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The term “risk adjustment” means different things to different people depending on their role. The Centers for Medicare & Medicaid Services’ (CMS) textbook definition is that risk adjustment is “a statistical process that takes into account the underlying health status and health spending of the enrollees in an insurance plan when looking at their health care outcomes or health care costs.” In contrast, a certified medical coder would tell you that risk adjustment is about making sure the medical record accurately reflects the diagnoses and procedures captured on a claim. And a health plan chief financial officer would say that risk adjustment ensures that the plan is properly compensated for its clinical burden.
In its simplest terms, risk adjustment ensures that the health conditions, health status, and demographics of the beneficiaries in a Medicare Advantage (MA) or an Affordable Care Act (ACA) plan are accurately documented—and that the health plans managing those beneficiaries are adequately compensated for that management. Successful risk adjustment has three fundamentals:
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To have a successful risk adjustment program, health plans must help members and providers engage with each other with the goal of ensuring quality healthcare delivery. Within the MA and ACA markets, health plans commonly provide a set of defined and generally complimentary or low-cost member benefits such as annual wellness visits, comprehensive wellness exams, and annual physical exams. The goal of these benefits is to encourage members to visit their primary care physician (PCP). The documentation created during these member visits is critical to ensuring an appropriate and accurate risk score.
Health plans often use a combination of tactics to encourage these visits. For example, they may send out lists to providers to remind and encourage them to reach out to their attributed members in their patient panel to schedule yearly check-ups. Health plans may also offer some form of reward or incentive to encourage members to visit their PCPs to ensure that they receive the right care at the right time. Member incentives may include, for example, gift cards when a member visits a provider and/or completes certain preventive health procedures. Other tactics include mailing and telephonic outreach campaigns to encourage members to schedule a visit with their PCPs or to attend a clinic fair. Finally, for members with complex health conditions and limited access to transportation, a health plan may offer the opportunity for a provider to visit them at their residence for an in-home assessment.
If diagnoses and health status are not properly charted in the medical record, then members’ conditions cannot be coded appropriately and the claim may not reflect their true condition(s). MA and ACA plans use both prospective and retrospective risk adjustment processes to support documentation and accurate coding.
Point-of-care (POC) tools help providers prospectively assess members’ medical conditions, reconfirm pre-existing conditions, and refer their patients to preferred physicians. POC tools range in sophistication from simple health risk assessment forms that are sent out to providers on a quarterly basis to clinical decision support systems that are embedded or tied to an electronic medical record.
A newer, emerging prospective tool is concurrent coding, which requires the health plan to have access to the medical record immediately after the encounter with the provider. In this case, the plan reviews the submitted claim in the context of the medical record. With the advent of computer-assisted coding and electronic medical records, health plans are using more real-time technologies to review medical records and correct claims information.
Finally, many health plans are actively reaching out to providers to encourage better charting techniques, survey reconfirmation rates of chronic conditions, and review potential care gaps for members in providers’ patient panels.
Unfortunately, claims data does not always accurately reflect a member’s true medical condition (although this trend is shifting as prospective tools improve). To address this problem, health plans use analytics to identify members with potential chronic conditions that are not currently documented. In these instances, markers or indicators in the member’s claims data suggest that a medical condition may be present but not represented in the claims data.
Once a list of members with potential encounter data gaps is identified, the health plan requests and reviews the members’ medical records. With this new “supplemental” information, the health plan updates its encounter data with CMS so it better reflects what is in the members’ medical records.
Accurate, thorough, and complete submissions are the third fundamental of successful risk adjustment. The diagnosis codes documented in the encounter submissions are what CMS and the Department of Health and Human Services (HHS) use to calculate a health plan’s overall risk score. In other words, encounter submissions are the receipts that the government uses to calculate health plan risk adjustment payments. If a health plan does an excellent job facilitating member/provider connections and ensuring accurate charting and coding, but it does poorly with encounter submissions, then all that effort was wasted.
Because encounter submissions are so critical, CMS published a memo last year that outlined the 12 best practices on which a health plan should focus, falling into three main categories: reconciliation, operations/process improvement, and education/analysis.
Currently, there is much discussion about health plans reconciling their EDPS and RAPS risk scores. Health plans should not only reconcile their MAO-002 with MAO-004 reports, and 277CA with MAO-002 reports, but also review the Encounter Data Report Cards they receive from the Health Plan Management System. The Encounter Data Report Card benchmarks a health plan with other health plans at the national and regional level. These very useful tools aid a health plan in assessing the quality of their encounter submissions.
In the 2017 memo, CMS focused on the need for health plans to continually look for ways to streamline and improve their risk adjustment processes. To help with this, the agency is currently conducting user groups to discuss encounter submissions data and has provided the Encounter Data Front End System (EDFES) as a test bed for encounter submission, with the goal of helping health plans better understand encounter submission edits.
CMS recommends that health plans communicate with their providers and internal teams to stress the importance of encounter submissions and collaborate on ways to improve the quality and completeness of encounter submissions. The agency also recommends health plans use encounter submissions as a data source to spot operational and clinical trends.
Risk adjustment is complex, but breaking it down into these three critical fundamentals helps health plans focus their efforts. If a health plan masters all three fundamentals, it can ensure accurate, compliant, and positive risk adjustment payments; foster strong provider engagement; and positively impact the health and wellness of its members.
Learn more about Verscend's end-to-end approach to risk adjustment from our latest podcast, "how risk adjustment coding validation gives health plans more certainty."