The “Risky Business” of Risk Adjustment

Why risk adjustment coders are more valuable than ever


By Crystal May, CCS, CPC, CDEO, CPMA, CRC, AAPC Approved Instructor, Senior Risk Adjustment Consultant, Norwood


If you’re of a certain age, the title of this article probably conjured up the image of a popular male actor sliding across a wooden floor in a button up shirt and socks—an unsupervised and carefree teenager doing whatever he wants. Lately, it seems Risk Adjustment (RA) is similar, if recently published audit findings are any indication. Left unsupervised, some organizations have apparently been carefree in their risk capture by submitting diagnoses that weren’t supported by the documentation.

But, just like the parent who comes home to a destroyed house after their teenager throws a party, the OIG will catch you… and you’ll pay for it. 

The overall concept for RA is to “level the playing field” with capitated payments to manage costs for patient care. Healthier patients are likely to need less care (and thus funds) than chronically ill patients. RA seeks to create balance so organizations with sicker populations receive payments to help offset the increased cost of care. This is accomplished by submitting diagnoses with risk adjustment value known as hierarchal condition categories (HCCs). HCCs are used to calculate the patient’s risk adjustment factor (RAF) score, which must be done annually. 

There are different models in risk adjustment, each with varying weights for HCCs, adjustments for certain circumstances such as frailty, and disease interaction coefficients. Models can be plan specific such as CMS-HCC (used for Medicare Advantage, among others); specific to patient populations such as PACE (elderly dual-eligible patients); or even based on diagnosis group such as the ESRD (End-Stage Renal Disease) model. Documentation review is performed using the appropriate model for the population or plan to ensure supported diagnoses are submitted to CMS for calculation into the RAF score. 

This score, along with other factors, will determine how much CMS will pay to the plan or organization for the enrollee’s expected care the following year. 

When capturing risk diagnoses, it is imperative to follow CMS requirements for RA submission. This includes ensuring diagnoses are from valid face-to-face visits performed by an acceptable provider with documentation support. That last part seems to be where some organizations are struggling. And the OIG is on watch.

From January through July 2023, the OIG released six reports on MA audits spanning audit years 2016-2018. These audit reports reviewed high-risk diagnoses including acute stroke; acute MI; embolism; vascular claudication; major depressive disorder; and lung, breast, colon, and prostate cancers; which totaled $3.78M. In these six audits, the OIG recommended repayment of $2.76M. However, had extrapolation been applied, total overpayments received for these diagnoses was nearly $63 million.

Which just so happens to be the amount “Risky Business” grossed at the box office. 

Recoupments will only increase once extrapolation is applied for audits of 2018 and forward. The OIG clearly has MA firmly in its sights, so ensuring capture of accurate and supported HCCs is more important than ever. 

Remember that an ounce of prevention is worth a pound of cure… possibly even millions.

To learn more about compliant reporting of outpatient diagnoses, view this article.

Related News & Insights

Calling Card for Success: Keisha Wilson on Entrepreneurialism and Telehealth

Listen to the episode here: I have to say it’s very inspiring being around my guest…

Read More read more

Audit Provider Documentation to Ensure Accurate Risk Adjustment

Norwood performs CMS compliance-level audits for its partner organizations. These audits involve: Evaluation of provider documentation Review…

Read More read more