Risk adjustment is complex, but breaking it down into three critical fundamentals helps health plans focus their efforts.

The term “risk adjustment” means different things to different people depending on their role. The Centers for Medicare & Medicaid Services’ (CMS) textbook definition is that risk adjustment is “a statistical process that takes into account the underlying health status and health spending of the enrollees in an insurance plan when looking at their health care outcomes or health care costs.”

In contrast, a certified medical coder would tell you that risk adjustment is about making sure the medical record accurately reflects the diagnoses and procedures captured on a claim. And a health plan chief financial officer would say that risk adjustment ensures that the plan is properly compensated for its clinical burden.

The truth is, risk adjustment—and the complex nature of the processes involved—is often misunderstood. In its simplest terms, risk adjustment ensures that the health conditions, health status, and demographics of the beneficiaries in a Medicare Advantage or an Affordable Care Act plan are accurately documented—and that the health plans managing those beneficiaries are adequately compensated for that management.

Successful risk adjustment has three fundamentals:

  • High-quality member/provider connections: enables members and providers to connect in meaningful ways to document and promote the health and care of beneficiaries
  • Accurate medical charting and coding: ensures members are correctly assessed and the diagnoses captured and charted effectively
  • Complete encounter and supplemental data submissions: ensure that submissions to CMS are accurate, compliant with regulatory guidelines, thorough, and comprehensive

High-quality member-provider connections

To enable members and providers to connect in meaningful ways to document and promote the health and care of beneficiaries, health plans need to be able to answer the following questions:

  • What is the best way to reach and influence a member?
  • Was the appropriate care delivered in a timely manner and at the right place?
  • Did the interaction with the provider boost the member’s perceived value of the health plan?
  • Are provider and member incentives aligned?

Central to a health plan’s ability to answer these questions are interactions with the primary care physician (PCP). The PCP relationship accomplishes three goals:

  • Better care and monitoring of members
  • Documentation of members’ health status required for the risk adjustment process
  • Active engagement between members and providers

Payers have a vested interest in ensuring that their members connect with their physicians—and vice-versa. Through this connection, not only do members receive the care they need, but their doctors can proactively manage their overall health, which increases members’ confidence in their providers. Studies have shown that engaged members are less costly and experience better outcomes than non-engaged members, and ensuring care is delivered appropriately enables the documentation that is critical for risk adjustment programs.

Member-directed programs

Health plans typically offer a set of often complimentary or low-cost member benefits that encourage their members to initiate and then continue the process of managing their personal health. The primary goal of these benefits is to encourage members to connect with their doctors.

For example, many health plans proactively reach out and remind their members to complete annual physicals, wellness visits, or comprehensive wellness exams. In addition, plans may offer free or low-cost screenings for cancer, diabetes, and other chronic conditions. These “soft” interventions not only encourage members to actively manage their health and help ensure their complete medical profile and history are appropriately documented, but also let members know that the health plan cares for its members.

Some health plans will offer incentives, such as gift cards or rewards, to members to ensure they follow through on needed procedures and examinations. Although CMS has set some limitations on allowable amounts, these incentives have been shown to influence members’ behavior and support care goals.

Call-to-action programs remind and encourage members to schedule an appointment with their PCPs or specialists. Health plans conduct outreach campaigns, for example, informing members that they are due for their annual visit or reminding them to schedule a needed screening procedure. Plans deploy direct mail, email, phone, or text messages, depending on the demographics of the member population.

Health plans often leverage machine learning analytics to identify members who could benefit from seeing a provider but are not likely or may be unable to do so. For example, for members requiring an increased level of care coordination to manage their chronic conditions, health plans may offer house calls or in-home visits, where physicians or nurse practitioners visit members in their homes to conduct annual wellness visits, health assessments, and physical exams. The primary goals of these house calls are to validate clinical conditions, educate members about next steps to appropriately manage their health, close annual quality measures, help members enroll in specialized care management programs, and ensure the members’ PCPs are appropriately informed about their patients’ clinical conditions. After these visits, many health plans ask for the medical records to be forwarded to the member’s PCP for follow-up.

Without in-home assessments, many of these members would not complete annual primary care visits or start the process of pursuing the care they need. Apart from ensuring members get the right care at the right time, house calls or in-home visits also ensure that their medical records are complete and accurate, which helps avoid any disruptions in care.

