The No Surprises Act Is in Jeopardy, But Providers Should Stay the Course Image
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The No Surprises Act Is in Jeopardy, But Providers Should Stay the Course

Recent federal layoffs have added a new layer of uncertainty for providers impacted by the No Surprises Act. 

The federal office responsible for implementing this critical legislation faces staffing cuts, so revenue cycle leaders must stay proactive to mitigate the impact of surprise billing on their organizations. While the future of surprise billing legislation may be in limbo, providers can take actionable steps to strengthen their revenue cycle operations, including leveraging medical billing services and partnering with the best medical billing company in the USA to support compliance

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HCC Risk Adjustment Coding Update for 2025
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HCC Risk Adjustment Coding Update for 2025

Value-based reimbursement is driving expanded complexity in the healthcare industry, increasing the need for revenue cycle leaders to ensure patient conditions are captured accurately. One of the primary ways to do this is through hierarchical condition category (HCC) risk adjustment coding. 

To help you keep your HCC risk adjustment coding up with the challenges of 2025, 3Gen Consulting has put together this update of the latest research and findings in HCC risk adjustment.  

Why Research in HCC Risk Adjustment Coding Matters

One of the primary reasons that research in HCC risk adjustment coding is so important is that differences in calculations can shift incentives for different healthcare stakeholders. These codes are based on the complexity of a patient’s health condition, so coding can make a significant difference in reimbursement received. 

For example, highly complex patients will often receive higher reimbursement, so accurate coding of a patient’s chronic condition can increase their risk score, resulting in higher reimbursement. This is considered acceptable since the provider is assumed to be expending more time and resources managing more complex patients that require greater care. 

While this dynamic can be used for unethical purposes, not all coding differences are used illegally. Sometimes, there is an issue of coding simply being applied differently between Medicare and Medicare Advantage (MA) programs, which should ideally be similar in coding practices and reimbursement. This is of particular concern to government agencies since Medicare Advantage is growing at a significant rate. The Congressional Budget Office (CBO) has projected that the share of beneficiaries of Medicare Advantage will increase from 54% of eligible Medicare beneficiaries in 2024 to around 64% 10 years from now. Today, it is believed that Medicare Advantage plans are significantly overpaid in comparison to traditional Medicare plans. The Medicare Payment Advisory Commission (MedPAC) has estimated that, in 2024, MA payments were 22% higher than traditional Medicare, a difference of $83 billion [1]. These overpayments tend to benefit plans rather than beneficiaries, meaning that there is a financial incentive for plans to restrict care after members are enrolled, something that can result in delays and denials of service and ultimately, poorer outcomes for patients. 

Medicare Advantage Risk Adjustment Can Be Strengthened with Diagnosis Codes and Survey Responses

As things stand now under the existing Medicare Advantage risk-adjustment system, participating plans face questionable incentives. These include incentives to report diagnosis codes on their enrollee medical claims that reflect more severe health conditions and additional conditions. This action increases enrollee risk scores and payments. With the goal of improving risk adjustment integrity, some researchers have released a proposal including four alternative methods for constructing risk scores [2]: 

  • Calculating Hierarchical Condition Categories scores while excluding diagnosis codes from health risk assessments and chart reviews
  • Calculating HCC risk adjustment coding scores excluding diagnosis codes most subject to score inflation
  • Using pharmaceutical claims only 
  • Using self-reported survey responses alone or potentially in conjunction with diagnosis codes

They compared the predictive accuracy of each of these strategies against the standard HCC risk adjustment coding approach. The researchers did this using 2016–19 medical and pharmaceutical claims linked to Consumer Assessment of Healthcare Providers and Systems survey responses gathered from 151,432 Medicare Advantage enrollees. They found that, in relation to the standard HCC risk adjustment model, the models that combined survey responses with risk scores did a better job of predicting healthcare use. This approach explained 5.8-6.0 percent of the individual variation in total price-standardized Medicare Advantage utilization in comparison to 5.1%. The findings suggest that diagnosis codes can be used in conjunction with survey responses to improve Medicare Advantage risk adjustment results. 

