Skip links

On-Demand Webinar: To Learn How Payers Can Automate Prior Auth at Scale with AI. View Now.

Industry blog

Prospective: The Future of Risk Adjustment

Understanding the health of a population and predicting how patient health will evolve over time is incredibly complicated. Patient health can change rapidly and unexpectedly, which makes risk adjustment a crucial activity for plans and providers.

Today, the majority of healthcare organizations assess patient risk retrospectively—that is, by looking at historic clinical records to determine the relative health of members within a given population. But in order to better understand patient health and manage care appropriately, we need more than a view of the past. Accurate and efficient capture of a member’s risk requires a forward-looking, prospective view of patient conditions and treatments.

How risk adjustment (RA) works today

Healthcare organizations that take on risk—meaning they’re paid for patient outcomes instead of how many services they provide—need to develop an accurate picture of the health of their patient population in order to receive appropriate reimbursement. This impacts government-sponsored programs like Medicare Advantage, Managed Medicaid, and Commercial Exchange plans, as well as value-based arrangements that set rates based on population risk. The sicker the population, the more providers and insurers need to get paid to manage patients’ conditions.

Providers spent decades learning and improving coding practices for CPT (Current Procedural Terminology) codes under fee-for-service payment models, because these codes directly impacted payment. Now that these organizations are moving to risk-sharing arrangements, the use of ICD (International Statistical Classification of Diseases and Related Health Problems) codes has become critical to measuring a population’s risk. Because they have less experience with these codes, patient conditions can get missed or inaccurately entered during claims coding.

To capture these missing codes, health plans and at-risk provider systems employ coders to review patient charts and find evidence for missing condition codes. These codes are then submitted to the payer or directly to CMS for reimbursement (MA) or reconciliation (Commercial).

The challenges of retrospective risk adjustment

Retrospective risk adjustment is the normal mode of operation for Medicare Advantage and Commercial plans today. But there are some significant challenges with this approach to risk adjustment.

The first issue is that, because analysis of patient conditions is happening months after they’ve gone to the doctor, the collective picture of risk is out-of-date even when it’s first assembled. This means plans and providers don’t have a concrete measure of how sick their population currently is or will be next year—they only have a concrete measure of how sick their population was during the previous plan year. This is problematic for care management, utilization management, and population health programs, which rely on an up-to-date understanding of patient conditions and behaviors to inform education and intervention efforts.

The second issue is that retrospective reviews are operationally burdensome to perform. Plans pay vendors to chase down charts from providers, and both plans and providers hire internal or outsourced coding teams to perform chart reviews, coding, and QA. This process is expensive and time consuming. It also doesn’t capture a full picture of risk due to human error—no surprise when the average patient has over 300 pages of documents to review for HCCs.

The third issue is that retrospective risk adjustment causes provider abrasion. Not only do provider organizations spend time up front documenting clinical encounters and coding claims, but they also work with chart retrieval vendors to pull patient documents for additional rounds of reviews by multiple payers. These activities are often disruptive to physician office staff and take precious time away from serving patients.

Why prospective is a better approach

While prospective risk adjustment is in some ways more complex than retrospective review, this approach offers significant benefits over the status quo approach.

Because prospective assessments happen closer to the point of care, physicians have data in hand earlier to inform patient monitoring, diagnostics, and treatment plans. This approach also provides them with timely intelligence to improve their clinical documentation and coding practices before submitting claims, which results in more accurate payments earlier. It’s also becoming increasingly important for HCC data submission—a recent ruling by CMS increased the percent of patient risk scores to 50% encounter data starting in 2020.

Prospective risk adjustment has benefits for health insurers as well. With a list of suspects—patients who seem likely to have certain chronic conditions, but don’t have supporting documentation on file for diagnosis coding—in hand, care managers and population health program administrators can plan proactive outreach for members who may benefit from their services, which can have a positive impact on patient health, quality scores, and care costs.

Lastly, both plans and providers stand to benefit from a prospective approach’s more streamlined administrative process. By integrating suspecting, patient follow-up, and coding improvements into existing workflows, both sides can improve risk assessment accuracy, decrease operational costs, and reduce the amount of back-and-forth needed to perform accurate and timely risk adjustment reporting.

What plans and providers need to succeed at prospective RA

In the current world of retrospective reviews, success hinges on having access to patient charts and a highly-trained team of coders to review them. Both of those things are required for prospective risk adjustment as well, plus a few others:

  • Collaborative Deployment. To maximize the effective deployment of prospective programs, health plans need to form collaborative partnerships with provider groups to ensure that providers receive the training and support they need to stay engaged and succeed with the program.
  • List of Suspects. Healthcare organizations need an up-to-date, accurate list of suspects, ideally integrated into their current workflow. This information is important for providers to have during patient visits, as well as insurer-administered programs that impact patient routing and care management.
  • Patient Outreach Plan. To properly assess patients with suspected conditions, providers need a strategic outreach program in place to get patients to schedule follow-up assessments at the office or during a home visit.
  • Upstream Clinical Improvements. Providers must have processes in place to take action with patients who have suspected conditions, and to optimize their documentation and coding practices to improve risk capture upstream.
  • Incentives for Behavior Change. Provider compliance with new operational tasks often involves financial incentives. For prospective, this can come in the form of shared upside risk under a value-based contract, and include additional bonus payments for program activities.

Risk adjustment is a critical business activity, and it will take time for plans and providers to move away from retrospective reviews to a prospective approach. Those who do, however, will be well-positioned to improve care for their patients while also reaping financial and operational benefits for their organizations.

Considering prospective risk adjustment? Apixio’s Prospective Insights solution can help you get ahead with AI-powered suspecting and documentation improvements.

🍪 This website uses cookies to improve your web experience.