2021 Brings Another Risk Adjustment Calculation Change

August 24th, 2020 - Aimee Wilcox, CPMA, CCS-P, CST, MA, MT, Director of Content
Categories:   Medicare   Diagnosis Coding  

In 2021, a big change in Risk Adjustment score calculations will take place, which will affect payments to Medicare Advantage (MA) plans for the coming year and take us closer to quality and value-based programs instead of fee-for-service (FFS) or risk-adjusted (RA).  

An Overview of Risk Adjustment

Currently, CMS pays a per-enrollee capitated payment to each Medicare Advantage (MA) plan based on the assumption that every enrollee in the MA plan is an average health risk. In other words, until proven otherwise, CMS assumes all MA enrolled beneficiaries are equally healthy and the capitated payment will cover any healthcare services for the year. Obviously that isn't the case, as some beneficiaries have more healthcare problems than others which could drastically increase costs beyond the capitated amount set aside for a healthy beneficiary. To account for these differences, CMS will increase the capitated payment if the payer can prove the beneficiary has more health issues than the average Medicare beneficiary.

To accomplish this, the MA plan collects and reviews the medical records of each beneficiary during the year, identifying all diagnoses that may raise the patient's health risk score and reports those diagnoses to CMS. Each diagnosis is assigned an appropriate ICD-10-CM code, which is then crosswalked to the correlating Hierarchical Condition Categories (HCC) code based on a specific CMS HCC-model. Each HCC code has an assigned point value and all HCC codes assigned to a beneficiary are totaled (using those point values) and reported, along with the beneficiary demographic data, to CMS through the Risk Adjustment Processing System (RAPS). CMS then adjusts the capitated payment based on the severity of the patient's risk-adjusted score. 

When is the Change Headed Our Way?

CMS has made no bones about wanting to change from an FFS model to one that offers quality and value so they instituted a Risk-Adjustment model. Along with collecting risk scores from MA plans for each beneficiary, CMS was also tracking encounter data. They began looking at certain diagnoses and how providers and healthcare organizations implemented treatments along with how successful and cost-effective those treatments were. They looked at outcomes, quality of services, and beneficiary reviews of those programs. CMS has a pretty clear idea of what they want to accomplish with value-based care and they have decided to determine an overall risk score for each beneficiary based in part on RAPS scoring and the encounter data collected. 


A patient is diagnosed with diabetes mellitus type 2 with hypertension. 

Assess the patient using both scoring options. The two scores might differ by just a couple of points.

  1. Assess a RAPS score for a patient with this diagnosis
  2. Assess score using the encounter data collected

A portion of the RAPS score and a portion of the encounter data score are then blended together to determine the overall risk score and capitated payment amount.

Calculations have been made this way since 2015 and changes in the ratio are planned through 2021 (as shown in the table below). 

The table listed here identifies the percentage of RAPS vs Encounter Data from 2015 through 2021. At some point in time (not currently identified), the MA capitated payment will be determined 100% by the encounter data.

One additional change has been noted in these calculations; as of 2021 the RAPS score will be calculated using the 2017 CMS-HCC model and the encounter data score will be calculated using the CMS HCC-2020 model. The scores will be blended by using 50% of each to determine the overall risk adjustment score for each beneficiary.

Proper Resources Pave the Way to Better Reimbursement

Never before has clinical documentation improvement been so important. Accurate and clear documentation leads to the correct ICD-10-CM code assignment and HCC calculations. Team up with HCC Coder and the innoviHealth ICD-10-CM specialty codebooks and Provider Documentation Guides to ensure proper code assignment is taking place. 

To review a list of the books available through innoviHealth, visit our innovihealth store

Provider Documentation Guidebooks are available to assist with quick, effective provider/coder education and training on clinical documentation improvement issues for the ICD-10-CM codes most commonly reported for your organization. 

Risk Adjustment HCC Edition for 2020, covers the ins and outs of Risk Adjustment coding including tips and guidelines vital to accurate code assignment — For example: when would you assign the appropriate Z code versus a code from Chapter 2: Neoplasms (C00-D49) for a patient with active cancer or cancer that is currently in remission? Common errors like these can have an astounding effect on reimbursement. 



Questions, comments?

If you have questions or comments about this article please contact us.  Comments that provide additional related information may be added here by our Editors.

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