Risk adjustment (RA) is a method used by CMS and HHS to adjust healthcare payments to reflect the demographics and ongoing needs of a patient population. The goal is to ensure that organizations that serve needier patients receive additional funds to cover their higher cost of care.

Risk adjustment coding is the process for health plans and providers to accurately represent the full patient health profile for reimbursement. The process includes identifying demographics and diagnosis codes to understand the patient’s health profile. The codes are then calculated as a risk score for each patient. Health plans and risk-bearing providers are reimbursed for the health status of the patient population.

There are three risk adjustment models for different government programs. CMS-HCC risk adjustment model is used to adjust payment for Medicare Advantage, Medicare Shared Savings Program (MSSP), and other alternative payment models (APMs). The HHS-HCC is a risk adjustment model that calculates risk score concurrently for the Affordable Care Act (ACA).

Risk adjustment is a pivotal component of the Affordable Care Act (ACA), serving as a method to reimburse health insurance plans for variations in the health profiles of enrollees. This ensures that plan premiums accurately account for disparities in coverage scope and other plan-related factors.

Many companies offer risk adjustment solutions for healthcare, including actuarial and consulting firms, and healthcare technology companies, including Apixio, for retrospective and prospective risk adjustment.