A Medicare Advantage insurer facing termination of one of its contracts from the program is suing CMS over the methodology it uses to calculate star ratings.
Chicago-based Zing Health filed a lawsuit against HHS and CMS in federal court in Washington, D.C., on March 25. In its complaint, the company alleged CMS made a "serious error" in calculating its star rating for 2024.
In December, CMS informed Zing Health that it would terminate one of its contracts for a Medicare Advantage Part D plan at the end of 2024. Zing Health breached its obligation to maintain a three-star or higher rating for that contract three years in a row, the agency said in a Dec. 27 notice.
Zing Health's MA-Part D plan has 3,640 members, according to CMS data. The agency has also barred the plan from enrolling new members or advertising for the rest of 2024.
In the lawsuit, Zing Health challenged CMS' application of the Tukey method, a change announced by CMS in a 2020 final rule and implemented in 2024 star ratings. The method removes extreme outliers from measure scores to prevent outliers from affecting all MA contracts and makes it more difficult to achieve a high star rating.
CMS also introduced guardrails to prevent "cut points" used to calculate ratings from changing more than 5% year to year. CMS reran cut points from 2023 using the Tukey method to delete outliers to calculate cut points for 2024, Zing Health alleged. The company argued this violated CMS' established guardrails.
"CMS's failure to adhere to its articulated methodology to calculate Zing's Star Ratings constitutes an unexplained and unreasonable departure from its own regulation, which carries dire consequences for Zing and other MA Plans," the company wrote in the lawsuit.
Elevance Health has also sued the federal government over its implementation of the Tukey method, arguing the agency violated its 5% guardrail standard by deleting outliers before calculating cut points. Elevance said it stands to lose $500 million in revenue from a decline in star ratings.
In March, CMS upped the ratings of four of Elevance Health's Medicare Advantage contracts.
A CMS spokesperson told Becker's in a March 5 statement that the agency "makes an administrative review process available to Medicare Advantage organizations for payment determinations based on the quality bonuses. MA organizations may request an administrative review of their ratings for Quality Bonus Program determinations and rebate retention allowances. Following the completion of an administrative review process, star ratings are updated as needed."
In the lawsuit, Zing Health alleged it would have received a three-star rating had CMS used its stated regulations.
Zing Health is asking the court to require CMS to recalculate its 2024 star rating and prevent the agency from using its 2024 star rating in connection with any termination decisions.
Zing was founded by Health2047, a venture fund founded by the American Medical Association. The MA-Part D plan has been in operation since January 2020.
Zing Health declined to comment on the lawsuit. Becker's has reached out to CMS for comment and will update this story if more information becomes available.