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Risk Adjustment Coding 101 for Providers

Wooden letter blocks that read the word "BASICS"
Ramneek Kaur
Solutions Consultant
April 2, 2024

As a leader of your provider organization, you’re already knee-deep in juggling a myriad of responsibilities: delivering the most comprehensive patient care possible, maintaining the financial viability of your organization, and easing administrative burden for your overworked clinicians. When you add the goal of achieving value-based care (VBC) on top of that, it all may seem overwhelming.

This is where risk adjustment coding can come in as a helpful solution to lighten this heavy load. In order to reduce costs while maintaining the highest level of quality clinical care, accurate and complete documentation is paramount. When patient diagnoses are captured accurately and this information is effectively leveraged to execute earlier interventions, provider groups may see significant improvements in patient outcomes.

In this guide, we’ll walk you through the basics of risk adjustment coding, explaining how it works and why it’s important. We’ll also share actionable strategies for effective implementation of coding programs. 

How Risk Adjustment Coding Works

Risk adjustment coding is a method used by health plans and provider organizations to capture a patient’s health conditions. By thoroughly documenting their patients’ diagnoses, providers can ensure that the risk scores of their patient populations accurately reflect their health needs. This, in turn, aims to ensure that providers are fairly compensated as they treat patients who may have chronic conditions that require more extensive care. 

Cycle starting with accurate documentation, then effective care management, and ending with cost savings & quality care

In this process, medical coders assign specific codes to patient diagnoses based on the International Classification of Diseases (ICD) coding guidelines. Developed and maintained by the World Health Organization (WHO), this set of coding standards is utilized globally for reporting and categorizing health conditions. 

Although there are a variety of risk adjustment models, the Hierarchical Conditions Codes (HCC) model created by the Centers for Medicare & Medicaid Services (CMS) is widely used by healthcare organizations to capture patient diagnoses using the ICD coding guidelines. The HCC model groups codes into categories that represent conditions with similar cost patterns. Each category is assigned a risk weight, which contributes to a patient’s overall risk score. This score is then used to adjust payments to healthcare providers, ensuring they are aligned with the expected cost of care for each patient.

Coding Under FFS vs. VBC

Historically, payments to providers have been tethered to procedure codes, reflecting the services provided rather than the patient’s health status or diagnoses. For example, payments are made for individual services like office visits, procedures, tests, and other treatments. This fee-for-service (FFS) system has rewarded providers for the quantity rather than the quality of care, with little emphasis on diagnostic codes. However, as the healthcare industry shifts towards value-based care models, which aim to instead tie payments to quality of care and cost efficiency, the accuracy of diagnostic coding becomes much more important. 

5 Best Practices for Implementing Risk Adjustment Coding

In this section, we’ve distilled over 15 years of working with health plans and provider groups to optimize their risk adjustment coding programs into five key strategies you can leverage to successfully implement coding within your practice.

  1. Start with retrospective coding: If you’re just starting to build a risk adjustment coding program, consider starting with a baseline retrospective coding project. Review your existing charts, identify any codes that previously went undocumented, and submit them to CMS. These reimbursements can then be immediately re-invested into additional care and/or coding programs. More importantly, however, a retrospective review will help you gather extensive data on the health of your patient population. This is especially helpful in a post-COVID era where hospitals are understaffed and documentation suffers as a result. Retrospective coding can help fill in those gaps.
  2. Build concurrent/prospective programs: Once you’ve got the hang of retrospective coding, it’s time to elevate your game and implement concurrent and/or prospective coding. Prospective coding allows clinicians to review a patient’s chronic conditions and suspects before the visit, while in concurrent coding, medical coders review charts for accuracy before the provider submits the claim. These two types of coding reviews will give you additional opportunities to get the documentation right.
  3. Create regular data check-ins: Gain a better understanding of both your patient population and clinicians by keeping abreast of key trends in your coding program. By measuring these metrics on a regular basis, you’ll give your team more time to react to any changes in membership or risk adjustment models. Here are a few trends you can consider measuring:
1. Year-over-year recapture rate trends
2. HCC recapture rate trends and impact factors
3. Member engagement trends
4. Member-provider touchpoints
  1. Implement ongoing training: Invest in regular training and education for your coding and clinical teams to keep them updated on the latest coding standards and best practices.
  2. Don’t rely on a one-size-fits-all solution: If you’re looking to outsource some or all of your coding work to a vendor, avoid one that’ll just hand you a one-size-fits-all solution. A good partner will consider factors like panel size, provider incentive structures, number of electronic health records (EHRs), technology team capacity, and more before delivering a customized solution.

For healthcare providers navigating the complexities of risk adjustment coding, understanding its importance and implementing best practices is crucial for success in value-based care. Accurate risk adjustment coding is not just about ensuring fair reimbursement; it’s also about understanding your patients’ health conditions on a deeper level. By prioritizing comprehensive documentation and investing in education and technology, providers can optimize their risk adjustment coding processes and thrive in an entirely new payment system.