While the Medicare Advantage and Part D Advance Notice Call Letter is usually done early each calendar year, plan actuaries and finance executives were treated to a late December additional notice a few days ago. The notice was triggered by the 21st Century Cures Act and directed the Centers for Medicare and Medicaid Services (CMS) to make several changes to the Hierarchical Condition Categories (HCC) Risk Adjustment Model used in the Medicare Advantage program.
The Cures Act directed CMS to evaluate adding additional mental health, substance use disorder, and chronic kidney disease conditions in the risk adjustment (RA) model and make additional RA model changes to take into account the individual beneficiary’s overall number of conditions. Also, the notice makes other important technical updates and restarts the Encounter Data Processing System (EDPS or 837 encounters) methodology phase-in.
The major points of the special notice include:
- While a number of diagnoses are included in the main HCC risk adjustment model covering mental health, substance abuse and kidney disease, the notice proposes the following additions:
- Drug Abuse, Uncomplicated, Except Cannabis (HCC 56)
- Reactive and Unspecified Psychosis (HCC 58 -- the current HCC 58 will be renumbered as HCC 59)
- Personality Disorders (HCC 60)
- Chronic Kidney Disease, Moderate (Stage 3) (HCC 138)
- Selected drug and alcohol “poisoning” (overdose) codes to existing “Drug/Alcohol Dependence,” to create “Drug/Alcohol Dependence, or Abuse/Use with Complications” (HCC 55)
- Just last year, CMS broke out community segments to improve the credibility of full duals vs. partial duals payments for the aged and disabled. Continuing this refinement, CMS will add new factors to the six community and single long term institutional (LTI) segments that take into account a beneficiary’s number of conditions that are in the payment model. CMS’ HCC model already recognizes co-morbidities because it is an additive model, giving a risk factor for each counted HCC in the model. But the proposal calls for calculating the impact of the number of conditions present for each individual into the payment. Changes will be phased in. In 2019, 25% of the risk score will be calculated with the proposed Payment Condition Count CMS HCC model and 75% of the risk score calculated with the 2017 CMS-HCC model. The condition count changes will be phased in 25% at a time through 2022. CMS looks for comments related to whether the Payment Condition Count vs. All Conditions Count methodology should be used. CMS recommends the Payment Condition Counts model and would factor it only in the EDPS portion of the risk adjustment calculation. Plans should do better with the Payment Condition Count option vs. All Conditions Count model.
- As we have written often, we believe that CMS is committed to migrating fully to the 837 encounter process from the simple Risk Adjustment Processing System (RAPS) in place historically. A few years ago, CMS laid out a migration that would be complete by 2020. In the 2018 call letter, recognizing the revenue impact on plans ill-prepared to continue phasing in 837 encounters, CMS took a step back. While 2017 payments had 25% tied to 837 encounters, in 2018 just 15% will be calculated using this process. But the respite was temporary. The 2019 notice lays out that risk adjustment payments will be 25% EDPS and 75% RAPS. It does not lay out the rest of the schedule at this time.
- EDPS encounters will be supplemented with RAPS inpatient diagnoses. CMS determined that 837 submissions are low compared to corresponding RAPS inpatient submissions. CMS believes that this change will improve the completeness of the data for payment in 2019.
As we have stated in past blogs, we see CMS continuing to refine the risk adjustment system to ensure accurate payment and to encourage quality of care. The substance abuse additions help address the Opioid crisis and overuse of such drugs within the elderly and disabled community. The mental health changes respond to rising mental illness concerns in the Medicare population. Fourteen percent of the nation are impacted by chronic kidney disease at some point in their life and this tends to eat up a disproportionate share of medical loss ratios. So expect continued revisions in both the main and End State Renal Disease (ESRD) models. The proposed condition count changes tie to Model of Care (MOC) and Value Based Insurance Design (VBID) changes and respond to the disproportionate costs and quality challenges associated with those with co-morbidities.
As we noted, CMS seems very committed to EDPS to better recognize actual disease states and risks and ensure payment accuracy. It continues to be suspicious of RAPS due to studies showing perceived overpayments. Expect that the EDPS phase-in will be back on track beginning in 2019. Look to our August 10, 2017 definitive review of EDPS vs. RAPS and Risk Adjustment Data Validation (RADV).
Plans that have yet to take the migration seriously must get ready. And, ready or not, financial payment reconciliation will now be that much more complicated due to the EDPS vs. RAPS phase-ins, the phase-in of the condition counts in the EDPS portion, and the use of RAPS diagnoses in EDPS. If you’re in need of a financial reconciliation solution that addresses all of these moving pieces in a seamless compliance-based application, talk with MedHOK about its MP Financial Reconciliation module to make your life more sane.