Lack of Persistent Medicare Coding May Widen Risk-Score Gaps

Research from HealthAffairs has revealed that risk-score gaps could be attributable to differences in capture of diagnostic codes [3]. 

Medicare Advantage payments are adjusted using a risk-score model calibrated on demographic data and diagnostic data from traditional Medicare beneficiaries. This data is in turn applied to Medicare Advantage beneficiaries. If Medicare Advantage plans are capturing more diagnostic codes in comparison to traditional Medicare, they can receive higher payments in comparison. 

Researchers analyzed Medicare Advantage encounter data and Medicare claims from 2017-2019 to compare persistence of diagnostic coding under sixteen chronic conditions. Analysis found that the difference accounted for 2.85 percentage points (22.3%) of the Medicare/MA risk-score gap in 2020, amounting to $8.1 billion in Medicare spending. 

Work with 3Gen Consulting

As the complexity of HCC risk adjustment scoring increases and the need for certified risk adjustment coders grows, 3Gen Consulting is here to help support your revenue cycle needs. Schedule a call today to discuss how we can improve the efficiency and effectiveness of your risk adjustment efforts.

References

[1] P. N. Van de Water, “Growth in Medicare Advantage Raises Concerns,” Center on Budget and Policy Priorities, 10 January 2025. Available: https://www.cbpp.org/research/health/growth-in-medicare-advantage-raises-concerns.
[2] M. Bellerose, H. O. James, J. Shroff, A. M. Ryan and D. J. Meyers, “Combining Patient Survey Data With Diagnosis Codes Improved Medicare Advantage Risk-Adjustment Accuracy,” Health Affairs, vol. 44, no. 1, 2025.
[3] N. Ghoshal-Datta, M. E. Chernew and J. M. McWilliams, “Lack Of Persistent Coding In Traditional Medicare May Widen The Risk-Score Gap With Medicare Advantage,” Health Affairs, vol. 43, no. 12, 2024.

How the No Surprises Act Has Impacted Providers and Physician Billing Services
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How the No Surprises Act Has Impacted Providers and Physician Billing Services

The No Surprises Act (NSA) brought with it large amounts of speculation on its impact on physician billing services, and now, in 2024, it’s been in play long enough to finally understand how it’s affecting providers and how they’re responding. 

Two years in, the industry is seeing results that anyone responsible for physician coding and billing services should consider – and information they should evaluate as they consider their relationship with physician billing companies as a potential solution. 

Looking Back at the No Surprises Act

The No Surprises Act went into effect on January 1, 2022, shaking up physician billing services around the country. It was intended to address “surprise medical bills” – the issue of insured consumers receiving care with an out-of-network provider they didn’t choose. They’re then shouldered with a bill they weren’t expecting and didn’t authorize. This issue happens in 20% of emergency department visits and around 9-16% of in-network hospitalizations in relation to services from providers like an anesthesiologist. Since the bill took effect, there have been developments around the arbitration process, dispute resolution, and the impact on patients. 

When the act first took hold, the American Medical Association stepped in to help physicians understand their rights when caring for patients who obtained out-of-network services without their knowledge [1]. It put together a toolkit that focused on three operational challenges that physicians would need to address. 

  • Notice-and-consent requirements which physicians are now required to make publicly available for all patients enrolled in commercial health coverage
  • Rules around emergency services and post-stabilization for hospitals
  • Their obligation to provide good faith estimates for their uninsured and self-pay patients 

Impact of the No Surprises Act on Physicians

While consumers have generally celebrated the outcomes of the NSA, many are realizing that providers are now experiencing financial hardships and other burdens. Out of all providers, physicians’ groups and air medical transportation companies have shouldered much of the burden in their work to provide emergency services. This is reflected in the fact that bankruptcies in healthcare jumped 84% between 2021 and 2022, with many in the industry directly blaming the NSA along with other factors like payer contracts and higher costs of debts [2]. By November 2023, 30 public companies had pointed to the NSA as a risk to their financial performance [3]. 

