The memorandum states that CMS will comply fully with the district court’s order as long as it remains in effect, while continuing to pursue upcoming RADV payment year audits. A calendar for future RADV audits is under development; CMS anticipates beginning PY 2020 RADV audits by February 2026. The extrapolation policy was not discussed in the memorandum.1
CMS also announced plans to redesign RADV program web pages to improve transparency into audit processes. This will provide a location for key RADV documents, including the upcoming audit calendar and guidance.1
Health plans will need to remain alert for any additional guidance CMS provides.
How can payers prepare?
Whatever the short-term outcome of the September court ruling and CMS’s appeal, the agency’s focus on increased Medicare Advantage contract oversight is likely to continue. Although the court’s decision creates uncertainty regarding the immediate future of this oversight, it does not diminish or eliminate CMS’s commitment to curbing overpayments. Thus, payers must continue to prepare for heightened oversight.
It’s also important to remember that inaccurate diagnoses in patient records not only increase payers’ potential exposure to penalties from CMS and OIG. They also directly impact the quality of patient care.
Veradigm offers an end-to-end solution that can help payers address all data elements currently required for audits. These include:
- Veradigm’s Risk Mitigation tool, which can help payers identify and analyze conditions with the greatest audit risk
- Veradigm eChart Courier™, which can help payers obtain relevant patient charts and records in a secure, automated manner
- eChart Integration and Analytics, which help to standardize chart data across all EHR platforms, making it easily accessible to payers
- eChart Coder, which uses advanced computer-aided coding technologies, such as natural language processing, machine learning, and optical character recognition, to identify, extract, and validate chart contents to ensure coding accuracy
- Veradigm Claims Management solution, which helps reveal and resolve provider coding issues on the front end, facilitating cleaner claims
These solutions are part of a network that touches over 300,000 providers, enabling impact at scale.
Whatever CMS’s next move, don’t be caught off guard. Contact Veradigm today to learn how we can help you prepare for any eventuality.
References:
- Centers for Medicare & Medicaid Services (CMS) Audits and Vulnerabilities Group. January 27, 2026. Memorandum: Update on the Status of Medicare Advantage Risk Adjustment Data Validation Audits. Department of Health & Human Services, Centers for Medicare & Medicaid Services.