What is the purpose of risk adjustment?

What is the purpose of risk adjustment?

Curious about the history and purpose of Medicare managed care risk adjustment? First, how about a little history lesson.

The Balanced Budget Act of 1997 mandated that any operator running under Medicare+Choice (which is now Medicare Advantage) utilize a risk adjustment payment methodology when dealing with information regarding beneficiaries’ health status.

Under this model, risk adjustment of Medicare Advantage payments were to be based on data from enrollees’ hospital stays. The model was designed to pinpoint diagnosis models for inpatient care where it was most appropriate. This was modeled to predict higher future costs.

There are several purposes to risk adjustment. The main reason is to ensure the integrity and accuracy of data submitted to The Centers for Medicare & Medicaid Services (CMS) systems.

Any and all diagnosis codes have to be documented once a patient visit occurs. Whatever the diagnosis may be is coded under the International Classification of Diseases Clinical Modification Guidelines for Coding and Reporting.

Furthermore, risk adjustment is mandated to ensure that whatever diagnosis is made comes from an acceptable data source. What are the acceptable data sources you ask?

  • Hospital inpatient facilities
  • Hospital outpatient facilities
  • Physicians

Plan sponsors also play a role in determining provider type. Again, this determination comes from the source of data.

If it isn’t apparent at this point, this is why risk adjustment is so important. Diagnosis models are important when it comes to both patient care and safety.

Although this is a high-level look at Medicare risk adjustment, we could honestly fill a novel with this information. Join us back here at the Chartfast blog on a regular basis. You know we will bring you only the latest information on what you need to know regarding health care, health care IT, and more.