Risk Adjustment Reviews are Your Key to Success in Value Based Contracts

Retrospective reviews of risk adjustment coding are foundational to the financial health and stability of Accountable Care Organizations (ACOs) and Medicare Advantage plans (MAPs). This is increasingly true as value-based contracts and their underlying details become more complex, coding requirements change, and the demand for qualified risk adjustment coders increases.

By focusing on retrospective reviews of risk adjustment coding, you can position your organization for more accurate representation of your population and possibly better financial outcomes.

Put simply, retrospective risk adjustment is looking back at past claims to ensure proper diagnosis coding. The benefit is that this process can reveal gaps in your diagnosis coding of chronic illnesses that could lead to decreased reimbursement in the future. 

And while many ACOs and Medicare Advantage plans have a retrospective risk program, sometimes the plans themselves are inefficient and wasteful. This can be because they are focusing only on closing gaps from previously identified chronic illnesses or working with a vendor that doesn’t fit their needs. 

Retrospective reviews happen after claims are submitted with the goal of identifying codes that are clinically documented but have not been reported. These reviews also help to identify ongoing patterns of clinical documentation problems. This can help to identify areas of improvement in training and education. If these issues aren’t properly addressed, an organization will continue to misrepresent their patient population. This misrepresentation can result in lower risk scores and a decrease in future payments.

ACOs should be strategic about stratifying high-risk patient populations. For them, investment in retrospective risk adjustment coding can improve care outcomes, increase cash flows, and improve utilization. It can help: 

• Optimize claim processes going forward
• Improve compensation accuracy
• Align with compliance requirements
• Avoid legal penalties
• Create a cycle of ongoing feedback for training and education

The increase in value is partly because of the rise of value-based care and payment models that incentivize providers to improve outcomes for their patient populations. ACOs need to be assured that their patient population has been assigned the proper risk adjustment factor (RAF) scores resulting in accurate prediction of medical expenses.

Recent changes from Centers for Medicare & Medicaid Services (CMS) mean that both ACOs and MAPs will need to take a close look at their billing practices and outcomes. The Hierarchical Condition Category (CMS-HCC) risk adjustment model was updated by CMS in 2023, increasing the value of effective retrospective risk adjustment reviews. This update includes data years for calibration and an updated denominator year used in calculating the average per capita expenditures predicted. This means an increase in potential errors around:

• HCC names and numbers                                       
• The 29 new HCCs
• HCC mapping     
• Coefficient HCC values
• The 2,294 diagnosis codes that were removed that previously mapped to an HCC
• The 268 diagnosis codes that were added that previously did not map to an HCC

Additionally, CMS is phasing in a new risk adjustment model over the next three years. For payment year 2024, scores are calculated as 67% of the existing model (V24) in addition to 33% of the finalized 2024 model (V28). For payment year 2025, scores will be 33% of the current model plus 67% of the new model, and in 2024, full transition will kick in. 

MAPs risk score trends are also changing, per CMS. The risk score trend is 3.30% under the 2024 risk adjustment model and 5.00% under the current risk adjustment model. Since we will blend CY 2024 risk scores using 67% of the risk scores under the current risk adjustment model and 33% of the risk scores under the finalized 2024 risk adjustment model, the bottom line table reflects the blend of the MA risk score trends under the two models, yielding a 4.44% overall trend [1].

For Medicare Advantage plans, retrospective risk adjustment can help ensure they’re properly reimbursed for the risk they’re taking on. It can help support proper distribution of funds for members at all risk levels, from low to high. Risk adjustment has a significant impact on plan performance, so retrospective risk adjustment can help support ongoing payment accuracy and improvement.

Options in Improving Risk Adjustment Coding

Improving retroactive risk adjustment coding results is a multi-pronged decision. Leadership will need to decide on questions like how to implement diagnosis guidelines, whether they have the risk adjustment coders necessary to meet their goals, whether their technology is up to the task, and how outsourcing should be leveraged in their overall strategy. 

Thankfully, outsourcing is a flexible solution that can address issues ranging from a lack of experienced staff, to a complex healthcare plan environment, to increasingly complex diagnosis guidelines. To discuss how outsourcing should complement your use of retrospective risk adjustment, contact us today.