Provider-directed programs

Provider encouragement programs give providers incentives to reach out to assigned members in their patient panel. For example, a health plan may provide a bonus payment for the completion of annual wellness visits or annual physical exams. To qualify, the PCP must complete outreach to members to schedule appointments to see them in a clinical setting and document the visit. Health plans with risk-sharing agreements with their provider networks may also offer incentives to providers to document and code more thoroughly by tracking and comparing the chronic condition reconfirmation rates of members in the providers’ patient panel.

The goal of any provider encouragement program is to reward providers that actively reach out to the health plan’s members, ensure they routinely see members, document the members’ health records, and, if needed, close care gaps (or refer members to appropriate specialists).

Our recommendations

Ultimately, health plans must continue to develop and support programs that encourage members to connect with providers while offering multiple care settings for convenience and compliance. At the same time, they need to ensure that rewards and incentives encourage appropriate behaviors for their members and providers.

Payers should leverage the power of advanced analytics to not only identify how and when to reach members, but also know which providers are administering care appropriately, adhering to best medicine and coding practices, and cost-effectively addressing their members’ health care needs. To help with this, health plans should leverage member demographics and historical care information to identify different market segments and develop programs tailored to the needs of each segment, all with the goal of stimulating and encouraging regular and high-quality member-provider connections.

Accurate medical charting and coding

To succeed in ensuring that a member’s health status is accurately charted and coded, health plans need to consider the following:

  • Are providers using best documentation practices to chart patients?
  • Does the encounter data reflect members’ true health status and medical conditions?
  • How prevalent is undercoding and overcoding? Are there discernible trends or patterns with these coding discrepancies? And what is the financial impact to the health plan from these discrepancies?

To ensure member conditions are accurately documented within medical records, health plans should make use of the following five tools.

  1. Provider education

Hierarchical condition category (HCC) models rely on a patient’s reported ICD-10-CM diagnosis codes to establish the patient’s health status annually. Therefore, thorough clinical documentation and complete and accurate diagnosis coding are critical to compliant HCC reporting. With such an emphasis on yearly code capture, provider education becomes a high priority early in the year to prevent the loss of HCC diagnoses. Providers should be educated to understand that although chronic conditions continually impact the patient’s health status, they are not implied under the HCC models.

To help providers chart their patients and document conditions according to best coding practices, many health plans offer providers some form of feedback through education or continued learning opportunities. These initiatives encourage best charting practices to ensure accurate, complete, and thorough documentation. As such, plans can offer feedback through:

  • Group seminars
  • Practice-to-practice educational events
  • One-on-one provider meetings with a physician liaison
  • Online educational webinars
  1. Prospective charting

Accurate and thorough documentation is increasingly important as payers shift risk onto accountable care organizations, provider groups, and ultimately providers. This trend incentivizes providers to chart and document more thoroughly and completely while complying to best coding practices. More health plans also enable their network providers with point-of-care analytics to improve the delivery of care to their members. Ultimately, the goal of these tools for payers is to help providers “get it right the first time” and reduce the need for retrospective coding.

New technology, such as artificial intelligence, helps providers deliver value-based care through the use of more sophisticated clinical decision support platforms and electronic medical record systems. Patient-specific analytics can also help providers better assess, chart, and document patients’ medical conditions and health status, which not only leads to better care but also ensures that a payer’s risk adjustment needs are met.

For example, point-of-care tools deliver patient-specific information to providers in a host of ways. These tools include forms that health plans publish regularly that list patients’ prior chronic conditions, potential new conditions (along with evidence that may support diagnosis of a new clinical condition), recent visits, labs, and/or prescription refills, with the goal of helping a provider document each member’s health during an annual wellness visit, annual physical, or comprehensive wellness visit.

Patient-specific alerts are another example of ways in which to prompt providers to validate and update documentation, and therefore remain compliant with payer needs and expectations. Finally, many health care organizations are excited about the promise of virtual assistants to help providers assess, chart, and document patients’ medical conditions, allowing providers to focus on patients while administrative needs are met.

  1. Concurrent coding

By definition, concurrent coding is when coders are beginning to match the medical charts of patients to diagnosis codes. This process helps speed up the billing cycle and allows the medical coding team to code patients before discharge. Concurrent coding is a proven method for verifying that the medical record accurately reflects diagnoses before they are submitted for claims processing and payment. For example, some health plans code medical records immediately after the member-provider encounter, within a two- or three-day window. When discrepancies arise, the plan sends the medical record back to the provider to ensure the accuracy of the documentation within the medical record.

