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Medicare Plans Need to Embrace Conversion to Encounter-Based Risk Adjustment

The New Year is more than just a fresh slate for health plans – it’s also the year that we finally see a move in the Medicare risk adjustment revenue calculation. Plans greeted the introduction of the submission of 837 encounter data (known as EDPS) with a bit of a yawn back in 2012, but now will need to be alert. In 2016, CMS will be blending 837 encounter data and the traditional Risk Adjustment Payment System (known as RAPS) for the calculation of Medicare risk adjustment revenue. Although this has been on the horizon for four years, it has many plans scrambling to determine the impact and just how to adjust to a much more complex system.

For 2016, the Centers for Medicare and Medicaid Service (CMS) will use a 90% RAPS and 10% EDPS blend for reimbursing plans for the Hierarchical Condition Categories (HCC) risk adjustment revenue system. Coupled with the ever-increasing standards for achieving and maintaining 4- and 5-Star quality bonus status, the conversion over time to a complete encounter based system creates significant fiscal challenges for plans.

A solid risk adjustment strategy is key for financial success in the Medicare Advantage world. The current RAPS submission process is a relatively straight-forward one. It has just 5 data elements and an easy way to identify errors and conduct remediation. In contrast, EDPS is much more sophisticated, including passing both a submission gateway step and then potentially resolving multiple submission errors related to records before getting the encounters accepted. The chance of so-called leakage (the inability to identify the reason for encounter rejection and losing the opportunity to qualify an encounter) is much greater and analysis and remediation much more time-consuming. In addition, submitting retrospective submission is easy with RAPS and has been the hallmark of maximizing revenue over the years. With EDPS, identifying missed encounters and submission is significantly more complex.

So how can plans weather the storm and successfully adapt to the change from RAPS to EDPS? Here are some best practices plans should employ to safeguard revenue:

  • It is imperative that plans implement an end-to-end, thorough encounter data gathering and submission process. This starts with education of the provider and goes throughout the submission and remediation process. This includes overseeing capitated providers, FFS providers, and downstream subcontractors for their accurate and timely encounter submission.
  • Must have the ability to create compliant, outbound 837 consistently to CMS (best practice monthly) as well as target remediation of failed files or encounter records on an ongoing basis.
  • Capture both RAPS Return Files and Encounter Data Return Files during the transition process. Conduct remediation of both RAPS and EDPS submission. This is especially key for EDPS, where files can be rejected as well as individual records for multiple times and reasons.
  • Conduct robust financial reconciliation on both RAPS an EDPS submissions to determine where deltas exist between the two formats/submissions.
  • Analyze both RAPS and EDPS to ascertain “falloffs” (when chronic conditions are not reported at least once per year) and “opportunities” (where higher reimbursement may exist within a disease cluster or a new qualify cluster may exist). Ensure submission of these falloffs and opportunities if documented.

Plans must also prepare for the inevitability of a Risk Adjustment Data Validation (RADV) audit. CMS will send plans a sample of previously submitted encounters and they must provide medical chart documentation to justify the submissions. If they cannot, plans will face major penalties. These penalties would be attributable to all plan revenue based on the percentage of failure in the sample.

We know the blending will eventually increase in favor of EDPS as RAPS is phased out; therefore, how can plans assess the potential impact of the conversion over time from RAPS to EDPS? The below strategies will help plans analyze and prepare for the transition ultimately to a 100% EDPS process:

  • For both RAPS and EDPS, compare frequency/count by diagnosis in the aggregate.
  • For both RAPS and EDPS, identify the number of unique members with one or more diagnoses.
  • Compare HCCs that are accepted in RAPS and not accepted in EDS.
  • Log error reasons and frequency.

For plans with multiple lines of business, the preparation here is applicable for Medicaid and Exchange as well. The Exchange has already adopted a variant of the Medicare risk adjustment formula. While currently retrospective, it should migrate to prospective over time. And more than half of states today use some form of risk adjustment for Medicaid.

Marc Ryan

Marc S. Ryan serves as MedHOK’s Chief Strategy and Compliance Officer. During his career, Marc has served a number of health plans in executive-level regulatory, compliance, business development, and operations roles. He has launched and operated plans with Medicare, Medicaid, Commercial and Exchange lines of business. Marc was the Secretary of Policy and Management and State Budget Director of Connecticut, where he oversaw all aspects of state budgeting and management. In this role, Marc created the state’s Medicaid and SCHIP managed care programs and oversaw its state employee and retiree health plans. He also created the state’s long-term care continuum program. Marc was nominated by then HHS Secretary Tommy Thompson to serve on a panel of state program experts to advise CMS on aspects of Medicare Part D implementation. He also was nominated by Florida’s Medicaid Secretary to serve on the state’s Medicaid Reform advisory panel.

Marc graduated cum laude from the Edmund A. Walsh School of Foreign Service at Georgetown University with a Bachelor of Science in Foreign Service. He received a Master of Public Administration, specializing in local government management and managed healthcare, from the University of New Haven. He was inducted into Sigma Beta Delta, a national honor society for business, management, and administration.

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