The Centers for Medicare & Medicaid Services (CMS) issued a memo January 27, 2026, with updates on the agency’s approach to checking whether Medicare Advantage (MA) plans are being paid correctly. These reviews are conducted through Risk Adjustment Data Validation (RADV) audits, which help CMS confirm that the diagnoses MA plans report are supported by medical records.
The January 2026 memo signals that CMS intends to honor its commitment to strengthen oversight of MA payments, including accelerating and expanding the use of RADV audits and using AI (artificial intelligence) to streamline human coding reviews. MA organizations must now prepare to respond to the RADV audit notice within the required five-month window, while balancing their other risk-adjustment programs.
In this article, we explain the rapidly evolving landscape affecting RADV audits. Wakely, an HMA company, addresses what these changes mean for MA organizations and key considerations to ensure they are prepared for the upcoming enhancements to federal program integrity initiatives.
Overview of CMS’ RADV Refresh
CMS announced a major shift in May 2025: All MA plans will undergo RADV audits—not just a small sample as before. These audits look for cases in which diagnosis information submitted by a plan does not match the documentation in the patient’s medical record. When this happens, CMS may decide the plan was overpaid and require repayment. Historically, CMS audits have identified widespread diagnosis-code documentation errors, resulting in significant revenue recoupment from MA plans.
The 2025 announcement creates a framework for additional risk for MA plans, which could shift to risk-bearing provider groups. As we explained in an earlier article, key components of that announcement include:
- All MA plans will be audited starting with Payment Year (PY) 2018.
- CMS committed to accelerating audits by adding more staff and using new technology.
- CMS planned to use “extrapolation”—meaning if errors were found in a small sample of records, the error rate could be applied to the full population, which could lead to much larger repayment amounts.
- CMS also planned to eliminate the fee-for-service (FFS) adjuster—a policy that previously helped reduce the amount a plan would have to repay. This proposal would increase financial risk for plans.
Both the use of extrapolation and the removal of the FFS adjuster were later challenged in court.
Legal Challenge
In September 2023, Humana sued CMS in federal court, arguing that the 2023 RADV final rule, which allowed extrapolation and removed the FFS adjuster, was put into place without following proper federal rulemaking procedures. On September 25, 2025, the court agreed with Humana and vacated certain parts of this final rule, meaning certain parts of the rule are no longer in effect.
CMS appealed the ruling on November 1, 2025, which has created uncertainty about how RADV audits will work in future years.
Navigating the Legal and Regulatory Changes in Early 2026
The court did not say that extrapolation or elimination of the FFS adjuster is illegal—only that CMS did not follow the required process for changing the rules. Hence, the 2023 RADV final rule cannot take effect unless CMS wins its appeal or reissues the policy using the proper steps.
In its January 2026 Health Plan Management System (HPMS) memo, CMS stated that it will comply with the order while it is in effect.
The pending litigation does not diminish CMS’s broader commitment to increased audit activity and heightened scrutiny of MA risk-adjustment practices.
Effect of the Ruling. During RADV audits, CMS selects a sample of enrollees and requests corresponding medical records from the MA plan. These records are reviewed to confirm that the documented diagnoses meet CMS requirements. If unsupported diagnoses are found, CMS may recalculate payments and recover overpayments from the health plan. This audit process maintains program integrity and ensures accurate payments.
Plans that submit incomplete records could owe significant repayments to CMS.
CMS’s January 2026 memo clarifies how the agency plans to roll out additional RADV audits starting with PY 2020. CMS also addresses the agency’s plans to:
- Reduce burden on plans and providers, for example by extending the submission window
- Balance the volume of medical record submissions needing review by using smaller sample sizes where appropriate
- Use AI to further accelerate the review process
Preparing for What’s Next
Given CMS’s stated direction and the still unsettled litigation environment, MA plans should remain vigilant and audit ready.
Key steps include:
- Prioritizing timely and complete chart submission processes
- Strengthening internal criteria to identify and prioritize charts most likely to support diagnoses
- Improving documentation and coding accuracy through provider engagement
- Conducting proactive self‑audits to identify potential vulnerabilities
- Partnering with expert RADV consultants to navigate audit strategy, documentation, and submission readiness
Connect with Us
Wakely assists plans with their RADV initiatives and development of robust RADV playbooks. For more information about Wakely’s RADV playbooks, contact Debbie Conboy.
