Many people believe that risk adjustment started with Medicare Advantage in 2004, but Medicaid risk adjustment led the way, starting in Maryland in 1997. Today 46 states currently have contracts with some form of managed care, through managed care organizations (MCOs) and/or primary care case management (PCCM), and data from 2022 indicate that 75 percent of Medicaid beneficiaries are enrolled in managed care. Thirty-eight of these states contract with risk-based MCOs.
Unlike Medicare Advantage, which leverages one risk model (CMS-HCC), states can use several risk models, with the predominant model being the Chronic Illness and Disability Payment System (CDPS). This model, used by 33 of the 38 risk-adjusting states, relies on ICD-10 codes to assign CDPS categories based on illness burden and clinical severity.
The predominant CDPS model focuses on conditions that are more common, including individuals with disabilities. This model in its current version has 52 categories within 19 major categories that correspond to body systems or type of disease. Some of the other models count or include most diagnosis codes for risk assessment while others count primarily high cost and more likely valid and reliable codes. The fundamental difference between the models is the logic they apply to aggregate diagnosis codes into groups. Despite these differences, all models perform similarly in terms of overall predictive accuracy, and all the models except one use claims-based diagnosis codes and age/sex data. Next generation models are being developed that include EHR clinical data such as diagnostic test results. Some of the next generation models also include social risk factors for programs that serve many diverse populations. These models provide better estimates of the interactive effects of behavior and physical health issues.
Most states actively track the quality of their Medicaid programs and often tie financial rewards or penalties to how well MCOs perform on specific quality measures. As of July 2021, more than 75 percent of states that use MCOs reported using at least one financial incentive to encourage better care. These incentives often focus on areas like mental health, long-term illness care, and outcomes related to pregnancy and birth. However, states do not usually make detailed information about individual health plan performance publicly available, which makes it difficult for Medicaid recipients and others to see how well different plans are doing in areas like access and quality. In FY 2024, most states using MCOs reported using their contracts to promote at least one strategy to address social factors that impact health. States can also use these contracts to help reduce differences in health outcomes among various groups.
Unlike Medicare Advantage, the focus of Medicaid coding work relates primarily to the correlation between HCPCS/CPT for annual wellness visits (AWV) and evaluation and management (E&M) codes and the reporting of diagnosis codes that are appropriate for the age of the beneficiary. Also, there is a focus on when it is appropriate to capture codes that represent both illness and wellness and to use modifier –25. Lack of focus on these areas presents a significant risk of overcoding, which leads to overpayments and possible impacts to quality measures and incentives. Other notable coding guidance relates to the types of services and counseling that are included in a preventive care visit vs. an illness/follow-up visit and a well examination with and without abnormal findings. Additionally, there are various resources available that help providers and their revenue cycle staff understand the guidelines and how to apply them, such as The American Academy of Pediatrics’ educational material that guides medical coding for preventive medicine specific to children and the American Hospital Association’s Coding Clinic.
In summary, here are some of the most important guidelines:
- Distinguish between a routine wellness visit and a problem-focused visit.
- Use the appropriate CPT code for the type of wellness service provided (e.g., IPPE, initial AWV, subsequent AWV, or age-specific preventive medicine codes).
- Use the correct ICD-10-CM code as the primary diagnosis, typically a Z code indicating a routine examination (e.g., Z00.00 for without abnormal findings, Z00.01 for with abnormal findings).
- Report additional ICD-10-CM codes for any significant abnormal findings identified during the examination.
- Understand the guidelines for using modifier -25 if a significant and separately identifiable E&M service is performed for a problem during the same wellness visit.
- Stay updated on payer-specific guidelines and coding changes, and note that because some payers operate MCOs in multiple states that might be using different risk models you might be directed to code all conditions found as opposed to those that are included in the model.
- Ensure that capture of SDoH-related codes is incorporated into workflows, since the Medicaid population has a high prevalence of these conditions that represent social risk factors.
In conclusion, it is also worth mentioning that if you are partnering with vendors to perform coding work for Medicaid, you must be sure to choose a partner with experience in Medicaid. Although ICD-10 and HCPCS/CPT coding guidelines are universal, health care organizations who perform Medicaid coding work need to be assured that they understand these guidelines, since risk adjustment work in other lines of business tends to focus solely on diagnosis coding and not the diagnosis-HCPCS/CPT correlation. Given that Medicaid pays for nearly half of all U.S. births and covers over 91 million lives out of the current population of 347 million people, it is important for providers and their staff to understand these guidelines or they run the risk of overcoding/undercoding and the financial and other consequences that can follow, such as impacts to risk scores and quality measures.
About Centauri Health Solutions
Centauri Health Solutions works with health care payers and providers to improve the lives of their members and patients through compassionate outreach, sophisticated analytics, and data-driven solutions, including risk adjustment, eligibility & enrollment (Duals, SSI/SSDI), clinical data exchange, and quality program support. Our reimbursement-focused services and unparalleled expertise lead to more accurate payment rates, a reduction in uncompensated care, and quality measurement compliance.