On January 6, 2020, the Centers for Medicare & Medicaid Services (CMS) released Part I of the 2021 Advance Notice of Methodological Changes for Medicare Advantage Capitation Rates and Part C and Part D Payment Policies (the Advance Notice), which contains key information about proposed updates to the Part C CMS-Hierarchical Condition Categories (HCC) risk adjustment model and the use of encounter data.

For the past several years, CMS has released the Advance Notice in two parts due to requirements in the 21st Century Cures Act, which mandated certain changes to Part C risk adjustment.

Part 1 of the Advance Notice announced a major change to the way that CMS will calculate risk scores in 2021:

• Encounter data (i.e., EDS) submissions will comprise 75% of a Medicare Advantage (MA) plan’s risk score using the 2020 CMS-HCC model
  • The 2020 model complies with the 21st Century Cures Act, adding certain mental health diagnoses and including an adjustment for members with multiple HCC conditions known as the Alternative Payment Condition Count (APCC model)

• RAPS data submissions will comprise 25% of the MA plan’s remaining risk score using the 2017 CMS-HCC model

Through this change, CMS is continuing its trend of shifting risk-adjusted payments towards 100% reliance on encounter data submissions. For the 2020 payment year, the blend is 50% EDS (2020 model) / 50% RAPS (2017 model).

According to CMS, the combined impact of the transition to a greater percentage of MA risk scores calculated using encounter data, fee-for-service (FFS) claims, and RAPS inpatient records is 0.00%. CMS further states that the transition to the new model will have a .25% positive impact to RAF in 2021. 

However, obtaining revenue neutrality or favorability may be difficult for payers who do not have an adequate data integrity process in place to ensure that all eligible encounters are being submitted to both EDS and RAPS. A recent study of 2.5 million MA lives led by Pareto Intelligence, a GHG partner, found that the transition to 75% EDS submissions in risk score calculations is projected to result in $23 per member per year (PMPY) revenue shortfall for 2021.

How Payers Can Prepare for this Change and Mitigate Potential Revenue Shortfall

Plans should take steps now to determine the impact of the blend and model change to their risk scores and revenue, and mitigate potential adverse outcomes of the risk adjustment changes:

• Compare 2020 midyear risk scores against 2020 final budgeted risk score. Was this in line with your expectations when you created your risk score goals during CY 2019?
  • Why This Matters: Even though 2020 payments are blended at 50% EDS/50% RAPS, any shortcomings in expected versus actual risk score performance could be magnified by the increased use of encounter data, which is an inherently more complex submission process. A better understanding of performance will give some insight into whether the blend and model change could have an adverse impact on risk scores, particularly when CMS moves to the 75% EDS/25 RAPS% split in 2021. Once you identify any gaps that may exist, you can begin to mitigate the impact of these changes to risk score calculations.

• Accelerate data integrity and reconciliation operational processes. This reconciliation should be applied to both claims and supplemental data.
  • Why This Matters: As CMS moves towards calculating 100% of risk adjustment payments using encounter data, payers need to evaluate whether current CMS submission processes result in complete and accurate data without filtering or truncating any data that is eligible to be submitted.
    
    This is also critical for any risk score differences that may exist between RAPS and EDS submissions. If the advanced submission requirements and filtering logic for EDS are causing encounters that would otherwise be accepted by RAPS to be rejected by EDS, you could be leaving money on the table. Payers should evaluate data completeness and accuracy from encounter through to regulatory submission to proactively resolve issues.

The accelerated transition from RAPS to EDS is not the only notable change in the Advance Notice. Be on the lookout for a follow up to this article where GHG works in tandem with Pareto Intelligence to analyze the estimated risk score impact of the changes to the risk adjustment model.

For assistance navigating impending changes to the MA risk adjustment model and optimizing your risk adjustment program for success, please contact Jeff De Los Reyes at jdelosreyes@ghgadvisors.com.