The Medicare Advantage 2024 Advance Notice introduces important modifications to HCC codes, disease mappings, and disease coefficient values, resulting in an impact on RAF scores for Medical Advantage Organizations!

On March 31, 2023, HHS announced their final rule on 2024 Medicare Advantage Rate Change which included significant changes to the Medicare Risk Adjustment Model (named Version 28).

The rate change includes an estimated 3.32% increase in payments to Medicare Advantage plans, as well as significant changes to the risk adjustment methodology. The rate change is a slight increase from the originally proposed 1.03% increase in the 2024 Advanced Notice, but markedly lower than 8% in FY2023. CMS has also updated MA risk adjustment methodology from Version 24 to Version 28 (V28), which will be rolled out over three years starting Jan 1, 2024.

The transition from Hierarchical Condition Category (HCC) Version 24 to Version 28 is a significant decision made by the Centers for Medicare & Medicaid Services (CMS). However, the three-year transition period that providers will undergo to manage this change may present considerable challenges. In this article, we will explore the CMS-HCC transition in detail, emphasizing the modifications in Version 28, and discuss the potential difficulties that providers may encounter throughout the process.

Background on HCCs and Medicare Advantage

HCCs were developed by Medicare to predict future costs and payments for patients in Medicare Advantage plans. However, concerns have been raised regarding upcoding in these plans, resulting in inflated payments. Multiple audits conducted by the Office of Inspector General (OIG) have highlighted unsupported diagnoses in medical records. In response, CMS aims to refine the HCC model and address these concerns.

Understanding the Medicare Advantage Reimbursement Model

The Medicare Advantage (MA) reimbursement model operates on the principle of shared risk between providers and payers. It utilizes a risk adjustment model that relies on historical claims data to predict future expenditures, thereby determining provider payments. Initially built on ICD-9-CM codes, this model established guidelines to identify diagnostic conditions suitable for expense prediction. Despite the industry’s adoption of ICD-10-CM codes in 2015, the model continued to employ ICD-10-CM codes for payments while maintaining its foundation in ICD-9-CM codes.

Transitioning to an ICD-10-CM Based Foundation

On an annual basis, CMS performs model calibration using updated diagnostic and expenditure data. This process ensures that the reimbursement model remains aligned with industry standards. During this year’s update, CMS deemed the ICD-10-CM coded claims data to be sufficiently reliable in predicting future case expenditures. Consequently, CMS made the decision to clinically reclassify the model’s foundation from ICD-9-CM to ICD-10-CM for the calendar year 2024.

The Clinical Reclassification Methodology

To facilitate a smooth transition, CMS employed a clinical reclassification process that involved categorizing over 72,000 ICD-10-CM diagnostic codes into approximately 1,500 diagnostic groups called DXGs (Diagnostic Categories). Codes were assigned to DXGs based on their clinical and cost characteristics. Subsequently, Hierarchical Condition Codes (HCCs) were established from the DXGs, resulting in the development of Version 28 of the CMS-HCC risk adjustment model.

Highlights of Version 28

Version 28 introduces several notable changes and enhancements to the risk adjustment model. The primary highlights are as follows:

1. Renaming and Renumbering of HCCs: Version 28 incorporates a comprehensive renaming and renumbering process for HCCs to improve clarity and organizational structure.
2. Increase in Total Number of HCCs: The number of HCCs has increased from 86 in the previous version to 115 in Version 28. Notably, Version 28 includes new HCCs such as HCC 35 Pancreas Transplant Status, which was not present in the previous model (Version 24) despite the ICD-10-CM code Z94.83 being designated as an HCC.
3. Decrease in Number of ICD-10-CM Codes Designated as HCCs: Version 28 streamlines the risk adjustment process by reducing the number of ICD-10-CM codes designated as HCCs by approximately 2,000.
4. Changes in Coefficient Risk Adjustment Factors (RAF): Version 28 introduces changes in the RAF values for specific HCCs. For example, the chronic hepatitis RAF differs between Version 24 (0.147) and Version 28 (0.185).
5. Consolidation of multiple diabetes categories into a single category, impacting risk scores for patients with diabetes.
6. Removal of 2,294 diagnosis codes that no longer map to a payment HCC
7. Addition of 268 diagnosis codes that did not map to a payment CMS-HCC in V24

Managing the Transition: Two Model Versions

CMS has implemented a phased transition approach from Version 24 to Version 28 of the CMS-HCC risk adjustment model. This transition will continue until Version 28 is used for 100% of payments by 2026. Providers will face the challenge of managing two model versions simultaneously, with each version having differences in HCC inclusion and RAF values.

To effectively navigate this transition, organizations must identify the top HCCs within their patient population. This analysis will allow them to understand and assess the potential impact of both model versions. Despite the challenges presented by the transition, it underscores the importance of documenting conditions with the highest clinical specificity. Detailed documentation not only captures the complexity of patient populations but also provides valuable coded data for future analysis and model recommendations.

Conclusion

The transition from CMS-HCC Version 24 to Version 28 represents a significant change in the risk adjustment model used in the Medicare Advantage reimbursement system. Providers must carefully manage this three-year transition period while simultaneously adapting to the challenges posed by managing two model versions. By embracing clinical specificity in documenting patient conditions and comprehending the differences between the model versions, providers can ensure accurate reimbursement and effectively adapt to the CMS-HCC transition.