Last month we had an interesting conversation quick break session focusing on the growing importance of risk adjustment in various health insurance programs and new government theories of liability associated with risk adjustment reporting. Morgan Lewis partners, Tesch Leigh West and Michelle M. Arra, described the fundamental processes around risk adjustment and highlighted recent trends in auditing and application in this area.
If you weren’t able to watch the program live, here are some key takeaways:
- Risk adjustment is the method by which the Centers for Medicare & Medicaid Services (CMS) adjusts capitation payments (per member per month) to Medicare Advantage organizations and similar risky entities to account for differences in costs health expected of beneficiaries. CMS bases risk adjustment payments on recipient demographic information and any diagnostic codes submitted for the previous year. Beneficiaries are assigned a risk adjustment factor score which acts as a multiplier on the base capitation payment rate. The higher the risk score, the higher the expected beneficiary cost and the higher the capitation payment.
- As managed care and value-based models continue their resurgence in the healthcare market, the emphasis on using risk adjustment and related statistical processes to ensure health outcomes and costs adequate health care has increased.
- In recent years, CMS and the Office of the Inspector General (OIG) have focused on risk adjustment reports to ensure that data reported by health plans and payments to health plans are accurate. and appropriate.
- CMS and OIG appear to disagree on some risk adjustment mechanisms, offering varying advice on the subject.
- There are a number of important risk areas that health plans should consider when evaluating their compliance with risk adjustment reports, including top coding and appropriate medical history coding.
To learn more about these at-risk areas, see our program.
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