CMS Makes Big Changes to the Risk Adjustment Model

Blog Posts  |  02 May 2023

Written by: Cheryl Reifsnyder, PhD

After multiple delays, CMS published the Risk Adjustment Data Validation (RADV) Final Rule on January 30, 2023. The move caught many health plans by surprise, as it came more than 4 years after CMS initially proposed the RADV final rule. Then on March 31, 2023, CMS issued its “Final Notice,” finalizing the new risk adjustment 2024 Hierarchical Condition Category (HCC) model known as the v28 model.

This new model, using updated HCCs for calculating risk adjustment scores, will be phased in over the next 3 years:

  • Payment Year (PY) 2024: The 2024 risk scores will be blended, with 67% calculated using the current (2020 or v24) risk adjustment model and 33% calculated using the finalized 2024 (v28) risk adjustment model
  • PY Year 2025: For 2025 risk scores, 33% will be calculated using the current (2020 or v24) risk adjustment model and 67% calculated using the finalized 2024 risk adjustment model
  • PY 2026: 100% of 2026 risk scores will be calculated using the finalized 2024 (v28) risk adjustment model

This “phasing in” process will not only require payers to adjust to using the new risk adjustment model for risk score calculations; payers will also have to use both the new and the existing payment models at the same time—a process that will require twice the amount of work—while simultaneously trying to optimize their HCC submissions to identify those opportunities most likely to result in reimbursement under the new payment model.

Of course, change is also an opportunity for improvement, and Veradigm is still your answer for optimizing payer analytics and risk adjustment. Keep reading to see how we can help you prepare for the upcoming changes—and even turn them to your advantage.

What does the new model mean for payers?

The new payment model implements more changes than seen before in a single update. One significant change is that the 2024 (v28) risk adjustment model completely renumbers the existing HCCs (those used in the current 2020 risk adjustment model).

HCCs are categories of medical conditions linked to specific clinical diagnoses to identify individuals with chronic or serious acute medical conditions. Each HCC represents diagnoses with similar predicted annual care costs. Clinicians are required to add the appropriate diagnoses to patients’ medical records, as well as supporting documentation; the diagnosis codes are submitted to CMS where they are mapped to HCCs and are then used to calculate payments to healthcare organizations for patients insured by Medicare Advantage (MA) plans, Accountable Care Organizations (ACOs), some Affordable Care Act (ACA) plans, and others. As a result, HCCs directly affect the amount of money healthcare organizations receive from CMS, the single largest US healthcare payer.

The risk adjustment model currently in use is based on ICD-9 diagnosis codes, but the country transitioned to use of ICD-10 codes in 2015. For the 2024 risk adjustment model, CMS undertook a complete reclassification of HCCs using ICD-10 diagnosis codes. They reviewed each ICD-10 diagnosis and evaluated the best way to group diagnoses according to their ability to predict Medicare costs.

The ultimate goal of updating the clinical classification system was to improve the predictive ability of HCCs by having them better reflect current disease patterns, treatment methods, costs, diagnoses, and coding practices. As a result, many of the new HCCs differ from the previous HCC list. A number of diagnosis codes have been mapped to different HCCs. Some HCCs have been removed completely, as they were no longer the best predictors of costs.

Dropped and altered HCCs may lead to decreased payments for many plans, and plans will need to reevaluate their intervention strategies to accommodate the HCC changes.

Do you have the visibility to accommodate upcoming changes?

CMS’s new rules will require plans to have visibility into both observed and potential HCCs, as without this visibility, they will not be able to determine how they need to change their approach under the new rules. In this context, communications with your provider network will become even more critical; however, their interactions with Managed Care, Risk Adjustment, and Quality Ratings means providers are already inundated with administrative chores. Productive collaboration will require a communications approach that minimizes provider burden and alert fatigue.

Veradigm® Collaborate supports this objective by providing efficient outreaches via a portal that can be linked to your provider portal and complement provider workflow. Member-specific “Provider Alerts” are delivered through a self-service provider portal that can be interwoven directly into your providers’ workflow. These alerts provide efficient and respectful notices of diagnostic coding opportunities; these concise communications can help improve provider relations, allowing you to engage with your provider network more effectively.

Collaborate also features a series of analytic dashboards that equip the plan for managing the process. Our dashboards and scorecards evaluate providers in areas ranging from case mix and clinical performance to coding accuracy and rates of diagnostic capture. Our analytics can help you gain a more accurate picture of the HCCs linked to your enrollees under both the new and old payment models. At the same time, provider analyses can assist you in identifying those who might benefit from additional education or engagement.

Providing support for your CMS compliance and financial goals

Veradigm can help support your CMS compliance and financial goals during this time of change, just as we currently do for our existing customers. Veradigm Payer Analytics offers multiple solutions that can help payers optimize their reimbursement—and can do so in both the existing and the new payment model. Veradigm’s product offerings include the following:

  • Veradigm Collaborate (formerly Collabor8), which can facilitate payers’ interactions with their provider network, helping to identify diagnostic coding opportunities while streamlining provider alerts
  • Veradigm Risk Adjustment Analytics (formerly Calcul8), which can apply precision risk adjustment analytics to MA and ACA markets, among others
  • Veradigm Risk Mitigator (formerly Valid8), which can help payers prepare for potential RADV audits by identifying and analyzing conditions presenting the greatest audit risks
  • Veradigm eChart Coder (formerly Popul8), which employs advanced computer-aided coding technologies, such as Natural Language Processing (NLP), Machine Learning (ML), and Optical Character Recognition (OCR), to optimize coding performance

Let’s talk —let us show you more about how we can support you and help you thrive in this time of change.

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