Unlocking the Potential of Medicare Risk Scoring for ACO REACH

By Charlie Vazquez – Vice President of Quality, ilumed 

“Healthy members only,” used to be the joke in healthcare when it came to treating new patients. Almost 20 years ago, Health Maintenance Organizations (HMOs) didn’t want to take on patients who had severe chronic illnesses with exacerbation and required more care. That’s because the plans did not receive additional reimbursement for these sicker members.

The Centers for Medicare and Medicaid Services (CMS) used to reimburse providers the same for each Medicare patient, whether a member was healthy and required less care or if they had chronic health issues that needed more procedures and medications. Consequently, the plans were risk-adverse and pursued healthier patients. Healthier patients were pursued by HMOs, while patients with chronic illnesses were often left in Traditional Medicare. CMS recognized this wasn’t a fair model, so, in 2000, they began implementing risk scoring to help level the playing field.

What is Medicare risk scoring?

According to CMS, risk scoring is a number representing the variance factor in predicted cost of treating a patient, or group of patients, compared to the average Medicare patient, based on certain characteristics and health conditions.

With risk scoring, the more complex or chronic a patient’s health conditions, the higher their risk score will be. In turn, health plans will receive higher payments for the care of these patients.

Factors that go into Medicare risk scoring

CMS and the National Center for Health Statistics (NCHS) assess the risk using Hierarchal Condition Categories (HCCs)—a predictive risk-adjustment model that CMS uses to predict healthcare costs for patients. The model assigns a risk score to individual patients based on their diagnosis history. The more serious or complex a patient’s health conditions, the higher the risk score. This score is used to adjust capitated payments made to managed care plans and providers.

This system relies upon the assignment of codes, during each encounter, from the International Classification of Diseases, Tenth Revision (ICD-10), which are medical codes linked to specific clinical diagnoses. If there’s a condition, there’s a code for it; everything from flat feet to chronic heart disease is assigned a medical code.

When someone has multiple chronic conditions, their risk score is higher, because these conditions could complicate each other. For example, someone with diabetes and congestive heart failure scores higher than if a patient had only one of these conditions. When it comes to risk scoring, sometimes 1+1 = 3 if you have multiple specific chronic illnesses. They can add up to being a bigger issue together than alone.

A patient’s medical condition is just one piece of the puzzle. Other data is used to determine risk scoring, including:

  • Demographic location
  • Gender
  • Age

All these factors work together to create a patient’s risk score.

Why does Medicare risk scoring matter?

Since Medicare risk scoring was introduced, it’s been a double-edged sword for both Medicare organizations and providers.  

  • Providers benefit because, with Medicare risk scoring, they get reimbursed fairly for patients who have complex and chronic needs.
  • But with the annual obligation to submit patients’ medical information, it can feel like it adds a lot of meaningless busywork for providers. The amount of additional paperwork that needs to be filled out can take up time that could be spent seeing patients.

There’s a push/pull when it comes to risk scoring in creating a balance between patient health and provider reimbursement. Accurate risk scoring is important to ensure you’re properly reimbursed for the level of care you’re providing. With the right care, patients should get healthier, decreasing the cost of their care. This can help free up providers so they can spend their time and resources on patients who need it, while giving them more time in their schedule to see other patients.

With this system, it can be tempting for providers to overstate a patient’s health issues so they can get paid more. That’s why Medicare Advantage (MA) providers have been accused of submitting inflated bills to increase their profits.

Risk scoring in the ACO REACH model

Risk scoring can also help create better balance in serving disadvantaged communities. It plays an important role in targeting underserved communities to help deliver coordinated, value-based care. Another major benefit is that it helps improve patients’ overall outcomes and decreases costs, which are key goals of the Accountable Care Organization Realizing Equity, Access and Community Health (ACO REACH) model.

To help move toward those goals, CMS recently added new protections to the risk scoring model to help make risk scores more accurate and guard against bloated scores. Here are a few ways they’re doing this:

  • Putting a new cap on the risk-score-percentage increase year over year. This is to help prevent overinflation of risk scores.
  • Getting rid of some HCC codes, which include the distinction of a complication. For example, diabetes can be listed as diabetes or diabetes with complications. CMS wasn’t always seeing more resources going toward diseases marked as having a complication, so some of those tags have been removed to prevent overuse.

Risk scoring in Medicare Advantage vs. ACO REACH

Risk scoring is a factor in both Medicare Advantage (MA) and the ACO REACH model, although they use this scoring system in different ways.

Both MA and ACO REACH use HCC and ICD-10 codes, but ACO REACH relies less on risk scoring than MA plans as part of the formula for reimbursement. While many MA carriers can learn more about their clients outside of the doctor’s office, through claims data and health-risk assessments, ACO REACH providers might not have access to a more holistic view of their clients’ needs.

ACO REACH also offers a shared savings model. When the ACO REACH entity takes on more risk, it has a greater opportunity to gain more reward, which is then split with participating providers. It’s a benefit for both CMS, who has seen more than $1.8 billion in savings in 2022 with their full shared savings model, and providers, who receive a portion of the savings when they help reduce healthcare costs.  

ilumed helps ACO REACH providers improve coding accuracy

While paperwork can be a pain, accurate coding is the key to providers getting properly reimbursed. ilumed has designed a system that takes the guesswork out of coding and helps ACO REACH providers enhance their coding accuracy. Here’s how:

  • Connecting the dots. Accurate coding not only better captures patients’ stories but also helps providers get the right level of reimbursement for the right level of care.
  • Hands-on training. ilumed provides real-life examples with redacted files and hands-on exercises so the team can learn how to add the right patient info for coding. Plus, we help your team spot contradictions in notes to improve coding accuracy. This helps them understand where issues might occur so they can make adjustments and fix errors in the future.
  • Electronic medical records vendor assistance. ilumed can work with your electronic medical records vendors to ensure the system is working properly and adjust the system when needed.
  • Patient code audits. Our team of ilumed coders will run a statistically significant sample size to audit your patient codes and provide actionable feedback so you can make the proper adjustments. Using programs like PowerBi and BrainStream, we’ll visually show you the data implications of coding errors to give you a 360-degree view of your coding system.
  • Help for providers of every size. While some providers can afford to have a team of auditors to check their codes, others work on a smaller scale. ilumed can establish a system for code auditors and double-check their work to be sure it’s accurate. And for smaller providers, ilumed can do the auditing for you, to ensure you’re getting reimbursed properly, without having to add a lot of extra personnel or infrastructure cost.

ilumed has even more ways to help

Ensuring your risk-scoring system works properly is one important way ilumed helps you get paid. But it’s just one feature that ilumed offers.

We’re also working to help make patient care more proactive with quarterly patient visits and providing extra support for patients who experience food insecurity, transportation issues or struggle with loneliness or social isolation. There’s also a support team to provide case and disease management to patients. This is all part of a new financial model that helps create more sustainable cash flow and offers incentives when providers are good stewards of their patients and the Medicare dollar.

Check out our content library to learn more about how ilumed helps providers and patients.