Tag Archives: risk adjustment

CMS proposed changes to the Medicare Advantage risk adjustment model

Late last month, the Centers for Medicare and Medicaid Services (CMS) released a 60-day “Advance Notice of Methodological Changes for Calendar Year (CY) 2019 for the Medicare Advantage (MA) CMS-HCC Risk Adjustment Model,” which describes proposed changes to the 2019 Part C risk adjustment model. CMS is seeking comments on the proposed changes, which are due by March 2, 2018.

The 21st Century Cures Act (Cures Act) requires CMS to make improvements to the CMS-HCC risk adjustment model for 2019 and subsequent years. The Cures Act directs CMS to:

• Evaluate the impact of including additional diagnoses for mental health and substance abuse disorders, as well as chronic kidney disease
• Make adjustments to the risk payments to account for the number of diseases or conditions of a beneficiary
• Phase-in the above changes to the risk adjustment payment over a three-year period, beginning with 2019 and fully implemented for 2022 and subsequent years

Based on the evaluation of the additional diagnosis codes, CMS is proposing to add to the model three new Hierarchical Condition Categories (HCCs) related to mental health and substance abuse, and one new HCC related to chronic kidney disease. In addition, CMS is proposing to include additional diagnosis codes for an existing substance abuse HCC.

In order to account for the number of conditions for each beneficiary, CMS has proposed to include new HCC count variables in the proposed risk adjustment model. As part of the development of the new count variables, CMS compared the predictive power of a model that counts only the conditions that result in a payment to MA plans in the CMS-HCC model (“Payment Condition Count” model) to a model that counts all conditions, regardless of whether they are used for risk payment (“All Condition Count” model). CMS concluded that the “Payment Condition Count” model increased the predictive accuracy of the risk adjustment model, while the “All Condition Count” model decreased the predictive accuracy. Both models are included in the Advance Notice for comment. CMS also noted that, in order for the overall fee-for-service (FFS) risk score to remain revenue-neutral, adding the new count variables would result in a decrease to the coefficients for many HCCs.

For 2019, CMS is proposing a model phase-in schedule that blends 25% of the risk score calculated using the proposed “Payment Condition Count” model and 75% of the risk score calculated using the existing 2017 CMS-HCC model. The weights of the “Payment Condition Count” model are proposed to increase to 50% in 2020, 75% in 2021 and 100% in 2022. However, CMS comments that because the three-year phase-in is required over a four-year period (2019 to 2022), it may be possible to use 2019 for comments and implement model changes in 2020.

In addition to the requirements directed by the Cures Act, CMS is proposing to recalibrate the 2019 CMS-HCC model using more recent data. The Advance Notice also proposes an increase to the weight given to the Encounter Data System (EDS) risk scores, from 15% in 2018 to 25% in 2019; these weights are used to blend the EDS and Risk Adjustment Processing System (RAPS) risk scores during the transition to 100% EDS. For 2019, CMS is proposing to combine the two phase-ins (increasing the weight for EDS and adding the proposed new model) by using the “Payment Condition Count” model exclusively for EDS risk scores and the existing 2017 CMS-HCC model exclusively for RAPS risk scores. Hence, CMS will only calculate two risk scores, one using the proposed model and EDS data at a 25% weight, and the second using the existing model and RAPS data at a 75% weight. CMS also plans to include RAPS inpatient submissions as an additional data source for the EDS risk scores, noting that inpatient submissions for EDS are low compared to RAPS. No explanation is offered for why inpatient submissions are low under the EDS methodology.

In the CMS fact sheet, it is stated that the new model will lead to an estimated 1.1% risk score increase across all MA plans, which equates to a 0.3% risk score increase after recognizing the 25% phase-in. However, results will vary for each plan. We expect to be able to evaluate the impact using actual data for individual plans once CMS releases the updated mapping of diagnoses to HCCs later this month.

The full text of the Advance Notice can be found here. The CMS Advance Notice Fact Sheet can be found here.

Managing ACA risk adjustment

Many issuers participating in the Patient Protection and Affordable Care Act (ACA) have not put in sufficient effort to create a deliberate, comprehensive risk adjustment strategy. That could lead to lost opportunities and less certain financial outcomes.

The most successful risk adjustment management programs tend to be planned, firm-wide initiatives that recognize and account for the dollars at stake, the degree of government scrutiny, and the amount of people, processes, and technology involved.

In this paper, the first in a four-part series, Brandy Millen and Jason Petroske introduce risk adjustment management and discuss actions that can be taken to maintain its long-term success.

How does risk adjustment affect CMS episode-based payment models?

Each episode-based payment model has its own specific set of risk arrangements for providers to consider. Risk adjustment or risk stratification is present in these alternative payment models to amend payment levels and reflect cost considerations outside a provider’s control.

In this paper, Milliman’s Samuel Bennett and Tom Snook provide a high-level guide on risk adjustment within the broader scope of four episode-based payment models administered by the Centers for Medicare and Medicaid Services.

Medicare Advantage risk score considerations

Risk scores are a crucial area of focus for successful Medicare Advantage (MA) plans because changes in risk scores directly affect plan revenue. However, risk scores are complex and are influenced by many factors, which can confuse those who are new to MA risk score development. This article by Milliman’s Hillary Millican and Brad Piper offers perspective on the following questions related to MA risk scores.

• What time period of diagnoses supports risk scores?
• When are revenue payments made?
• Who submits diagnoses used to create risk scores?
• Why is member retention critical for the success of a Medicare Advantage organization (MAO)?

Implication of coding on risk adjustment and valued-based contracting

Healthcare providers are measured on certain performance metrics that dictate their payment amounts under value-based contracts. Risk adjustment plays an integral role in determining financial performance. In order for these contracts to be equitable for insurers and providers, risk adjustment must accurately capture changes in population morbidity to effectively measure the provider’s true cost impact.

In this article, Milliman’s Rong Yi, Howard Kahn, and Jared Hirsch highlight common data issues that affect risk scores. They also discuss practices that can improve coding efforts related to risk adjustment.

Risk adjustment modifications in view of potential CSR subsidy termination

If the cost-sharing reduction (CSR) subsidies of the Patient Protection and Affordable Care Act (ACA) were eliminated, it could expose insurance carriers to a substantial increase in selection risk related to their particular mixes of business. In August, the Centers for Medicare and Medicaid Services (CMS) announced its intention to propose a set of risk adjustment modifications for states in which insurance carriers raise silver premiums in response to potential CSR subsidy termination.

In this paper, Milliman’s Jeffrey Milton-Hall, Doug Norris, and Jason Karcher explore the CMS proposal along with the current ACA risk adjustment program and three other potential alternative modifications to risk adjustment in response to the possible elimination of CSR funding.