What is the Purpose of the Coding Intensity Adjustment?

In 2010, CMS introduced what’s referred to as a “coding intensity adjustment” factor. But, what is the purpose of the coding intensity adjustment? The adjustment is designed to account for differences in diagnosis coding patterns between Medicare Advantage (MA) and traditional Medicare. It can effectively bring down the normalized risk score of a population to more accurately reflect the population cost than what's been coded by the MA plans and their contracted providers. The Department of Health and Human Services, along with CMS and the White House, make the annual decision about the size of the coding intensity adjustment.

In 2000, The Benefits Improvement Protection Act required the use of ambulatory diagnoses in Medicare risk-adjustment, and CMS implemented the HCC risk adjustment model in 2004. The HCC risk adjustment model incorporated both inpatient and ambulatory diagnoses that were categorized into 70 HCCs that were determined to be predictive of costs. The predicted costs are then reflected in a weighted average risk score called RAF (risk adjustment factor) score.

Enrollment in MA Programs has increased dramatically and the Medicare risk adjustment payment system is designed to motivate MA plans to develop frameworks of care that attract beneficiaries that need the most care. CMS pays MA plans based on the health condition of the beneficiaries who enroll. They pay more for older and sicker enrollees and less for younger and healthier enrollees. Therefore MA plans have strong incentives to use specialized HCC risk adjustment coding tools to account for as many diagnoses as can be backed by the medical record.

In 2010, CMS rolled out a 3.4% coding intensity adjustment, which reduced MA risk scores by that amount. The Affordable Care Act, and thereafter the American Taxpayers Relief Act of 2012, put in motion a series of minimum adjustments, starting at 4.7% in 2014, increasing to 5.91% in 2018. The coding intensity adjustment factor remains at 5.91% today. For example, if an MA population's RAF score is 1.0, it will be adjusted down by CMS to 0.94.

Concerns about coding intensity in MA plans would be less of an issue if coding in traditional Medicare were relatively complete. However, traditional Medicare coding is known to be both incomplete and variable. Evidence of incomplete coding can be seen in the lack of consistency in coding of chronic conditions. For example, a Medicare beneficiary diagnosed with a chronic condition such as diabetes, heart failure, or chronic obstructive pulmonary disease one year, may not have the same diagnosis reported in the subsequent year. This inconsistency has created an opportunity for new computing power that leverages insight from AI in healthcare such as NLP technology and medicine machine learning, to assist in disease discovery and risk adjustment coding with more accuracy than ever before.

In the world of decreasing capitation payments, incomplete coding practices, and increasing pressure from CMS through RADV audits, precise documentation of complex populations is essential for MA plans to perfect their risk adjustment scoring. ForeSee Medical offers specialized HCC risk adjustment coding software that’s fast, accurate, and compliant - helping MA plans increase the profitability of their Medicare risk contracts.

Blog by: The ForeSee Medical Team