The Court Just Ruled on Medicare Advantage Audits. Here's Why That's Your Problem.

A federal court just blocked CMS's plan to use statistical extrapolation in Risk Adjustment Data Validation (RADV) audits. MA plans may be celebrating but if you're a provider, here's what you need to understand:

The burden of documentation falls on you either way.

Whether CMS is using extrapolation or not, your documentation is the foundation of every audit. When payers first review your records, your job is to prove that every diagnosis and procedure was supported by clear, compliant documentation. If that initial review raises questions, the next round hits harder as those same records become evidence in defending your coding and clinical judgment to avoid costly downgrades or denials. Either way, your documentation determines the outcome.

What Actually Changed (And What Didn’t)

The headlines might suggest a major shift. The reality? Not much has changed in practice. Before the ruling, CMS was already scaling up its audit infrastructure and that continues. Here’s where things stand:

The Fraud Defense Operations Center (FDOC) Is Fully Operational

• April 2025 pilot: 106 providers assessed, 50 payment suspensions totaling $100.4 billion

• January–August results: 315 suspensions holding $1.8 billion in escrow

• 4,242 provider revocations already implemented

FDOC doesn’t need RADV extrapolation to impact your bottom line. Payment suspensions can last up to 12 months, with funds held in escrow while you prove compliance.

CMS Is Going All-In on AI

CMS isn’t just hiring more auditors, it’s scaling artificial intelligence. Real-time fraud detection and machine learning models trained on millions of claims are already shaping how reviews are triggered and prioritized. That technology isn’t going away because of one procedural ruling.

What Was Actually Struck Down

The court vacated CMS’s 2023 RADV rule that allowed statistical extrapolation for payment years 2018 forward. The issue wasn’t with the concept — it was with CMS’s process. The agency changed its justification between the proposed and final rule without proper notice — what the judge called a “surprise switcheroo.”

What Didn’t Change

• CMS can still audit every claim individually

• The 2012 RADV methodology remains valid

• Other audit programs (RAC, MAC, UPIC, FDOC) continue unaffected

• The 10-year record retention rule still applies

The court didn’t stop CMS from auditing only from skipping steps in rule making. That’s an easy fix for an agency with this much momentum.

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CMS's Path Forward

Given Dr. Oz's public commitment to "crushing fraud, waste and abuse," expect CMS to pursue multiple paths simultaneously:

• Appeal to the 5th Circuit (60-day window)

• Issue a new rule with proper procedure (6-12 month process)

• Pivot to volume-based enforcement without extrapolation

• Accelerate other audit programs to compensate

The Preparation Window

This ruling bought you something precious: time. Perhaps 6-12 months while CMS regroups.

The audit infrastructure is being built. The AI is being trained. The workforce is being hired.

But here's what we know from hospitals already excelling in this space: organizations with strong documentation practices and modern workflows don't just survive audits—they turn them into competitive advantages.

Your documentation is what gets audited, whether CMS uses extrapolation or not. Every gap becomes ammunition for denials. Every inconsistency flags your organization for deeper review.

The question isn't whether increased audits are coming. It's whether your documentation can withstand this new level of AI-powered scrutiny.

Three Immediate Next Steps

1. Request our RADV Preparedness Checklist A comprehensive self-assessment tool to evaluate your current audit readiness across all programs.

2. Get Your 30-90 Day Roadmap We've built a detailed preparation plan covering immediate actions, strategic initiatives, and long-term positioning. Let us send you a customized roadmap based on your current state.

3. Schedule a Strategic Assessment Our team will analyze your current audit exposure, identify vulnerabilities, and create a personalized preparedness plan.

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At Cofactor, we help hospitals build documentation and appeal workflows that can withstand AI-powered audit scrutiny—from both government and commercial payers. Because preparing now means thriving later.

The audits aren't coming. They're already here.