In this article, Milliman’s David Liner and Jason Siegel analyze data from the Centers for Medicaid and Medicare Services (CMS) on risk adjustment transfers for the 2014 benefit year. The article examines some components of the risk adjustment program and proposes strategies that issuers of new and existing plans should consider to ensure optimal risk transfer payments.
Here is an excerpt:
New health plans face a number of competitive disadvantages related to risk adjustment as discussed in this paper. However, these disadvantages can be mitigated with effective optimization strategies. Note that many of these strategies apply to existing health plans as well and should be explored by any issuer in the ACA markets.
There are at least three components to an impactful risk adjustment optimization strategy:
1. Robust administrative system
2. Coding accuracy initiatives
3. Provider and enrollee engagement
An optimization strategy that does not include each of these components will not optimize risk adjustment outcomes.
A robust administrative system serves as the foundation for risk adjustment optimization strategies. A sound administrative system is required for valid data submission and enables health plans to effectively pursue coding improvement initiatives. System audits are an effective technique for validating a recently implemented administrative system.
…Another best practice involves developing elaborate algorithms on top of large commercially available datasets, using all possible elements from a health plan’s data to identify potentially missed diagnoses. This approach relies on identifying patterns among at least medical procedures, comorbidities, specialist office visits, and prescription drug utilization. Best in class models are set up to handle numerous interactions between these data elements and maximize the extrapolation power of these data through machine learning techniques.
Provider engagement is also a key strategic component because diagnosis coding starts with providers. Levels of engagement may range from education only to elaborate compensation schedules. Educating providers on the importance of valid diagnosis coding may improve risk adjustment outcomes. An additional level of provider engagement may be achieved by incentivizing optimal coding through reimbursement arrangements. Achieving a high level of provider engagement may require more effort in the short term than other strategies, but can also produce benefits over a longer horizon.