5 Key Elements of Medicare Risk Adjustment for Healthcare Providers

Risk adjustment helps payers bring value-based benefits to their members, such as exercise programs, case or disease management, transportation to medical appointments, and more. The program relies on the accurate and timely submission of claim diagnosis codes mapped to CMS-HCCs each year to calculate a patient’s risk score.

HCC coding requires physicians and eligible non-physician providers to document or document each patient’s active health conditions annually. The process can be a time-consuming clerical burden for providers.


Many are still not informed about what is Medicare risk adjustment and its role in healthcare services. According to experts, a health plan’s Medicare risk adjustment program relies on accurate documentation from providers of their enrollees’ conditions to ensure proper compensation for the healthcare costs associated with a member’s risk burden.

This process equates a patient’s medical diagnosis to a risk score, which predicts their healthcare costs. This methodology levels the playing field between payers and health plans that manage high-risk patients so that the sickest members don’t cost the insurance system more than their healthy counterparts. As such, the accuracy of a health plan’s Medicare risk adjustment depends on accurate medical coding and the submission of complete and correct information to CMS. This includes accurate diagnosis coding, documentation of medically necessary services that address the condition, and the provider’s assessment and plan for management.

CMS has specific guidelines around coding and documentation. For example, only face-to-face encounters from approved provider types and in approved locations can be used for diagnosis validation. This allows accurate, complete, and consistent data collection from healthcare professionals.


When it comes to Medicare risk adjustment, time is of the essence. HCC coding and submissions must be completed by the end of the contract year, or the health plan risks paying more. Many MAOs utilize a state-of-the-art risk adjustment software platform to automate and streamline available data collection and suggest ICD codes for Medicare Advantage RAF calculations to reduce the time and stress of risk adjustment. This allows for a much faster and more accurate approach to RAF coding compared to manual review. Different requirements for submitting encounter data exist depending on the risk adjustment model type. CMS provides MAOs with several resources, including user groups, operations manuals, webinar training, and help desks to ensure encounters are submitted correctly.


The risk adjustment models used by Medicare Advantage and commercial payers use medical records to document the health status of enrollees. The health status is recorded using the International Classification of Diseases (ICD) diagnosis codes. A qualified provider must correctly document the medical records to support the billed condition. If the documentation is incorrect, or there are no documents to validate the diagnosis, the coding and billing process will fail. Health plans have adopted concurrent coding to reduce the number of erroneous diagnoses. Concurrent coding reviews the medical record before it goes to coders to ensure that the chart accurately reflects the patient’s conditions before it is submitted for claims processing and payment. This method is a proven way to reduce coding discrepancies, which can have a negative impact on a health plan’s revenue. It also helps to improve a health plan’s eligibility for shared savings opportunities.

Social Determinants of Health

Social determinants of health are the economic and social conditions that affect health. These factors are outside of the healthcare system and influence a patient’s ability to make healthy choices (source). They also impact the overall cost of care. Health systems should incorporate the determinants of health to improve outcomes and reduce costs.

Health plans use the information in medical records and claims to identify patients with conditions that may require risk adjustment. This is done by assigning a value to each diagnosis code based on its potential impact on future healthcare spending (source). A patient’s HCCs can determine their eligibility for various programs that help manage their condition. Physicians should include social determinants of health in their practice by performing deeper than just a standard socioeconomic history Q&A during a visit. An expert explains that physicians should be trained to look at the bigger picture, including a patient’s lifestyle and unmet needs that can negatively impact their well-being. A more holistic approach can also increase member engagement, benefiting the provider and the payer.


With member outcomes and costs driving all plans, forward-thinking payers are integrating their risk adjustment and quality functions. This allows them to optimize staff and resources. This type of integration requires a robust IT solution that supports centralized, scalable data management. It also includes a platform allowing information sharing and retrieval across departments without workflow disruption. The risk and quality teams must work together to create more accurate, comprehensive member assessments and documentation. The challenge is that health plan coding and document review teams are often busy and need more staffing capacity. To make the most of this collaboration, payors must focus on creating member-centric initiatives to help drive member engagement and documentation.

This means developing a robust strategy to support the health and well-being of members while ensuring they are properly reimbursed for their services.

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