Capturing More Value from Risk Adjustment Scores

As healthcare providers continue to operate with increasingly thin margins, their value-based contract arrangements leave little space for missteps in performance. However, these models continue to grow in adoption.

The Centers for Medicare & Medicaid Services (CMS) is aiming to have 100% of Medicare beneficiaries and most Medicaid beneficiaries in accountable care organization (ACO) models by 2030.¹ Additionally, Medicare Advantage, which typically functions with lower revenue realization and greater degrees of shared risk, is projected to grow approximately 60% by 2030.^2,3

Many organizations have exhausted the typical playbooks to shore up costs and optimize reimbursement in value-based payment programs such as Medicare Advantage, but one key to success remains clear: a comprehensive risk adjustment program that captures the most clinically appropriate burden of illness plays a critical role in generating greater revenue capture.

Optimizing Risk Adjustment for Greater Revenue Capture

By capturing the complete and accurate illness burden of a covered population, providers can reflect more precise clinical and financial requirements to manage patients accordingly. For example, by achieving a clinically appropriate risk adjustment factor (RAF), there is an opportunity to capture:

• An average of $101-$267 per member per year (PMPY) for a 3% increase in RAF in the Medicare ACO program (subject to the 3% risk ratio cap over the five-year contract)⁴
• An average of $141-$282 PMPY for a 1% increase in RAF each year for a standard five-year Medicare Advantage contract⁵

Additionally, if an organization is truly strong in this space and manages total cost of care well, there is an even larger revenue opportunity to assume full financial risk (capitation) in Medicare Advantage products.

Accurately representing the full burden of illness of a patient population adjusts fee-for-service revenue payments, payer premiums, and total cost of care targets for both the Medicare ACO and Medicare Advantage programs (as well as various commercial and Medicaid contracts).

Simply put, underrepresenting the burden of illness of a population will cause CMS to underestimate the revenue a provider needs to care for their population. This will cause organizations to use more resources than CMS provides to care for their populations, creating revenue risk for providers. Further, clinical care delivery may suffer as care delivery teams often risk stratify patients to identify those in need of more resources if a patient’s true acuity is not appropriately reflected in coding and documentation.

Even for organizations that have made meaningful investments in a comprehensive RAF program, major changes to the CMS-Hierarchical Condition Category (HCC) risk adjustment model will create some challenges.  Organizations committing to a multidisciplinary approach that spans the entire risk adjustment continuum will be best positioned for success moving forward.

Bracing for CMS-HCC Version 28

CMS recently published a major update to the Medicare risk-adjustment program. Starting in 2024 and phased in over the next three years, organizations will see more HCCs with less diagnoses in each one. Disease interaction and linking across major categories, including diabetes mellitus and major depressive disorder, are reduced. Vascular conditions, such as atherosclerosis of arteries of the extremities, are withdrawn completely. HCC number(s) are shifting, too. In other words, 2023 HCC 18 is not equal to 2025 HCC 18.⁶

To complicate matters, HCC categories significantly impacted by the changes noted above are among the most commonly suspected and alerted in current electronic health record (EHR) and third-party assisted technologies. Existing risk adjustment and suspected condition algorithms will be obsolete, requiring upgrades (if not complete overhauls) to out-of-the-box clinical decision aids and analytics. For organizations already struggling to adequately capture clinically appropriate HCCs in the current risk adjustment model, the natural reduction in risk scores for lower acuity patients that is hardwired into Version 28 will be felt as a “double hitter.”

While some applaud CMS efforts to roll back Medicare Advantage coding “loopholes” as the overall Medicare Advantage market share continues tipping the scales, others worry the changes are coming too quickly and have the potential to cause harmful disruption in care practices.⁷ The greatest burden falls on health IT vendors, which are scrambling to prepare supporting infrastructure to ease transitions, but consumers shoulder the greatest risk. EHR end users relying on such vendors may be “seeing double” as multiple versions (Version 24 and Version 28) of HCCs phase in and out of validity.

Investing in a Multidisciplinary Approach

As the healthcare landscape rapidly evolves, executives find themselves at a crucial crossroads: invest in fuller degrees of risk adjustment capabilities despite diminishing profit margins or stick with the status quo and observe how the CMS ruling disperses itself through various sectors of the healthcare market.

Now is the time to refresh your risk management capabilities and get ahead of the impending changes. Take advantage of this mid-year announcement by expanding upon HCC capture efforts through a multidisciplinary approach.

Embracing the full continuum of care and the uniquely vital steps that collectively create value is critical, especially regarding value-based care and risk adjustment. Guidehouse sees opportunities to activate risk capture while alleviating provider burden through a team-based approach, ensuring top-of-licensure performance supported by optimized foundational infrastructure.

Unleash the fullest potential of your burden of illness program cycle proactively with six key components.

1. Suspecting: Credible data is the backbone of your risk capture program. Strengthen informatics in EHR and third-party analytics tools to proactively highlight patients with chronic condition coding and documentation gaps (e.g., identifying patients on insulin therapy but no code identifying diabetes).

2. Patient Engagement: Beyond outbound scheduling for routine appointments, unlock opportunities for addressing chronic conditions outside the walls of family practice clinics. Master the art of the annual wellness visit. Lean into the extension of Medicare-approved telehealth services, specialty care, and inpatient episodes of care opportunities that may be around the corner as CMS-HCC Version 28 debuts.

3. Pre-Service Clinical: Combining expertise of prospective clinical documentation integrity (CDI) staff and efficiency of registered nurse pre-charting, providers spend less time chart-searching for critical components and more time preparing for the most important conditions to address.

4. Point-of-Care: A well-maintained, socialized, and adopted EHR is critical to supporting day-to-day provider workflows. Especially in addressing chronic conditions, lean into technologies that weave seamlessly with daily processes without cumbersome extra steps.

5. Post-Service: Harvest insights gained through CDI and informatics programs to address near misses in coding and documentation. Analytics preceding missed targets with actionable insights activate the opportunity to steer teams back on track before those goals become unattainable.

6. Retrospective: Risk capture programming should iterate through cycles of incremental improvement as technology advances and regulations change. Identify these opportunities through retrospective audits and freshen up dry or dated education mechanisms lacking incentive and brevity with something fresh. Use analytic insights gained to uncover inefficiencies, monitor KPIs, and course-correct trends.

Navigating Your Risk Score Journey

Harmonizing customized operational workflows for cyclical risk capture with adequate technology enablers activates greater outcome potential for healthcare providers and, most importantly, their patients. It's time to embrace a multidisciplinary burden of illness approach. Investing in supporting infrastructure, optimizing the technology you already have, and empowering your staff with reliable data-driven insights will help your organization deliver industry-leading value-based care practices that support greater revenue capture and superior patient outcomes.