Six Best Practices in Risk Adjustment for ACA Health Plans. A holistic approach to HCC revenue management and patient care

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1 Six Best Practices in Risk Adjustment for ACA Health Plans DST Health Solutions July 2015

2 The business model for commercial healthcare payers is changing fundamentally in the wake of the Affordable Care Act (ACA). A major element of this change involves a shift in the way health insurers that serve the small-group and individual markets are paid, with the government taking premium dollars away from plans that serve lower-risk members and transferring it to plans that serve higher-risk members. As payers manage the transition to this form of risk adjusted payment, they are implementing new business processes, technology solutions and partnerships that can help them retain premium dollars and avoid legal action under the False Claims Act. This white paper focuses on best practices that commercial payers are adopting as risk adjustment becomes a critical business process. Accurate data is key Under terms of the ACA, revenue for most commercial payers that serve the small-group and individual markets is now based in part on risk scores that reflect the health status of members. Risk scores are derived from hierarchical condition categories (HCCs) assigned to members annually. HCCs, in turn, are based on encounter or claims data collected from providers. The data will be validated annually through an audit, referred to as a risk adjustment data validation (RADV) audit. In response to this change, many payers are developing provider-education initiatives designed to guide physicians and other providers to document medical records completely and accurately. This is an important undertaking because medical records are the ultimate source of truth in determining members risk scores. However, we re finding that payers that take a more holistic approach reap the greatest benefits. Best practices include: 1 Staying current on federal guidance and regulations 2 Improving data quality and mapping 3 Taking a member-centric approach 4 Educating and engaging providers 5 Knowing the market and the competition 6 Implementing a quality assurance and audit program. 1 DST Health Solutions DST Health Solutions 2

3 1 Staying current on federal guidance and regulations The federal regulations that implement the ACA are from each department can help the organization subject to change, and they can change abruptly. understand the details, anticipate the practical To stay ahead of the curve, many payers and the vendors that support them have established effects of changes and choose the best ways to respond. governance bodies that review applicable Because regulatory change can arise with little regulations, memoranda and guidance. When warning, payers are finding that being nimble is changes are announced, the governance essential. Many payers contract with third parties body advises affected departments within the that serve as strategic partners not merely organization. vendors in helping them monitor, understand While a governance body is essential, it s equally and meet rapidly changing requirements. important that subject matter experts within affected departments evaluate new requirements. No single individual or department can anticipate all the potential impacts of new or modified guidelines. Collectively, subject matter experts 4 Look for a partner with expertise in encounter-data submission, HCC risk adjustment, retrospective review of medical records and preparation for RADV audits. An effective partner will have sufficient resources to deal with abrupt regulatory Concurrent risk adjustment ACA risk adjustment is based on a concurrent model that uses diagnoses from a time period to predict cost in that same period, according to the Centers for Medicare and Medicaid Services. This is in contrast to a prospective model, which uses diagnoses from a base period to predict costs in a future period. While a prospective model is used for the Medicare Advantage program, we developed a concurrent model for the HHS risk adjustment methodology because, for implementation in 2014, prior year (2013) diagnoses data will not be available. In addition, unlike Medicare, people may move in and out of enrollment in the individual and small group markets, so prior year diagnostic data will not be available for all enrollees even after Determining who pays and who gets paid Because the ACA risk adjustment program calculates health insurers risk scores concurrently, data from plan year 2016, for example, will be used to calculate members 2016 risk scores. Scores are based on data derived from members medical visits, claims and demographics. All data for plan year 2016 will have to be submitted by April 30, Health insurers with lower risk scores than competitors within the same geographic market will make payments. Insurers with higher scores will receive payments. For plan year 2016, the insurers will learn by June 30, 2017, whether they will receive or make payments. changes and have its own governance body. 3 DST Health Solutions DST Health Solutions 4