To facilitate concurrent coding, health plans leverage workflow management technologies coupled with computer-assisted coding and 24-hour coding capabilities to code the medical records and ensure that the coded information is accurately represented in the claims domain. This provides three tangible benefits for health plans. First, concurrent coding reduces unnecessary retrospective chart reviews and minimizes the provider abrasion associated with retrieving charts. Second, claims are corrected to accurately reflect a member’s clinical conditions and true health status (which for hospital-based health plans also improves case-mix index accuracy). Third, care management teams can leverage more accurate clinical data and health information faster to improve care quality.

  1. Retrospective coding

Retrospective coding is the health plan’s last resort to ensure that its members’ true health status and medical conditions are accurately documented in the claims and encounter data. The plan mines claims, lab, and prescription-usage data to identify members whose medical conditions may exist in the medical record but are not present on claims and encounter data (or vice versa). With this list of potentially undocumented conditions for their members, health plans will pull the members’ medical records and re-code them.

This process essentially validates that the members’ potential health conditions are truly present and that the billed conditions are substantiated by the medical record. With this new “supplemental” information, the claims data can be amended either to include previously undocumented clinical conditions or to remove unsubstantiated diagnoses. It’s important to remember, however, that coders can only capture what the provider documents. If a condition is not documented appropriately by a qualified provider, it cannot be coded, even if the medical record suggests that one or more conditions may be present.

  1. Monitoring tools

To ensure that providers are charting effectively, health plans should not only track reconfirmation rates of chronic medical conditions but also use the power of analytics to look for trends and patterns that might identify documentation improvement opportunities for providers.

Plans should also perform risk score audits to estimate the prevalence of undercoding and overcoding that is uncovered in claims and encounter data. These audits go one step beyond the traditional mock Risk Adjustment Data Validation (RADV) audit by evaluating how well the members’ medical conditions documented in the medical record represent their documented conditions in the claims and encounter data record, as well as identifying the financial impact or exposure.

Our recommendations

Health plans should develop a regular cadence for monitoring coding quality and accuracy, using all the tools they have at their disposal. Ensuring members’ health status is accurately assessed, charted, and documented in medical records, and ultimately in claims and encounter data, requires significant coordination and partnership between providers and payers. Each stakeholder is critical for success under the risk adjustment programs. The tangible benefits of having more point-of-care information and more accurate medical records and claims data is that members can receive the care that they need at the right time because health care professionals have the right medical information.

Physicians and eligible non-physician providers must ensure their documentation complies with HCC reporting requirements and demonstrates that conditions are evaluated, monitored, assessed, and/or treated during face-to-face encounters. Risk adjustment coding professionals must follow best practice guidelines to ensure accurate coding and reporting of HCCs annually. By working together, health plans and provider organizations can ensure members clinical conditions are accurately documented in medical records and reflect the members’ health status to ensure the health plan’s true medical burden is appropriately represented.

Complete encounter and supplemental data submissions

Health plans can often underestimate the role that encounters play in the risk adjustment world, as well as the effort required to ensure high-quality, high-integrity encounter and supplemental data submissions. Those that recognize the impact that proper and complete submissions have on their beneficiaries’ overall risk score make this piece of the process a priority, with clear benefits.

Encounter submissions serve a critical role in helping CMS and the Department of Health and Human Services (HHS) calculate reimbursements paid to a government-sponsored health plan. The risk burden of its member population is factored in. In other words, the calculation is risk-adjusted to ensure that the plan can properly treat its members.

Accurate, complete, and compliant submissions, therefore, are critical to ensuring appropriate payments. However, the encounter submissions process has a lot of moving parts and room for error. Plans have three mechanisms at their disposal to ensure they get it right:

  • Stakeholder coordination
  • Data reconciliation and monitoring
  • CMS and HHS resources

Stakeholder coordination

Encounters span three functional domains:

  • Charting: where providers chart members’ medical conditions and health status in medical records
  • Claim processing: where health plans process claims to characterize and substantiate a member’s encounter with one or more providers
  • Encounter processing: where claims data is transformed to encounter data and sent to CMS and HHS to document that health care services were delivered to members and their health conditions were effectively managed

Each of these domains has its own set of challenges and complications. For this reason, the team overseeing the encounter submissions process requires deep, cross-functional expertise and broad knowledge of the entire process across all domains to identify and resolve issues that can occur at any point. Because of its complex and technical nature, health plans that are successful at submitting clean, accurate, and compliant encounters create multidisciplinary teams that include IT, finance, data processing, claim processing, and encounter processing (RAPS, EDS, EDGE, and/or state-specific encounter formats), which are laser-focused on encounter quality and completeness.

