SCAN filed the suit in December after its star rating decreased from 4.5 to 3.5 — a move that could have led to about $250 million in missed quality bonus payments for the health plan and “at the heart” of why the company filed the lawsuit, according to its CEO Sachin Jain, MD.
“This decision reaffirms that star ratings actually matter,” Dr. Jain told Becker’s. “When there are these changes to the rules and how they’re implemented, real people are affected by that, in this case Medicare beneficiaries.”
In the June 3 ruling from the U.S. District Court for the District Of Columbia, Judge Carl Nichols said CMS violated the Administrative Procedure Act when it calculated SCAN’s 2024 rating using new methodology changes, a decision that could have sweeping industry consequences.
The main change is referred to as the Tukey Outlier Rule, a policy announced by CMS in a 2020 final rule and implemented in 2024 star ratings. Through the new method, CMS removed extreme outliers from measure scores to prevent outliers from affecting all MA contracts, thereby making it more difficult for plans to earn a high star rating. In 2022, a final star ratings rule from CMS did not mention the new change, which the agency added back in the 2023 rule, citing an inadvertent removal. CMS also introduced guardrails to prevent “cut points” used to calculate ratings from changing more than 5% year to year.
SCAN said the agency did not follow the correct rulemaking process when implementing the changes and that it should have been given an overall star rating of at least four stars. MA plans must receive star ratings of four or higher to earn quality bonus payments from CMS, which can be used to improve member benefits.
Judge Nichols ordered that SCAN’s 3.5 star rating be set aside and prohibited CMS from utilizing the original score to calculate quality bonus payment eligibility decisions.
Other MA carriers such as Elevance Health, Zing Health and Renown’s Hometown Health have filed similar lawsuits, alleging unlawful methodology changes that led to missed bonus payments or terminated Medicare contracts.
“We hope and expect that CMS will move to expedite recalculation for all Medicare Advantage plans using the appropriate methodology to limit further impact to plans and most importantly, Medicare beneficiaries,” Hometown Health CEO Bethany Sexton said.
In March, CMS upped the ratings of four of Elevance’s Medicare Advantage contracts, a move the company estimates will lead to $190 million in bonuses for payment year 2025.
A CMS spokesperson told Becker’s in March 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.”