4 2 Improving data quality and mapping As payer organizations make the transition to the use of International Classification of Diseases risk adjusted payment, one process they are (ICD) codes, which represent the disease states of scrutinizing involves data mapping. Each time the members. In connection with the retrospective data is manually or automatically transferred from review process, corrected ICD codes can be 4 Use analytics, or work with a partner one system or format to another, errors can arise. submitted as supplemental data representing the who uses analytics, to review drug data Errors frequently occur as data is moved from disease state of the members. This helps ensure and other information to identify high- standard payer formats into HHS-required formats. that risk scores are correctly calculated. If a claim cost and potentially high-risk members; Mistakes can lead to inaccurate risk scores, doesn t match the member s medical record and incorrect payments and, in some cases, legal the medical record wasn t pulled for a retrospective action under the False Claims Act (FCA). review, then the risk score will be reflective of the information (ICD codes) contained in the claim The government may initiate an FCA action if it alleges that a health plan s or provider s coding/ medical review practices inaccurately reflect an enrollee s health status, and the plan or provider either knows or should have known that it submitted inaccurate data to be used to assign risk scores, according to the National Law Review.2 only. The question is, to get a full and accurate for example, premature infants, members with diabetes or congestive heart failure, and members who have visited certain types of specialists such as cardiologists. view, which members records should be pulled for The results of these reviews can be used the retrospective review? to improve data accuracy and support If a payer had the resources to conduct provider-education programs. retrospective reviews of all medical records, it theoretically could achieve 100 percent accuracy in Another process that payers are focusing on is risk scoring. Because that isn t cost-effective, most retrospective review. During retrospective reviews, ACA plans are targeting specific segments of the the payer (or a vendor with expertise in diagnostic membership. coding) pulls the medical records of particular members and then codes pertinent information relating to the comprehensive disease states of these members. In this context, codes refers to 5 DST Health Solutions DST Health Solutions 6

5 3 Taking a member-centric approach Given the new regulations, each member should This has left payers to find the best ways to 4 Leverage technology solutions that provide your CSRs with seamless access to undergo a medical examination at least once a year, enabling the physician to document the full range of the member s health conditions. Unless the member s conditions are documented in medical records and submitted to HHS via the Edge server at least once a year, the member s risk score won t reflect these conditions. The Edge server is a dedicated, secure server through which each health insurer is required to send data in HHS-specified formats. While thorough documentation of member health conditions is important for plan revenue, it s also important for member health and quality of care. encourage members to undergo annual exams. Some payers offer low-cost or no-cost annual physical exams or other incentives, advertised via text, , telephone or letter. Many payers also are striving to take fullest advantage of member touch points; for example, if a member calls to ask a question about benefits, the customer service representative (CSR) takes the opportunity to find out if the member has had an annual exam and, if not, encourage one. Payers also are focusing heavily on member retention; one important reason is that the longer a member stays with a given health plan, the more data the plan will collect. records from the core claims administrative system and other systems such as care management and customer service. This will enable CSRs to determine whether the member has undergone an annual physical exam and whether his or her plan of benefits includes a free or low-cost exam or other applicable incentives. Communicate often and educate CSRs about effective use of touch points. Many organizations are finding that a hybrid approach, involving both CSRs and clinicians, is ideal. 7 DST Health Solutions DST Health Solutions 8

6 4 Educating and engaging providers In the HCC model, it s critical that physicians fully document each patient s complete health status annually, whether or not the patient seeks help for particular conditions during the year. This isn t simply a matter of repeating last year s documentation; rather, payers want physicians to monitor, evaluate, assess and treat their patients conditions. Taking a holistic view If a woman who has lost a leg to amputation visits her primary care physician because she has a sore throat, the physician should take the opportunity to ask whether the patient is experiencing any issues related to the amputation. Taking a more holistic approach to patient care not only helps generate complete and accurate information about the patient s condition, but it also helps improve the quality of care. Medicine reported that, of the physicians surveyed regarding their coding practices, more than 30 percent admitted that they deliberately misdiagnosed major depression and more than 50 percent reported using a different code than that used for major depression. 3 In many cases, the physicians intentionally used inaccurate codes because they were concerned whether the patient would be able to obtain health insurance in the future; in other cases, physicians were concerned whether they would be reimbursed properly, the study suggested. The ACA prohibition on underwriting may mitigate this eventually, but that will take time and provider education, according to a recent article published by the Society of Actuaries. 4 4 Revise provider contracts to include incentives for fully and accurately documenting members health conditions each year and for coding these correctly. Consider implementing penalties for incomplete and inaccurate records and faulty coding. With this in mind, many payers have implemented training programs to help providers understand the importance of completely documenting the member s health status and all health conditions at least once a year. Correct diagnosis coding is also essential. Yet a study appearing in the Archives of Family This is cause for concern because, under the ACA risk adjustment program, if physicians are deliberately not providing diagnosis codes for members, the health plans will incur the expense of having less healthy members without the benefits of receiving the risk score adjustment and future potential payment from the risk adjustment model. 9 DST Health Solutions DST Health Solutions 10

