A Shift in Risk Adjustment: Riding the CMS Regulatory Wave

A Shift in Risk Adjustment: Riding the CMS Regulatory Wave

In the past few months, there have been big changes in the rules having a big impact on Medicare Advantage Organizations (MAOs). The Center for Medicare & Medicaid Services (CMS) made changes to how they check and adjust the risks involved in providing care, based on concerns about certain conditions that they think don’t accurately predict future costs. There have been lawsuits and reports claiming that there have been billions of dollars in overpayments due to legacy risk adjustment models, like chart reviews and home assessments.

Risk Adjustment is critical for Medicare Advantage. It’s a complicated process that makes sure organizations have enough money to take care of members based on their health conditions. As more people have joined these organizations in the past ten years, as a result the costs have gone up. The first change happened on January 30 this year when CMS released the final rule on Risk Adjustment Data Validation (RADV Final Rule). This rule lets CMS use the findings from audits to estimate problems across the whole organization. This means more frequent audits and bigger fines and penalties (CMS expects to collect $4.7 billion more from organizations over the next 10 years).

The next change came on March 31 when CMS released the Calendar Year 2024 MA Capitation Rates and Part C and Part D Payment Policies (Final Rate Notice). This changes the way diagnosis codes are used, and over 2,000 codes have been removed from the model used to adjust risks. Even though many people in the healthcare industry tried to change this, the new risk adjustment model was still adopted. However, CMS agreed to do it gradually over three years, which is a big concession.

Finally, on March 27, a bill was introduced in the Senate called the “No Unreasonable Payments, Coding or Diagnoses for the Elderly Act.” It wants to stop using diagnoses from chart reviews and health risk assessments when calculating a patient’s risk score. It’s still early in the process, but this bill reflects the current perspective and movement away from old ways of adjusting risks and towards involving doctors in the process.

Because of the gradual changes mentioned earlier, MAOs have a chance to review their risk adjustment strategies to make sure they work under the new rules. Here are a few practical things to consider:

Ø  Focus on working closely with primary care physicians (PCPs) to improve care, outcomes, and costs. It’s important for insurance providers and PCPs to collaborate and adjust risks accurately to make sure MA patients get the right care. With the loss of certain codes in the new rules, it’s even more important to accurately identify and document all risk-related conditions. It’s better to empower PCPs with tools and resources to do this because they know the patient and have access to their medical records.

Ø  Rethink chart reviews and home assessments. These are being targeted by government agencies because they often don’t involve PCPs and don’t improve care. They might become obsolete if the “No Upcode Bill” becomes law. Legacy risk adjustment models can have errors and bad incentives. They should be coordinated with PCPs to improve overall health and care.

Ø  Focus on accuracy. With the RADV Final Rule and the lawsuits and investigations, it’s important for organizations to invest in solutions that follow the rules. They should focus on improving the accuracy and completeness of documentation and coding and have a quality improvement process that checks and validates the codes before submitting them. As we move to value-based care, there will be more pressure to use solutions that focus on compliance and improving the accuracy of diagnoses codes and documentation.

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