Understanding the Changes in the CMS-HCC Model V28

Risk Adjustment Factor and CMS-HCC Model

The Centers for Medicare and Medicaid Services (CMS) uses Hierarchical Condition Category (HCC) risk adjustment models to estimate future healthcare costs for Medicare Advantage patients based on health status and demographic factors. The Risk Adjustment Factor (RAF) score determines the amount paid by CMS to the health plan per patient. Medicare Advantage Organizations (MAOs) are paid at a higher rate for patients who have multiple conditions and conditions with greater levels of severity, as their RAF scores and anticipated costs of care will be higher. In the current year, MA plans are paid on the 2020 version, V24 which was established using ICD-9-CM claims coded data. CMS finalized revisions for the Part C risk adjustment model for 2024 that incorporate recalibration and clinical reclassification of HCCs. Recalibration updated the data year to 2018 diagnoses and 2019 expenditures from 2014 diagnoses and 2015 expenditures used in V24. The denominator year used to calculate risk scores is updated to 2020 in V28 from the current 2015 in V24.

Phasing in CMS-HCC Model V28

The CMS-HCC model V28 will be phased in over a three-year period, with a blend of 33% from the V28 model and 67% from the V24 model for 2023 dates of service. V28 will be used at 67% for 2024 dates of service and fully phased in at 100% for 2025 dates of service. V24 will be used at 33% for 2024 dates of service and fully phased out for 2025 dates of service. CMS believes that revising the model will reflect more recent utilization, cost, and diagnostic patterns. In addition to improving payment accuracy, the updated model would also reduce coding differences between MA plans and fee-for-service Medicare providers.

The significant changes in V28 include:

• An increase in the number of HCC categories from 86 to 115.
• A decrease in the number of HCC codes (ICD-10-CM codes) from 9797 to 7770.
• Approximately 2294 codes have been deleted and 268 codes have been added.
• Re-numbering and changing HCC categories.
• Changes to the HCC coefficient values (risk scores that map to each HCC category).

Constraining

CMS uses a process known as constraining to reclassify HCC mappings in V28, where related HCCs are given the same coefficients. Diabetes can serve as an example to understand how constraining affects the RAF score. Diabetic disorders contribute the same to the RAF score whether the patient has uncomplicated diabetes or diabetes with complications. However, type 2 diabetes mellitus without complications (E11.9), receives a slightly higher risk score in V28 than it currently does in V24 (for example, from 0.105 to 0.166). A patient with diabetes with peripheral vascular disease in V24 has risk scores of 0.302 + 0.288 (0.590). In V28, the same patient receives a risk score of only 0.166. Overall, this will result in a significant reduction in the RAF score for patients with acute or chronic complications from diabetes.

CMS states that V28 will result in a more appropriate relative weight, reflecting recent utilization, coding, and expenses. Additionally, the CY 2024 impact on MA risk scores is projected to decrease by -3.12%. This will translate into a $11.0 billion net savings to the Medicare Trust Fund in 2024.

Documentation is Key

Accurate risk adjustment has always depended on the specificity of documentation and diagnostic coding. HCC model V28 will require even greater specificity in documentation and code assignment to ensure that the true level of the Medicare Advantage patients’ illness severity is captured and provides CMS with coded data for future analysis in model recommendations.

RAF Score Calculation

The calculation of RAF score during the transition phase requires the usage of both V24 and V28 models. The first step is to calculate risk scores for both the V24 and V28 CMS-HCC models. The next step is to calculate the risk score as the sum of 33% of the adjusted V28 CMS-HCC model risk score and 67% of the adjusted V24 CMS-HCC model risk score.

Succeeding during the Transition

Managing two versions of HCC models during the transition creates challenges for providers and health plans. Conditions that are considered as HCC in one version may not be in the other. Additionally, even if a diagnosis is an HCC in both versions, the actual HCC and RAF scores may be different.

Health plans and providers should identify the top HCCs among their patient population to examine and understand the potential impact of the two model versions. Investing in technologies that allow for more specific documentation, as well as accurate and efficient coding of large volumes of clinical documents will be vital strategies to enable health plans, providers, and other stakeholders to effectively manage their risk adjustment program.

Example: Jane is a 93-year-old female who has diabetic amyotrophy, fatal familial insomnia, CKD stage 3A, and toxic liver diseases with hepatic necrosis and coma. The table below illustrates how the RAF score is computed for CY2024.