7 5 Knowing the market and the competition Whether a given health insurer will owe or be organizations (PSOs), for example, will have owed risk adjustment revenue will depend on relatively high risk scores because they have ready factors unique to the insurer s market. If there is access to members medical records. Preferred little competition in the market, the insurer can provider organizations (PPOs) in contrast, will expect to pay little if anything. If competition is tend to have lower risk scores, if only because substantial, the insurer is more likely to have to it s harder for PPOs to gain access to members pay. Ultimately, however, this will depend on how medical records. high or low the insurer s risk scores are relative to the competition. Knowing who the competition is helps insurers 4 If you operate a PPO and compete directly with IDNs or PSOs, you may find it advantageous to invest more heavily in retrospective reviews. In contrast, if you operate an IDN and/or are facing little or Understanding this helps payers decide how much no competition, you probably won t need to to spend on retrospective reviews, which can spend as heavily on retrospective reviews. improve data accuracy. develop a sound risk adjustment strategy. It s probably safe to assume that integrated delivery networks (IDNS) and provider-sponsored 11 DST Health Solutions DST Health Solutions 12

8 6 Implementing a quality assurance and audit program 4 To enhance your quality assurance and audit program, contract with an experienced third party that offers advanced analytics as Effective quality assurance programs help payers If the SVA uncovers a high error rate, one of the improve data accuracy and meet the rigors of questions that HHS likely will raise is whether RADV audits. For these audits, the payer must the payer has in place an effective quality hire an independent third party to conduct what is assurance program. Such a program will focus on referred to as an initial validation audit (IVA). The ensuring that data is accurate, complete, properly U.S. Department of Health and Human Services formatted, and otherwise in compliance with HHS (HHS) will choose the sample of members whose requirements. Having a solid quality assurance records will be included in the IVA. The agency program in place is an important defense in False then will send the HCCs associated with each Claims Act cases. member included in the sample. The independent well as certified professional coders. An experienced third party can help you ensure compliance by evaluating over-coding as well as under-coding; for example, in the case of diabetics who aren t undergoing monitoring. These are important considerations, because they present RADV challenges and fall short of Quality Rating System (QRS) standards. Through the QRS, consumers can look The complexity of an effective quality assurance up information about your health plan s and audit program varies based on the size and outcomes, quality, consumer satisfaction sophistication of the entity involved, according to and cost of care. Correct coding of patient the aforementioned National Law Review article, conditions helps ensure that consumer but typically includes monitoring, through data evaluations of your health plan are based on Afterward, HHS will conduct a second validation analytics and personal review of claims and accurate information. audit (SVA), which focuses on a sub-sample of the diagnoses reported, and an audit plan. third party will attempt to substantiate the HCCs, based on medical-record documentation. The IVA must also verify enrollment of the members included in the sample. enrollees whose records were evaluated in the IVA. 13 DST Health Solutions DST Health Solutions 14

9 DST helps you improve data quality and HCC risk adjustment DST Health Solutions can help ensure that you receive appropriate payment for the risk your ACA plan assumes. Our HCC Revenue Management Service is both comprehensive and flexible, including Retrospective Risk Adjustment Services, Risk Adjustment Data Validation Services and Risk Analysis Services. Retrospective Risk Adjustment Services To provide the highest-quality retrospective reviews, we take a holistic approach, using our HCC Revenue Management solution. This solution integrates our proprietary analytics tool (Risk Analyzer ) and chart retrieval services, along with sophisticated coding technology and reporting capabilities. With the integration of Risk Analyzer, the HCC Revenue Management solution presents, via a user interface, a list of suspects ; i.e., providers and/or members whose records merit review. We structure the list in such a way that you have the flexibility to decide which suspects to focus on, depending on your risk adjustment strategy and the budget you wish to allocate to reviews. The list also allows for predictive financial analyses that can be altered and adjusted before finalizing. Once the list is finalized, we enlist the services of our national medical record retrieval partners, which capture the needed medical records. Our partners are the nation s leading chart-retrieval vendors. They offer seamless requests and deliveries of electronic medical records, best-inclass security and compliance, cost-effective rates, and reduced friction with providers. To ensure the accuracy of coding, DST relies on a team of certified, full-time coders to abstract diagnosis codes from the medical records. Our team is a carefully chosen group of professionals with extensive experience in provider education, quality assurance, coding, data analytics, and production. DST also employs a QA team, which verifies the abstracted codes submitted during the initial round of coding, thereby ensuring the accuracy of the data captured. A Super QA team member follows up on an agreed-upon percentage of the work performed by the QA team. Lastly, we provide you with access to Web-based, real-time reports via your own secure login. These help you educate providers and identify members who have chronic health management issues. A comprehensive suite of reports regarding revenue projections and probabilities is included as well. Risk Adjustment Data Validation (RADV) Services We provide initial validation audit (IVA) services for RADV audits. We are committed to data accuracy, as we fully understand the potential financial implications of these audits. Our highly experienced, certified coders play a key role in IVAs, which represent the first stage of the RADV audit process. We confirm member enrollment and then carefully code each chart. Our experienced QA team then reviews all charts. Many charts are subsequently reviewed by a Super QA team member, to ensure the integrity of the coding performed and the data abstracted for submission. The QA work is conducted with our proprietary HCC Revenue Management solution, which reduces human error. Both the human and technological safeguards are in place to help ensure the integrity of coding and of data abstracted for submission. The DST difference Risk Analysis Services Our Risk Analysis Services complement our extensive risk adjustment capabilities. We engage in customer-specific projects to help you deal with any unique challenges your plan faces. For example, we can apply predictive modeling in order to identify high-risk members who would benefit from care management interventions. Additional Services from DST In addition to the HCC Revenue Management Service, DST offers Edge Server, RAPS and EDPS file creation, helping ensure that your files are transmitted in the correct format. This covers all required file formats for ACA plans as well as Medicare Advantage plans. Relevant results are transformed into submission-ready files (RAPS, EDPS or Edge server). DST s HCC Revenue Management Service delivers tremendous advantages to ACA plans seeking to optimize HCC risk adjustment revenue. We have many years of experience helping Medicare Advantage plans identify risk, report it correctly and obtain optimal reimbursement. We leverage that same expertise and the technologies that support it to help ACA plans achieve their revenue objectives. We employ an extensive pool of certified, full-time coders with deep experience in abstracting diagnosis codes from medical records. Our QA team confirms the accuracy of our coders work; to attain an even higher level of precision, we employ a Super QA team that follows up on the QA team. We use a proven, proprietary tool (the DST RiskAnalyzer application) to quickly and accurately identify suspects. Our partnerships with leading national chart-retrieval firms enable us to obtain medical charts quickly and cost-effectively, with minimal provider friction. Our comprehensive Web-based reports help you educate providers, identify high-risk members and assess revenue projections/probabilities. 15 DST Health Solutions DST Health Solutions 16

