The Centers for Medicare & Medicaid Services’ (CMS) CY 2026 Rate Announcement introduces significant updates that directly impact medical coding risk adjustment, revenue cycle operations, and overall reimbursement strategy. As healthcare leaders evaluate their prospective risk adjustment strategies in light of these changes, understanding the full scope of the modifications and their financial implications is critical.
The announcement in the Federal Register not only confirms higher-than-expected Medicare Advantage payments for 2026 but also continues the three-year phase-in of significant revisions to the risk adjustment model that began in 2024, transforming how risk adjustment coding is executed.
Overview of Risk Adjustment Model Changes
The transition to the V28 CMS-HCC risk adjustment model marks one of the most substantial updates to Medicare Advantage payment methodology in recent years. This evolution in coding risk adjustment responds to several industry needs, including improved payment accuracy, better reflection of beneficiary health status, and enhanced protections against fraud, waste, and abuse [1].
Key modifications in the V28 model include a strategic reduction in the number of diagnosis codes included in risk scoring calculations. This refinement focuses coding efforts on the most clinically relevant conditions while reducing the administrative burden associated with capturing less significant diagnoses. Additionally, CMS has implemented a breakout of certain hierarchical condition categories (HCCs), creating more granular classifications that better distinguish varying levels of condition severity. The agency has also adjusted the weights assigned to HCC demographic elements, rebalancing how different patient characteristics contribute to overall risk scores.
The phased implementation approach reflects CMS’s recognition of the operational challenges these changes present. For payment year 2024, risk scores were calculated using a blend of 67% from the previous V24 model and 33% from the new V28 model. The current payment year (2025) sees this ratio shift to 33% V24 and 67% V28, with complete transition to V28 scheduled for payment year 2026.
Financial and Operational Implications of Risk Adjustment Coding Changes
The financial impact of these changes warrants careful analysis by revenue cycle leaders who rely on accurate risk adjustment coding to support Medicare Advantage revenue. CMS projections indicate that the average risk adjustment factor (RAF) score may decrease under the new model, though new-to-Medicare beneficiaries could experience slight RAF increases [1]. This differential effect underscores the importance of understanding how the changes will specifically impact an organization’s unique member population mix.
For organizations with significant proportions of members having multiple chronic conditions, the revised HCC weights and groupings could substantially alter expected reimbursement levels. The medical coding risk adjustment process must now account for these modified clinical category relationships, requiring updated training for coding staff and potential revisions to clinical documentation improvement (CDI) initiatives. Internal teams and technology platforms may require reconfiguration to align with the revised coding risk adjustment logic.
Updates to Risk Adjustment Data Requirements
Beyond the model changes themselves, CMS has implemented several important updates to risk adjustment data submission requirements that demand attention from compliance and revenue cycle teams. These modifications primarily involve technical updates to existing regulations but carry significant operational implications [2].
For PACE organizations, CMS has formally codified the requirement to submit risk adjustment data in accordance with MA organization standards at §460.180(b)(3). This change simply formalizes existing practices rather than creating new requirements, but it serves as an important reminder of the need for consistent data submission across all Medicare programs. Similarly, section 1876 Cost plans now explicitly must comply with risk adjustment data submission rules under §422.310 through the addition of §417.486(a)(3), another instance of codifying current expectations rather than imposing new burdens.
Adapting Your Medical Coding Risk Adjustment Strategy
The full implementation of the V28 model in payment year 2026 demands proactive strategic planning from revenue cycle leaders. Organizations must take decisive action across several key areas to maintain optimal financial performance under the new risk adjustment requirements.
Many organizations may find that their existing staffing models may not be optimally configured for the new environment. The increased specificity required in coding under V28, combined with the need for more frequent audits and provider education, has led many plans to reconsider their approach to medical coding risk adjustment operations. Strategic outsourcing partnerships are emerging as a valuable solution, allowing organizations to scale their coding resources flexibly while accessing specialized expertise in the new model’s requirements.
Preparing for Prospective Risk Adjustment Evolution
With a complete transition to V28 looming, organizations must solidify prospective risk adjustment frameworks. Building robust processes for monitoring and responding to CMS risk adjustment coding updates should be a priority for all revenue cycle leaders. This includes establishing clear channels for communicating regulatory changes to relevant teams and creating mechanisms for exploring productive partnerships with third-party vendors.
3Gen Consulting offers proven expertise in medical coding risk adjustment, from compliance-driven audits to scalable coding solutions tailored to V28. Whether you’re adapting your internal teams or seeking a partner to support your prospective risk adjustment efforts, we’re here to help.
Contact us today to future-proof your coding risk adjustment strategy under the new CMS model.
References
[1] J. LaPointe, “CMS releases CY 2026 Medicare Advantage payment policies,” TechTarget, 8 April 2025. Available: https://www.techtarget.com/healthcarepayers/news/366622258/CMS-releases-CY-Medicare-Advantage-payment-policies.
[2] CMS, “Medicare and Medicaid Programs; Contract Year 2026 Policy and Technical Changes to the Medicare Advantage Program, Medicare Prescription Drug Benefit Program, Medicare Cost Plan Program, and Programs of All-Inclusive Care for the Elderly,” 15 April 2025. Available: https://www.govinfo.gov/content/pkg/FR-2025-04-15/pdf/2025-06008.pdf.