Today, providers are open about emerging issues that are affecting them and their efforts in physician coding.

Claims Are Backlogged

One of the downstream effects of the NSA is the impact of the dispute and settlement process. When the law was created, it included requirements to address negotiations and settlements between providers and payers to handle services rendered outside contractual agreements. This falls under the “open negotiation” process, meaning that if the parties don’t come to an agreement within 30 business days of open negotiation, the decision then falls to the Independent Dispute Resolution (IDR) process which involves submission to an independent third party. The case can vary depending on the insurance plan type, sometimes following federal rules and sometimes falling under a process determined by the state. 

The result has been increased complexity and slower processing in the healthcare revenue cycle. The U.S. Government Accountability Office (GAO) reports that while federal departments expected around 22,000 disputes through the IDR process in 2022, over 490,000 were submitted between April 2022 and June 2023. As of June 2023, a full 61% of the disputes were unresolved [4]. 

Increased Resource Use of Physician Billing Services

Of course, these new requirements don’t exist in a vacuum. Physicians have had to employ additional resources to meet the requirements of the act. Providers are required to inform every patient about protections against balance billing and have an obligation to provide good faith estimates for their uninsured and self-pay patients. 

All this is happening in the midst of a healthcare revenue cycle staffing shortage that is affecting physician coding and billing across the board. According to Becker’s Hospital Review, 32% of revenue cycle leaders report challenges with hiring and training staff in 2024 [5]. This issue directly impacts provider revenue cycle outcomes, since shortages contribute to already growing denial rates. 

Processes That Are More Complex

Complexity is an ongoing concern in physician medical billing. Offices face falling reimbursement rates, shifting payer relationships, and increasing costs. In addition, many are inundated with pressures to use data to make increasingly productive decisions. The NSA only increased many of these demands. 

Leaders in charge of physician billing services have to adapt their revenue cycle to document and address low payments from payers they’re not contracted with. They also have to augment their staff with professionals who understand physician billing services and have the physician revenue cycle management and contract management skills that align with NSA processes. 

In response to pressures from legislation like the NSA, many healthcare leaders are looking into the support of physician billing companies. These partners can help improve revenue cycle results, increase efficiency, and manage the future impact of the act. To explore some of your options, contact us today. 

 

References
[1] A. Robeznieks, “The No Surprises Act is in effect. What physicians need to know.,” American Medical Association, 14 January 2022. Available: https://www.ama-assn.org/health-care-advocacy/access-care/no-surprises-act-effect-what-physicians-need-know.
[2] F. J. Thomas, “84% Increase of Healthcare Bankruptcies Due to No Surprises Act,” WorkersCompensation.com, LLC, 8 October 2023. Available: https://www.workerscompensation.com/daily-headlines/84-increase-of-healthcare-bankruptcies-due-to-no-surprises-act/.
[3] S. Biswas and B. Yerak, “Surprise Medical Billing Law Heaps Pressure on Healthcare Providers,” Dow Jones & Company, Inc, 28 November 2023. Available: https://www.wsj.com/articles/surprise-medical-billing-law-heaps-pressure-on-healthcare-providers-f9583485.
[4] U.S. Government Accountability Office, “Roll out of Independent Dispute Resolution Process for Out-Of-Network Claims Has Been Challenging,” 12 December 2023. Available: https://www.gao.gov/products/gao-24-106335.
[5] A. Cass, “The biggest challenges facing revenue cycle departments in 2024,” Beckers Hospital Review, 24 January 2024. Available: https://www.beckershospitalreview.com/finance/the-biggest-challenges-facing-revenue-cycle-departments-in-2024.html.

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