Alternatively, many health plans find success using external partners to help with this process, particularly when internal, cross-functional resources are constrained. A good partner goes beyond simply submitting information to also help ensure accurate information—for example, by providing insight into correcting rejects and/or isolating unreported diagnoses from potential duplicates.

Data reconciliation and monitoring

Because the encounter submissions process spans multiple functional domains, health plans must be able to track the flow of data throughout the process. This macro-reconciliation helps uncover the reasons for any fallouts that occur between domains, as well as various internal and external systems.

To help with macro-reconciliation, CMS provides Encounter Data Report Cards to health plans each quarter. These report cards benchmark a health plan’s encounter density against similarly sized plans, both in its own region and nationally, and can be a strong performance indicator.

In contrast, the similarly important process of micro-reconciliation focuses on reconciling different data domains. For example, a Medicare Advantage plan should not only reconcile 277CA reports with MAO-002s and MAO-002s with MAO-004s, but it should also correct discrepancies between EDS and RAPS submissions. In fact, Cotiviti performed a recent study that confirmed EDS risk scores still lag behind RAPS risk scores by somewhere between 3.5 and 9 percent, depending on how diligent the health plan was in reconciling its scores. This finding reinforces the need to continually reconcile and correct encounter data.

At its core, producing clean encounters is an exercise of data quality, data integrity measures, and transactional monitoring across different data systems, including CMS and HHS systems. To help with this, health plans should pay close attention to the encounter preparation and encounter submission steps. For example, health plans should pass encounter data through 999 and 277CA validation edits to ensure clean data before sending it to CMS. Health plans that effectively prioritize errors also experience better risk adjustment results. They identify and correct rejects that influence risk score accuracy, review duplicates to ensure no diagnoses are missed, and verify chart review data before submissions.

CMS and HHS resources

To help health plans submit encounters, CMS and HHS provide health plans with multiple resources, including user groups, operations manuals, webinar trainings, help desks, and monitoring reports.

Two excellent resources are the CMS Encounter and CMS Risk Adjustment user groups. Additionally, the Customer Service and Support Center (CSSC) Operations website has a vast array of resources, including encounter manuals, edit lists, and memos. These are valuable tools to help a health plan obtain information or learn more about how encounters should be processed for successful submissions.

CMS also provides the Encounter Data Front End System test area to allow health plans to understand the behavior of CMS’ filtering logic for EDS encounters in a risk-free manner.

Our recommendations

Ensuring the quality and integrity of encounter data is no small task for a health plan. The process of generating and ensuring clean, accurate, and compliant encounters for CMS and HHS submissions is complex and requires not only coordination among all the stakeholders but also multi-disciplinary and highly technical expertise to identify, correct, and manage encounter fallouts and errors.

Having the right tools and processes in place to monitor the encounter data, isolate aberrancies, and address any errors in a timely and efficient manner is critical for a health plan to ensure its population’s risk burden is accurately represented. Doing this in a complete and thorough manner requires constant attention, continual learning, and dependable partners.

Bringing it all together

Risk adjustment is complex, but breaking it down into these three critical fundamentals helps health plans focus their efforts. If a health plan masters all three fundamentals, it can ensure accurate, compliant, and positive risk adjustment payments; foster strong provider engagement; and positively impact the health and wellness of its members.

About the author

Rebecca Darnall provides leadership and oversight into new product and business development, growth, and strategy to help health plans optimize revenue and risk mitigation. With more than 17 years of health care experience, she is known for creating and establishing solid operating policies and procedures for all risk adjustment programs that comply with CMS requirements and industry practices. Before joining Cotiviti, Rebecca was a manager of risk adjustment strategy and performance solutions at Advantasure, a health care optimization company serving health plans and providers. In this role, she was responsible for the revenue accuracy and risk adjustment efforts for all lines of business for Blue Cross Blue Shield of Michigan.