Health Law Scan

Legal Insights and Perspectives for the Healthcare Industry

Last month, we had an engaging Fast Break session covering the growing importance of risk adjustment in various health insurance programs and novel government theories of liability associated with risk adjustment reporting. Morgan Lewis associates Tesch Leigh West and Michelle M. Arra described the fundamental processes regarding risk adjustment and highlighted recent audit and enforcement trends in this area.

If you weren’t able to catch the live program, below are some key takeaways:

  • Risk Adjustment is the method by which the Centers for Medicare & Medicaid Services (CMS) adjusts capitated payments (per member per month) to Medicare Advantage Organizations and similar risk-bearing entities to account for the differences in expected beneficiary health costs. CMS bases risk adjustment payments on beneficiaries’ demographic information and any diagnosis codes submitted for the prior year. Beneficiaries are assigned a risk adjustment factor score that acts as a multiplier on the capitated payment base rate. The higher the risk score, the greater the expected cost of the beneficiary, and the greater the capitated payment.
  • As managed care and value-based models continue their resurgence in the healthcare marketplace, emphasis on the use of risk adjustment and related statistical processes to ensure adequate healthcare outcomes and costs has increased.
  • In recent years, CMS and the Office of Inspector General (OIG) have focused on risk adjustment reporting to ensure that the data reported by and payments to health plans are accurate and appropriate.
  • CMS and OIG appear to be at odds over certain risk adjustment mechanics, offering variable guidance on the subject.
  • There are a number of important risk areas health plans should consider when assessing their compliance with risk adjustment reporting, including upcoding and proper coding for past medical history.

For further discussion of these risk areas, view our program.

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