The term “risk adjustment” means different things to different people depending on their role. The Centers for Medicare & Medicaid Services’ (CMS) textbook definition is that risk adjustment is “a statistical process that takes into account the underlying health status and health spending of the enrollees in an insurance plan when looking at their health care outcomes or health care costs.” In contrast, a certified medical coder would tell you that risk adjustment is about making sure the medical record accurately reflects the diagnoses and procedures captured on a claim. And a health plan chief financial officer would say that risk adjustment ensures that the plan is properly compensated for its clinical burden.
The truth is, risk adjustment—and the complex nature of the processes involved—is often misunderstood. In its simplest terms, risk adjustment ensures that the health conditions, health status, and demographics of the beneficiaries in a Medicare Advantage (MA) or an Affordable Care Act (ACA) plan are accurately documented—and that the health plans managing those beneficiaries are adequately compensated for that management. Successful risk adjustment has three fundamentals:
- High-quality member/provider connections: enabling members and providers to connect in meaningful ways to document and promote the health and care of beneficiaries
- Accurate medical charting and coding: ensuring members are correctly assessed and the diagnoses captured and charted effectively
- Complete encounter and supplemental data submissions: ensuring that submissions to CMS are accurate, compliant with regulatory guidelines, thorough, and comprehensive