How risk adjustment payment models work today and their challenges

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Healthcare organizations that take on risk—meaning they’re paid for patient outcomes instead of how many services they provide—need to develop an accurate picture of the health of their patient population in order to receive appropriate reimbursement. This impacts government-sponsored programs like Medicare Advantage, Managed Medicaid, and Commercial Exchange plans, as well as value-based arrangements that set rates based on population risk. The sicker the population, the more providers and insurers need to get paid to manage patients’ conditions.


Providers spent decades learning and improving coding practices for CPT (Current Procedural Terminology) codes under fee-for-service payment models, because these codes directly impacted payment. Now that these organizations are moving to risk-sharing arrangements, the use of ICD (International Statistical Classification of Diseases and Related Health Problems) codes has become critical to measuring a population’s risk. Because they have less experience with these codes, patient conditions can get missed or inaccurately entered during claims coding.


To capture these missing codes, health plans and at-risk provider systems employ coders to review patient charts and find evidence for missing condition codes. These codes are then submitted to the payer or directly to CMS for reimbursement (MA) or reconciliation (Commercial).

What are our challenges

Retrospective analysis

Risk/Comorbid condition Analysis of patient conditions is happening several months after they’ve gone to the doctor, the collective picture of risk is out-of-date even when it’s first assembled. This means plans and providers don’t have a concrete measure of how sick their population currently is or will be next year. This is problematic for care management, utilization management, and population health programs, which rely on an up-to-date understanding of patient conditions and behaviors to inform education and intervention efforts.

Higher administrative costs

People engage secondary reviews of medical records to capture Risk Adjusting Diagnosis retrospectively. Retrospective reviews are operationally burdensome and have become costly every year with limited improvement in health outcomes. Plans pay vendors to chase down charts from providers. This process is expensive and time-consuming due to the nature of clinical documents and human errors during reviews.

Provider Abrasion

Not only do provider organizations spend time up front documenting clinical encounters and coding claims, but they also work with chart retrieval vendors to pull patient documents for additional rounds of reviews by multiple payers. These activities are often disruptive to physician office staff and take precious time away from serving patients.





What does plans and providers need to succeed in Risk Adjustment Programs


Healthcare organizations need an up-to-date high risk population prospectively managed with care management. Risk Adjustment programs should be looked from care management and quality perspective to address gaps in reporting the conditions.


Need a robust analytics platform that can identify the list of suspects and identity gaps at the early stages of claim processing. The analysis should focus on risk score gap identification, prospectively analyzing new data based on trend patterns on provider coding errors and predicting the gaps and report to care management teams for new conditions reported.

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