10 Conclusion Commercial payers are finding that HCC risk adjustment has become a critical business process and that a comprehensive risk adjustment strategy is equally critical. Following identified best practices can help ensure that the risk adjustment process is effective and that data on which risk scores are based is accurate and complete. It can also help limit the potential for reduced revenue as well as the potential for legal action under the False Claims Act. DST s HCC Revenue Management Service can help you improve process efficiency and data accuracy so that you can receive appropriate reimbursement for the risk you ve assumed and keep your focus on strategic priorities. For more information about our HCC Revenue Management Service, call DST Health Solutions at , us at marketingdsths@dsthealthsolutions.com, or visit us at End Notes 1 Kautter, John, et al. The HHS-HCC Risk Adjustment Model for Individual and Small Group Markets Under the Affordable Care Act. Medicare and Medicaid Research Review. 2014: Volume 4, Number 3. Available at Articles/A2014/MMRR2014_004_03_a03.html. 2 Carnegie, Theresa C., and Swenson, Tara E. Caution: Risk Adjustment Hurdles Facing Plans and Providers Under the Affordable Care Act. National Law Review. July 23, Available at 3 Rost, K., et al. The Deliberate Misdiagnosis of Major Depression in Primary Care. Archives of Family Medicine. April Available at 4 Siegel, Jason. Strategies for Leveraging the ACA Risk Adjuster. Health Watch. October Available at soa.org/search.aspx?go=true&q=jason+siegel&page=1&pagesize=10&or=true DST Systems, Inc. DST Systems, Inc. (DST) has provided the information in this White Paper for general informational purposes only, has a right to alter it at any time, and does not guarantee its timeliness, accuracy or completeness. All obligations of DST with respect to its systems and services are described solely in written agreements between DST and its customers. This document does not constitute any express or implied representation or warranty by DST, or any amendment, interpretation or other modification of any agreement between DST and any party. In no event shall DST or its suppliers be liable for any damages whatsoever including direct, indirect, incidental, consequential, loss of business profits or special damages, even if DST or its suppliers have been advised of the possibility of such damages. 17 DST Health Solutions HWP1005A1 DST Health Solutions 18

11 About DST Health Solutions LLC DST Health Solutions LLC delivers contemporary healthcare technology and service solutions that enable clients to thrive in a complex, rapidly evolving market. Providing business solutions developed from a unique blend of industry experience, technological expertise and service excellence, we assist our clients in improving efficiencies while also effectively managing the processes, information and products that directly impact quality outcomes. Our portfolio of services and solutions, which includes enterprise payer platforms, population health management analytics, care management and business process outsourcing solutions, is designed to assist clients in successfully managing their most important business functions while facilitating strategic and financial growth. We specifically support commercial and government-sponsored health plans and healthcare providers in achieving the goal of affording the best possible care to their members each and every day. DST Health Solutions LLC is a wholly owned subsidiary of DST Systems Inc. DST Health Solutions 2500 Corporate Drive Birmingham, AL MarketingDSTHS@dsthealthsolutions.com