Jessica Smith

Advance Notice Update – Risk Adjustment

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Now that Part II of the Advanced Notice and Call Letter has been released, we are able to get a full view of the proposed policy changes to pave the way for the future. For risk adjustment, the release of Part II did not contain any surprise policy changes. The crux of risk adjustment changes were included in the Part I release. Preliminary industry impacts of the Part I release are outlined in one of my prior blogs at the following link:

These are the high-level proposed policy changes from Part I and Part II impacting risk adjustment:

  • CMS will introduce the new Hierarchical Condition Category (HCC) count for 2019. By adding the HCC count component, Medicare Advantage (MA) plans serving the sickest populations, especially Special Needs Plans, are expected to see improvement in accuracy among the risk scores for these members, allowing for a more accurate reflection of financial risk. For 2019, the HCC Count Model will only comprise 25% of the risk score, so the impact will be minimal at first, then will gradually increase.
  • CMS is adding new HCC codes for chronic kidney disease, mental health, and substance abuse. The addition of these new HCCs will provide a marginal increase for affected cohorts.
  • The underlying data, model, and submission methodology percentage utilized for calculating risk score is proposed to change. For 2019, 25% of the calculated risk score will be based on diagnoses from Encounter Data Processing System (EDPS) supplemented by the Risk Adjustment Processing System (RAPS) inpatient data and Fee-for-Service (FFS) data. The remaining 75% of the risk score calculated will be based on RAPS and FFS data only, no data will be utilized from EDPS.
  • There is no change to the design of the Prescription Drug Hierarchical Condition Category (RxHCC) model, only updated factors.
  • The End-Stage Renal Disease (ESRD) model is being updated. This will be the first time the ESRD model will be recalibrated since 2012. Recalibration of the model is in preparation for 2021, when Medicare beneficiaries with ESRD will be able to enroll in MA plans.


The Centers for Medicare & Medicaid Services (CMS) is accepting comments on these proposed changes until Monday, March 5, 2018. Comments received by that date may be addressed in the Final Rate Announcement that will be released on April 2, 2018.

Look for more in-depth details from Gorman Health Group regarding the proposed 2019 policy updates.

For specific risk adjustment questions, please email me at




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Jessica Smith

About Jessica Smith

Jessica Smith is Vice President of Healthcare Analytics & Risk Adjustment Solutions at Gorman Health Group (GHG). In this role, she is responsible for the execution and oversight of risk adjustment consulting services for managed care, provider practice, and commercial market clients, and leading and integrating cross-functional teams to ensure superior performance outcomes related to risk adjustment operations. Read more

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