Risk Adjuster Reconciliation and Processing

The intent of risk adjusted Medicare Advantage (MA) capitation payments was to improve the equity of payments. This methodology has resulted in an even greater operational and financial burden on MA contractors.

While CMS has delayed full implementation, the risk adjuster methodology is already impacting Health Plans. Contractors without effective reconciliation processes could potentially be underpaid by several thousands of dollars per member per year.

These inaccuracies can be caused by many different factors, which include some of the following factors:

  • Miscoded Encounters
  • Transmission Errors
  • Missing Encounters
  • Improper PIP-DCG or HCC Calculations

MMC 20/20 has the expertise and software tools required to successfully accomplish the following tasks:

  • Identify Risk Adjusted Payment Errors
  • Implement Processes that Properly Account for All Encounter Data
  • Quickly and Efficiently to Generate CMS Submissions

The new CMS encounter requirements has forced all MA contractors to implement new systems and processes to comply. As the Risk Adjusted portion of the payment increases each calendar year, it is now more critical than ever for MA contractors to have an accurate and complete submission and tracking process in place today. MMC 20/20 offers several products to assist Plans with financial planning, strategy, data submission, and reconciliation.


Our InsightRA service can provide the Plan with a more clear and accurate picture of the potential MA revenue for 2005. By using more recent claims data to more closely resembles the 2005 data collection period and payment year relationship, we can more accurately predict the estimated 2005 payments. We use the following types of data to complete the InsightRA assessment: claims, encounters, members, monthly membership report, and disease management information. Once the data has been analyzed, we will:

  • Calculate HCC scores for members with valid claims
  • Calculated 2005 payments for members with an HCC score
  • Calculate 2005 payments for members without an HCC score
  • Compare these payments to 2003 payments for these members to determine the revenue impact of HCCs
  • Conduct a high level assessment of the quality of the Plan’s claims data
  • Prepare and present our findings including the financial analysis and recommendations for improvement

The RAVE Service

100% of Unknown Diagnoses Are Not Submitted

One of the fundamental changes under the new Risk Adjusted (RA) payment methodology is that the reconciliation process substantially changes from one of correcting CMS information to one of submitting payment data to CMS. Key challenges include:

  • Identifying and Managing the Data Collection Requirements
  • Implementing Operational Changes to Meet Risk Adjuster Needs
  • Balancing the Needs of the New with the Needs of the Old During the Transition Period from 2004 to 2006

While the new payment methodology is being phased-in, the impact on Health Plans is already being felt. Contractors without effective diagnosis identification and reconciliation processes could potentially be materially underpaid. The stakes are high.

  • The payment difference between a member with average HCC scores and no HCC scores is approximately $120 pmpm (in 2004 at 30% RA), and $200 pmpm in 2005
  • If HCC scores are under reported by 3% to 5% (conservative based on our experience), revenue shortfall is $3.60 to $6.00 pmpm or 0.6% to 1.0% of revenue
  • At 100% risk adjustment the pmpm impact is $12.00 to $20.00

RAVE – The Key to Finding the Unknown Diagnoses

Identifying missing diagnoses is critical to the Health Plan’s financial viability under the CMS-HCC model. MMC 20/20 has developed RAVE™, a proprietary methodology to determine which members are most likely to have missing diagnoses that should be researched and documented.

Beyond making sure the diagnoses for the Health Plan’s members are fully reported, there are strategic implications under the risk adjusted payment methodology. Old strategies and tactics must be reassessed to ensure on-going viability. As disease groups are key to the CMS-HCC model, a complete analysis of disease group profitability can bring out strengths and weaknesses. This will position the Health Plan to develop strategies critical to success under the payment methodology.

MMC 20/20 has assisted clients with all aspects of risk adjusted payment and operations implications, including:

  • Impact Analyses
  • RAVE Suspect Identification and Documentation
  • Disease Group Demonstration Financial Feasibility and Application
  • Program Development Focused on Specific Disease Groups

While significant today, the impact of risk adjusted payments will be even more critical in the years ahead. To find out how your Plan can ensure that it receives full risk adjusted payments, please contact one of our principals at (678) 775-1070 or