So how are risk adjustment programs actually using and implementing HCCs? We have to fist look at which risk adjustment payment programs are currently using HCCs to calculate reimbursement. These programs include Medicare Advantage Plan (MA) and small group and individual market populations within the ACA (Commercial). These models function simply by using ICD-10 codes submitted on claims and assign the appropriate HCC’s for individuals with serious or chronic illnesses. Once that is determined a risk factor score or “RAF” (Risk Adjustment Factor) is then assigned based on the individual’s health factors and demographic information. Patients with more serious conditions or chronic illnesses are generally assigned a higher risk factor and risk adjustment score. This model is revolutionary in the sense it allows CMS to pay plans for the risk of the beneficiaries they enroll, instead of an average amount for Medicare beneficiaries. Because of this, CMS is now able to base payments for enrollees with different expected costs. This all sounds great, but it is important to understand that the RAF data for programs like the above are based on active diagnoses. Ultimately, what this means is that providers must ensure the information is accurate and updated annually. Under this reimbursement model the providers are required to complete specific treatment protocols with patients and thoroughly document all relevant diagnoses for the patient’s medical record. Accuracy of the documentation is vitally important.
To ensure the highest level of reimbursement, the devil is in the details. Our next blog post will cover the financial impact and the five steps that influence the adjustment up or down. Stay tuned.