Risk Adjustment

Advance Notice 2020 Part 1

The Good, The Not-Too-Bad, and the Ugly


The recently released CMS Advance Notice 2020 Part 1 may not have many surprises in it, but there are a number of key components that will have far-reaching consequences for health plans. The April 2, 2018 final ruling foreshadowed many of the new changes by confirming that CMS will, in fact, have to implement the 21st Century Cures Act. That means that changes from reviewing and assessing the risk adjustment model will begin in 2019 with full effectuation in 2022 and beyond. In the immediate future, health plans will have to deal with some consequences that range from the good to the not-too-bad to the ugly.


The Good


Last year, CMS confirmed the addition of substance abuse, mental health, and additional chronic kidney disease conditions while also pushing back the implementation of the Payment Condition Count Model until PY 2020. The new release gives us two potential models that could be used: the Payment Condition Count Model that CMS proposed and a modified model that includes additional HCCs for Dementia and Pressure Ulcers as part of the Payment Condition Count Model. These models are good news for health plans due to a projected increase in overall payment to plans and additional HCCs that will more accurately predict medical expenditures.

As covered last year, the PCC model focuses on community RAF type members. For community members, additional coefficients start to have material value around the 4 to 6 HCC count and max out at the 10 HCC count. This seems to be the sweet spot where the additional HCCs add value to the overall prediction of cost and is statistically significant. There are a total of 83 HCCs in this model. On the other hand, institutional members were not found to have as much of a benefit from the model change.

Bottom line: Last year CMS used the same data set (2014-2015) to predict that the PCC model would increase overall payment to plans at around 1.1%. This is good news for health plans.

The second proposed model is also PCC but incorporates additional HCCs for Pressure Ulcers and Dementia, totaling 86 HCCs. These additional HCCs met the validation checks CMS has in place to ensure that these non-payment HCCs were under predictions in their cost. But, both are meaningful in clinical terms and for medical expenditure prediction. Three additional HCCs fit those criteria: HCC 51, HCC 52 and HCC 159.

Additional HCCs that add value and help predict additional cost are a welcome add to the current list of HCCs. With the additional HCCs in PY 2019 and the possibility of 3 additional HCCs in the PY 2020 model, CMS is certainly looking carefully at those HCCs that make the prediction of cost more meaningful. Again, this is good news for health plans.


The Not Too Bad


We’ve been headed in the direction of moving to EDS from RAPS for a few years now. In the PY 2020 Advance Notice Part 1, CMS solidifies that movement with confirmation of a 50% RAPS and 50% EDS split to calculate RAF. The band aid is coming off, albeit carefully. Plans will need to pay careful attention to the reconciliation reporting between the two and work to make EDS acceptance rates as high as the traditional RAPs acceptance rates. The real difficulty, however, lies in working with errors in EDS. With the PCC model the number of distinct HCCs accepted in the EDS will matter even more. Even with the new split, the RAPS sunsetting isn’t coming as quickly as one would think: CMS is including RAPS inpatient data for the EDS 50% weight.


And The Ugly…


There are a confluence of models and data sources at work in this notice that will be difficult for plans to balance. The Advance Notice PY 2020 provides the following guidance:

RAPS and EDPS have a proposed weight of 50/50 to calculate the risk scores and the sources of that data are also outlined in CMS’s proposal. The RAPS 50% weight coming from RAPs submissions that include FFS and RAPs records, whereas the EDS 50% weight comes from FFS, RAPS inpatient, and encounter data.

The PCC model will only apply to encounter data submissions proposed for 2020 PY. Whereas the RAPS submissions will use the 2017 CMS-HCC model. Health plans will have to manage this motley assortment of levers to reconcile data and predict their financial impact.

Even with the changes in this year’s Advance Notice, we have several more years of managing through multiple models, submission systems, and reconciliations. But when we come out on the other side, we will have a more comprehensive risk adjustment model that is better at predicting cost – and that is definitely one of the “good” outcomes.


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