On January 6, 2020, the Centers for Medicare and Medicaid Services (CMS) released Part I of its annual Advance Notice of Methodological Changes. The proposed updates, for calendar year 2021, include changes to the Part C CMS Hierarchical Condition Categories (HCC) risk adjustment model and the use of encounter data.
CMS-HCC Risk Adjustment Model Changes
The 21st Century Cures Act requires that CMS phase in changes to risk adjustment payments over a 3-year period, beginning in 2019, with changes being fully implemented for 2022 and subsequent years. The changes: take into account the number of diseases a Medicare Advantage (MA) enrollee has, make separate adjustments for every full-benefit dually-eligible beneficiary, and include additional diagnoses related to mental health and substance use disorders. 2021 will be the final year of the phase-in period, with the new model being in full effect in 2022.
To continue phasing in the model that meets the requirements, CMS is proposing to calculate risk scores for CY 2021 payments using the sum of: 75% of the risk score calculated with the 2020 CMS-HCC model and 25% of the risk score calculated with the 2017 CMS-HCC model. This is a change from the CY 2020 blend of 50% of the risk score calculated with the 2020 CMS-HCC model and 50% of the risk score calculated with the 2017 CMS-HCC model.
Using Encounter Data
CMS calculates risk scores using diagnoses submitted by Medicare Advantage organizations and from fee for service (FFS) claims. Historically, CMS has used diagnoses submitted into CMS’ Risk Adjustment Processing System (RAPS) by MA organizations for the purpose of calculating risk scores for payment. In recent years, CMS began collecting encounter data from MA organizations, which also includes diagnostic information.
CMS began using diagnoses from encounter data to calculate risk scores in CY 2015 and, for CY 2016, CMS blended 10% of the encounter data-based risk scores with 90% of the RAPS-based risk scores. CMS continued to use a blend to calculate risk scores by calculating risk scores with 25% encounter data and 75% RAPS data for CY 2017, 15% encounter data and 85% RAPS data for CY 2018, and 25% encounter data and 75% RAPS data for CY 2019. For CY 2020, CMS is continuing to use a blend to calculate risk scores, by calculating risk scores with 50% encounter data and 50% RAPS data.
As noted above, for CY 2021, CMS proposes to calculate risk scores for payment to MA organizations and certain demonstrations by summing 75% of the encounter data-based risk score with 25% of the RAPS-based risk score. Specifically, CMS proposes to calculate the encounter data-based risk scores with the 2020 CMS-HCC model and the RAPS-based risk scores with the 2017 CMS-HCC model.
Comments and What’s Next
Comments on this proposal shall be submitted online no later than March 6, 2020.
CMS will issue the final Rate Notice and Call Letter no later than April 6, 2020. Additionally, CMS will release Part II of the Advance Notice and a draft Call Letter no later than February 6, 2020. Part II of the Advance Notice and the Call Letter are likely to be much broader in scope than this announcement about the CMS-HCC risk adjustment model.