Question By: Risk adjustment is a critical part of both the financial and clinical aspects of healthcare in the United States. Still, even many people working in healthcare don’t really understand what it is, why it’s important, or how it works.
Risk adjustment enables payers to assess the health status and expected costs incurred by each member. Risk adjustment can correctly project the patient’s health profile and need for services that can ultimately help in achieving improved health outcomes in a cost-effective manner.
Timely access to accurate data is critical in the process of risk adjustment. Its absence can lead to penalties resulting from errors in encounter data submissions, infrequent, or inadequate reporting. The consequence of improper data submission could mean failing audits, repaying the Centers for Medicare and Medicaid Services (CMS) and even legal implications.
Risk Adjustment and HCC Coding
People with chronic health conditions represent a relatively high risk to insurance companies. Risk adjustment is a method to offset the cost of providing health insurance for such individuals. Risk adjustment models use a person’s demographic data and diagnoses to determine a risk score, which is a relative measure of the costs to insure that person. In a risk adjustment model, the payment rate for each patient depends on a variety of factors that determine the amount of risk/work involved to provide care for the patient. For instance, a patient with less serious health conditions could be expected to have average medical costs for a given time, while a patient with multiple chronic conditions would have higher than average health maintenance costs.
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