Healthcare IT Interoperability, EHR interoperability, Hospital Interoperability

Claims Management News

Why Value-Based Care Reimbursement Needs Risk Adjustment

The way risk adjustment works is by transferring the funds in plans with low-risk policyholders to plans with high-risk enrollees.

By Vera Gruessner

- The Patient Protection and Affordable Care Act is a very complex piece of legislation that covers a wide range of provider and payer issues. Several not commonly discussed factors include the ACA’s impact on risk adjustment and risk selection. The Henry J. Kaiser Family Foundation outlined in a publication the definition of risk adjustment and risk selection.

Value-Based Care Reimbursement

First, risk selection involves the incentive among payers to keep patients from enrolling who are in poor health and in need of expensive medical care. However, the ACA has prohibited payers from denying coverage to those with pre-existing conditions. Risk selection still captures its essence in a changing healthcare landscape by allowing payers to offer plans that are less beneficial to people with serious medical conditions or offering products that attract healthier risk pools.

Risk adjustment, on the other hand, is a provision that the Affordable Care Act brought forward to minimize the effects of risk selection. The way risk adjustment works is by transferring the funds in plans with low-risk policyholders to plans with high-risk enrollees. Kimberly Geidel, Director of Government Revenue at the UPMC Health Plan, offered more information about risk adjustment in an interview with

“UPMC Health Plan, prior to the year 2014, had many manual processes related to risk adjustment coding, and it was quite cumbersome,” Geidel explained. “This was prior to the ACA launch. We partnered with the UPMC Technology Development Center at the time (now folded into our commercialization arm UPMC Enterprises), for automation and coding workflow processes. This was the start of our transformation into big data analytics and population health management related to risk adjustment chart review and coding.”

“We do our submissions for Medicare based on claims and supplemental data from retrospective coding,” Geidel added. “Prior to the adoption of the technology, there was no ability to prioritize the charts for coding opportunity. With a significant member population to code, it was difficult to retrospectively review 100% of the membership which leads to less revenue gain and opportunity loss.”

READ MORE: Can Value-Based Purchasing Work with Pharmaceutical Companies?

Geidel spoke about how UPMC Health Plan incorporated new analytics tools and population health management strategies to improve their revenue cycle.

“We deployed Health Fidelity’s solution, HCC Scout, giving us the ability to automate and code charts through proprietary algorithms. The system utilizes a Natural Language Processing (NLP) engine and prioritizes the charts according to highest opportunity. Now we are able to code members with the highest opportunity first, thus increasing our revenue yield,” she continued. “In addition, due to the automation and increased efficiency, we can code 100% of our membership and be confident we aren’t leaving any revenue opportunity on the table.”

When asked how risk adjustment can be used to ensure that both a health plan and a hospital benefit, Geidel responded, “Risk adjustment is part of an overall structure for payment and quality. While the impetus is to ensure appropriate payments based on the level of services delivered, it’s equally important to note proper coding and documentation in the medical record at the time of the encounter for all diagnoses, not just the diagnoses associated with the CPT for payment.  Physicians are rated based on a variety of quality programs instituted by regulating bodies such as Physician Quality Reporting System (PQRS) not to mention all of the other quality programs instituted by payers including those with additional incentives.  If medical records accurately capture all of the services and conditions the physician is addressing in the encounter, it can benefit these other programs and increase overall scores.”

“It’s also critical hospitals have strong internal coding applications as well to capture all diagnoses treated during the stay.  From a revenue perspective, proper chart documentation and coding is imperative to ensure hospitals are paid accurately for the severity of their cases.  Overall, risk adjustment is helping to align with the value based care model in rewarding quality rather than volume.  This will continue to drive providers to focus on delivering quality services both clinically and administratively resulting in adequate payment for continued excellence.

When asked how exactly the risk adjustment provisions created by the ACA benefit the health insurance industry, Geidel answered, “This program is still in its infancy stages and most plans are still navigating the space. Generally, the zero sum model is driving appropriate payments based on severity, which is much different than the prospective Medicare model whereby plans are reimbursed independently of others based on their own risk score.  Plans are quickly learning how to remain viable in this market, and risk adjustment processes are at the core of the revenue stream.  This refers back to the earlier discussion on the importance of medical record documentation and coding, which can lead to increased opportunity and revenue and ultimately benefit the payer.  Plans must better understand their populations so they can better manage expectations and outcomes related to this program.”

READ MORE: House Passes AHCA To Repeal and Replace ACA By 1 Vote Margin

“For example, a larger population provides the ability to spread the risk; however, plans must be able to identify and target those members with high risk conditions within the population in order to remain competitive or risk a revenue loss in the zero sum model. On average, only about thirty percent (30%) of the ACA population have conditions for risk adjustment.  This is where analytics derived from HCC Scout and predictive modeling made UPMC Health Plan successful.”

“Some carriers may begin to change their plan offerings and benefit designs to remain competitive as well.  While certain predictions indicated consumers would increase utilization of services due to the previous lack of health insurance coverage, from a consumer perspective, people may begin to think about their benefits differently and seek services from providers with less out of pocket charge.”

Geidel predicts that the future will bring smaller carriers and independent providers to collaborate or merge with larger payers or hospitals nationally or within their regions, similar to UPMC’s structure as an Integrated Delivery and Finance System (IDFS) or other stuctures such as the variety of Accountble Care Organizations (ACO) throughout the nation. This will allow both payers and providers to be more competitive in the market.

Geidel concluded by discussing the population health and data analytics tools that are benefiting the patient community today. From mobile health solutions to big data analytics and greater health information access, new technologies are making an impact on improving the health of patients around the country and creating efficiencies for both providers and payers alike.


READ MORE: Payers, Providers Collaborate to Combat Opioid Abuse, Addiction

Dig Deeper:

The Role Risk Plays in Value-Based Care Reimbursement Models

Population Health Vital for Medicare ACO Models to Succeed


Sign up for our free newsletter:

Our privacy policy

no, thanks

Continue to site...