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the art and science of handling Medicare risk adjustment coding “gray areas”

March 09, 2017

While the Centers for Medicare & Medicaid Services (CMS) has guidelines in place for Medicare risk adjustment coding, that doesn’t mean that every Medicare Advantage plan will code the same way. In fact, there is room for many different approaches—and it’s up to each plan to decide what will lead to the best outcome. We caught up with Deb Bradley, Verscend’s senior vice president of clinical coding services, to talk about how health plans can seek a better return on investment in their Medicare risk adjustment programs.

What is Medicare risk adjustment and why is it important for Medicare Advantage plans and their members?

Risk adjustment is a process that CMS uses to level the playing field regarding the reporting of patient outcomes and Medicare reimbursement based upon patient health status. It enables health plans to be paid appropriately based upon their members' overall health. It’s important because Medicare Advantage (MA) plans contract with physicians to provide care for these members, and the risk adjustment program ensures that both the plans and physicians get paid for the care they provide. But it’s also important for the members, as the benefits they receive under an MA plan are richer than those of the standard Medicare program. Co-pays are reduced and benefits like vision, dental, and gym memberships are often included.

What do you think is more reliable and cost effective for the accurate assessment of member health risk: retrospective or prospective programs?

Both are effective programs because they meet different needs. Retrospective risk adjustment ensures that the plan/provider gets adequately compensated for the level of care members require based on their health profile (i.e., any chronic conditions and comorbidities). As a large majority of the members in an MA plan have chronic conditions, plans often focus on better management of and education around these conditions so members can avoid costly ER visits and hospital admissions.


The prospective program, on the other hand, focuses on early identification of members who may be developing a chronic illness or are at risk for a potential illness. The outcome of the prospective assessment is an appointment for the member to see his or her physician for care. Both programs are focused on the maintenance of the member’s health and provide a balance for the plan to treat members with active disease, while watching over the members that may be at-risk for a future illness.

What is CMS’ objective when it comes to risk adjustment coding?

CMS wants to ensure that all members enrolled in an MA program are provided the appropriate level of care based on their health status. Risk adjustment coding validates that the member’s physician-treated diagnoses are supported through acceptable documentation in the medical record. These documented diagnoses codes, which map to a risk adjusting Hierarchical Condition Category (HCC), are captured and submitted to CMS for reimbursement. The more clinical care required to treat that HCC, the higher the reimbursement. As an example, diabetes uncomplicated will be reimbursed at a lower rate than diabetes with complications.

Can MA plans take their medical record coding guidelines beyond that of CMS? How so and what are the kinds of results they can expect?

CMS, as well as the AHA Coding Clinic®, provides guidance on what constitutes clinical supporting evidence, but there is some flexibility in the interpretation. Not every situation is black and white, and this is where plans can balance their comfort level with their interpretation of the coding guidelines against the potential for those decisions holding up in a Risk Adjustment Data Validation (RADV) audit. To ensure a successful risk adjustment coding effort, plans should have documented coding guidelines that are discussed, reviewed, and signed before coding begins so that as many of the “gray” areas as possible are identified for consistent coding across reviewers. Additionally, plans can look to previous RADV audits to know what position CMS has taken in the past. It’s also important to monitor coders on an ongoing basis for potential under- and over-coding.


In addition to coding guidelines, health plans have options on their coding approach. Some health plans decide to look for the “best” date of service in a medical record, meaning the date of service that supports the diagnosis/HCC in the first half of the year and then again in the second half of the year. Others prefer to look at all dates of service and capture all diagnoses, whether they map to a revenue-generating HCC or not. CMS doesn’t provide guidance on which approach plans should take—it is simply focused on reimbursement for the risk-adjusting diagnosis codes that are supported in the medical record.


We advise health plans to evaluate all dates of service and capture the diagnosis codes that map to a revenue-generating HCC. This approach is the best mechanism to ensure the risk diagnosis codes are collected. Diagnosis codes that do not fully meet CMS coding guidelines can still be captured (not submitted) and used for coder training purposes or provider clinical documentation improvement initiatives.  

Is there a downside to being more aggressive with retrospective medical record coding guidelines?

Plans that have overall member risk levels and subsequent reimbursement dramatically increase from year to year send a red flag to CMS. If plans become too aggressive in their coding strategy, they may be selected for a RADV audit, which is CMS’ quality oversight program. In a RADV audit, CMS selects a set of members and their corresponding HCCs and requires the plan to submit the medical records that demonstrate the member has these conditions. If the plan cannot produce clinical documentation according to CMS standards, the plan runs the risk of having its reimbursement reduced—not just for that member, but across all members. Yet another important reason for coding accuracy, especially for more aggressive plans.

What should MA plans expect from their coding vendors?

The best strategy is to engage with a company that has deep domain expertise in CMS and Coding Clinic guidelines as well as RADV auditing. Plans should expect vendors to use a standard set of coding guidelines, which is reviewed with the plan. The vendor and plan should mutually agree upon the handling of any gray areas, such as how to use the medication list as supporting clinical documentation for a diagnosis. Vendors should leverage their experience to offer sound guidance on the level of risk a plan is taking and the approach.


A coding vendor should be an extension of the plan. The vendor should have a vested interest in minimizing the RADV risk while ensuring that all diagnoses that are supported in the medical record are captured. Vendors should also supply data on quality oversight to confirm that under-coding or over-coding is not occurring. The OIG has set a standard that 95 percent of the medical records coded should be correct. Plans should expect to be able to monitor vendor coding accuracy to be sure that both sides are comfortable with the coding outcomes. Continued dialogue over coding questions should be expected.


Finally, plans should also engage with their vendor to help improve clinical documentation. This has become especially relevant with ICD-10. Vendors should provide data on which physicians could benefit from additional clinical documentation training as part of the plan’s overall quality assurance program.


Verscend has developed tactics based on our 20 years in the industry that will improve your risk adjustment initiatives this year. View our end-to-end Medicare Risk Adjustment solution brochure:

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Deb Bradley has more than 40 years’ clinical experience and over 35 years in designing and leading healthcare software applications. As Verscend’s senior vice president of clinical coding services, she has direct responsibility for the clinical coding team that provides medical record coding services for our Medicare, commercial, and Medicaid clients, including retrospective, prospective and auditing services. She oversees both the onshore as well as the offshore coding programs from a production and quality perspective. Prior to joining Verscend, Deb served as the vice president of product management and sales support for The TriZetto Group, an integrated healthcare management technology provider. She is a registered nurse and a certified professional from the Academy of Healthcare Management.

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