A dispute about a single diagnosis code can become a civil False Claims Act case, a criminal prosecution, or an administrative audit, and the standard the government has to meet is different in each. That is the core thing to understand about Medicare Advantage risk-adjustment enforcement. A coding disagreement is not automatically fraud, a civil case is not a criminal one, and an audit that recoups money is not a finding that anyone lied. This article explains how risk adjustment works in plain terms, then separates the three tracks and what each one actually requires.
How risk adjustment works
Medicare Advantage, also called Medicare Part C, pays private insurers a fixed amount per enrollee rather than paying for each service. Because a sicker patient costs more to care for, that per-person payment is adjusted for risk. The adjustment runs on diagnosis codes. The plan submits the conditions documented for each patient, and more serious documented conditions produce higher risk-adjusted payments.
Unsupported diagnoses can lead to overpayments. Reviewing a disputed submission requires the medical record, the applicable coding and payment rules, and evidence of how the data was generated and submitted. Documentation is central, but its presence alone does not answer every payment or fraud question.
CMS tests that documentation through Risk Adjustment Data Validation, or RADV, audits. A RADV audit pulls a sample of enrollees and checks whether the submitted diagnoses are supported by the underlying records. The recurring points of dispute are whether a diagnosis was adequately documented, whether the plan acted "knowingly" in submitting it, and whether any coding error mattered enough to affect payment.
Three tracks, three standards
The same coding dispute can travel on more than one track, so each standard needs separate analysis.
Civil False Claims Act. A civil FCA case requires a false claim submitted knowingly and materially. "Knowingly" carries a subjective meaning after the Supreme Court's decision in United States ex rel. Schutte v. SuperValu Inc. (2023). What matters is the defendant's own knowledge and belief, not what an objectively reasonable coder might have thought. Materiality is a demanding standard under Universal Health Services v. United States ex rel. Escobar (2016). And falsity is a separate element from knowledge, which matters in the medical-judgment context discussed below.
Criminal. A criminal prosecution demands proof beyond a reasonable doubt and criminal intent, a much heavier burden than the civil track. The elements depend on the charged offense; an audit finding alone does not establish a criminal violation.
Administrative. A RADV audit is an administrative payment review, rather than a criminal prosecution or a civil FCA lawsuit. It is the agency recovering what it concludes was overpaid, on its own processes and a lower showing than a fraud case, and it can proceed even where no one is charged with anything.
Keeping these apart matters because a favorable outcome on one track does not decide another, and the burden that defeats a criminal charge is not the burden that governs an audit.
Where clinical judgment fits
In United States v. AseraCare, Inc., 938 F.3d 1278 (11th Cir. 2019), the court addressed hospice eligibility based on a terminal-illness prognosis. It held that reasonable expert disagreement alone did not establish falsity, while remanding to allow consideration of other evidence in the full record. The decision therefore requires attention both to the kind of clinical judgment involved and to evidence beyond competing expert opinions. Opinion, pp. 2–3
The case concerns hospice certification. Applying its reasoning to a Medicare Advantage dispute requires analysis of the particular diagnosis, documentation and payment rules. It supplies no automatic defense to an unsupported code or an inaccurate record.
What the case examples show, and what they do not
The prosecution of a former HealthSun risk-adjustment director, tried in the Southern District of Florida and ending in acquittal, is discussed in our HealthSun case analysis. The outcome illustrates why the proof concerning an individual defendant must be assessed separately from the company’s conduct.
It is equally worth being careful about what a single case does not establish. An acquittal in one prosecution does not create a defense rule, and it does not show that the government cannot win these cases. A general acquittal also does not identify which element the government failed to prove; a jury that returns a not-guilty verdict has not announced whether it doubted intent, falsity, or materiality. And one trial outcome, favorable or not, is not a conviction rate or a census of how these matters resolve. The value of a case example is as an illustration of the issues, not as a shortcut around them.
Questions worth raising
These are prompts to discuss with counsel, not conclusions about any situation.
- Is the dispute about whether a diagnosis is supported by the record, or about the clinical judgment behind it? The two lead to different defenses.
- Which track is actually in play, civil, criminal, administrative, or more than one at once?
- What does the documentation show about who made the diagnosis and who entered the code?
- On the civil track, what evidence supports or disputes each element, including knowledge and materiality?
Risk-adjustment enforcement rewards precision about which standard applies and what the records actually show. The firm's Federal Health Care Fraud Defense Report develops the Medicare Advantage analysis, and our article on the HealthSun prosecution covers that case in detail. If you are facing a RADV audit, a civil inquiry, or a criminal matter involving risk-adjustment coding, we are available to discuss your circumstances.
Sources and further reading
- AseraCare: Eleventh Circuit opinion
- False Claims Act liability: 31 U.S.C. § 3729
- CMS: Medicare Advantage RADV program
Explore the Healthcare Fraud resource hub or contact the firm to discuss your circumstances.
