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Risk Adjustment for ACOs: A Primer

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June 22, 2019

In December 2018, the Centers for Medicare & Medicaid Services (CMS) released its final Medicare Shared Savings Program (MSSP) rule, called “Pathways for Success,” for Accountable Care Organizations (ACOs). The new rule is designed to have ACOs “take on real risk while offering them the incentives and flexibility they need to coordinate care and innovate” and is projected to result in almost $3 billion in savings over the next 10 years.

Relying on Risk Adjustment

Many ACOs are looking towards risk adjustment to benefit from the new ruling. Risk adjustment enables them to account for severity over a specific period and set and track targets for performance. The risk adjustment process also allows ACOs to identify high-risk patients, determine reimbursement levels, and accurately predict costs.

CMS is viewing this as a small measure of prevention should the ACO have beneficiaries that are much sicker than average. There is a 3% upside to risk adjustment that is a buffer for ACOs that might have sicker than average beneficiaries. Additionally, it helps organizations understand their patients’ risk adjustment scores and acts as a tool for evaluating their performance. The risk adjustment factor (RAF) of each patient is recalculated annually by CMS and provided to ACOs quarterly.

Hierarchical condition category (HCC) coding relies on accurate documentation and bestows higher payments for patients who are sicker and lower payments for those who are healthier. The HCC model assigns a risk score — or RAF — to each patient within an ACO. The RAF is calculated using retrospective and demographic patient data and medical diagnoses.

Complex Coding

Risk adjustment coding allows ACOs to normalize medical risk and ensure they are capturing all necessary codes for their patients. However, miscalculating RAF can result in a lower financial benchmark. Risk adjustment coding necessitates collecting, managing, and interpreting a large volume of data and adhering to strict deadlines. Without the right technology or a knowledgeable risk adjustment partner, a higher number of missed or incorrect codes may occur.

Accurate clinical documentation and coding are especially crucial for ACOs because they ensure accurate RAF and help ACOs better manage their patient population. Leveraging a partnership for risk adjustment coding lets ACOs enhance shared savings, perform both prospective and retrospective coding optimization, automate coding gap detection, and analyze gaps in provider documentation.

Picking a Coding Partner

Most ACOs don’t have the in-house coding expertise necessary to handle the risk adjustment process. Utilizing a partnership with a specialized vendor helps ensure they can undertake the risk adjustment process adequately. As ACOs begin vetting potential risk adjustment companies, several questions can help determine how knowledgeable the vendor is about the risk adjustment process and if they will be the right fit for the ACO. Below are questions ACOs should ask, along with the answers they should expect to receive from a high-quality risk adjustment vendor.

1. What years do we risk adjust?

It’s necessary to follow CMS guidelines on claim payment adjustment. If you had a date of service that was January 15, 2019, you should have the adjustment to CMS by January 15, 2020. These rules can vary by state. For example, in Texas, the Medicare Administrative Contractor (MAC) rules change so that your deadline is based on the date of payment. If CMS received a claim on January 15, 2019 and paid it on March 27, 2019, you have until March 27, 2020 to get the change submitted.

2. How do we figure out our current and projected RAF?

Once you receive data from CMS, you should run it through the CMS-HCC model (also used for Medicare Advantage) to calculate your current RAF. Based on the score that the model provides, you may need to project what your RAF will be if you adjust for risk because it will result in a higher RAF.

While retrospective coding optimization is necessary for ACOs this year as they transition to the risk adjustment model, it is also essential to set up an ongoing program that will capture codes throughout the year. By developing a risk adjustment process, you can consistently examine ways to ensure all necessary codes are being captured and submitted on the claim up front. Timeliness is key, you don’t have a large window to get your data corrected and back to CMS — timelines also vary by state. For more information, reach out to Episource for state-specific information.

3. What’s the deadline for submitting missing diagnosis codes to CMS?

The deadline for submitting the codes for the most recent year of the benchmark (2018) is December 31, 2019, but you should try to get all your submissions in before December. It is possible that CMS may reject some initial codes, so you want to give yourself time to make corrections.

Note that this process is different from the one used for Medicare Advantage because you’re submitting to a regional clearinghouse for CMS, meaning submission rules may vary slightly based on your location.

4. How much lead time should I build into this process?

You should give yourself a lead time of a couple of months, especially if this is the first year you’re completing the process. By the first week of December, you should plan to have every code submitted. If you can start processing data immediately as it’s received, it will lessen your burden at the end of the year.

A challenge might arise for ACOs that are in more than one state because of the different states guidelines. In this case, you will have to follow two different submission formats. Make sure to ask a potential risk adjustment coding partner if they’ve worked in your particular state or area and are capable of dealing with the various submission formats.

5. Is there any downside to risk adjustment?

The simple answer is no. CMS has noted that it is only going to deal with upside risk adjustment. Although the initial CMS proposal in August 2018 reported that scores could increase or decrease by up to 3%, the downside 3% was eliminated.

At Episource, we provide risk adjustment and quality solutions for ACOs, including consultation, analytics, medical record review, and data and management workflow tools. Learn more about our risk adjustment solutions or talk to one of our experts and discover how we emphasize transparency and trust to become a valuable extension of your team, from outreach, retrieval, and coding to final delivery.