Introduction
This blog continues our series on the changes to the Medicare Advantage (MA) risk adjustment models brought on by the 21st Century Cures Act (CCA). The first blog described changes made to account for the number of conditions each member has, as well as providing a refresher on how the MA risk adjustment models work. In this second blog, we provide an overview of the changes made to account for additional conditions specifically related to mental health disorders, substance abuse disorders, and chronic kidney disease (CKD).
Adding Additional Conditions to MA Risk Adjustment Models
As discussed in the last blog, when conducting MA risk adjustment, the health status of each MA enrollee is largely measured through diagnosis codes that are documented in medical records. These codes are categorized into groups of clinically-related conditions called Hierarchical Condition Categories (HCCs), which generally reflect chronic conditions (e.g., chronic obstructive pulmonary disease and congestive heart failure). Enrollees with more documented HCCs are associated with higher risk scores (i.e., adjustments) and, consequently, higher payments for the MA plan.
The CCA requires that additional diagnosis codes for mental health disorders, substance abuse disorders, and chronic kidney disease (CKD) be incorporated into the MA risk adjustment models as additional HCCs. Mental health disorders and substance abuse continue to be on the rise in the United States, with the recent opioid epidemic being a perfect example. The trend may have worsened during the global coronavirus pandemic, which resulted in stay-at-home orders, massive job losses, and other significant disruptions in people’s daily lives.
There are five stages of CKD ranging from very mild kidney damage in stage 1 to complete kidney failure in stage 5. End Stage Renal Disease (ESRD) is an advanced state of CKD in which individuals require ongoing dialysis or a kidney transplant. Both CKD and ESRD populations represent a large and disproportionate share of medical spending for the Medicare population. Prior to the CCA, there were two HCCs included in the MA risk adjustment models related to CKD (HCC 136 – Chronic Kidney Disease, Stage 5 and HCC 137 – Chronic Kidney Disease, Severe, Stage 4). Part of the reasoning to consider expanding the number of CKD HCCs is to help ensure that earlier stages are being identified, with the goal of preventing more severe kidney damage. Prior research has shown that a large proportion of earlier stages go undiagnosed.
The Centers for Medicare & Medicaid Services (CMS), which administers the MA risk adjustment models, considered several options for incorporating additional mental health, substance abuse, and CKD HCCs. In their evaluations, CMS was guided by three criteria they considered essential for inclusion: (1) the additional diagnoses and categorizations must be clinically meaningful; (2) they are predictive of medical expenditures; and (3) the conditions can be diagnosed definitively. Using these criteria, CMS landed on the following additional HCCs:
- HCC 56: Substance Use Disorder, Mild, Except Alcohol and Cannabis
- HCC 58: Reactive and Unspecified Psychosis
- HCC 60: Personality Disorders
- HCC 138: Chronic Kidney Disease, Moderate, Stage 3
In general, industry perspectives viewed these changes positively, as evidenced by comments received by CMS in response to the proposed changes. CMS began incorporating the additional HCCs in 2019. As with the adjustments for total count of conditions, the adjustments for mental health, substance abuse, and CKD HCCs will be phased in and fully incorporated into the MA risk adjustment models in 2022.
Impact to the MA Risk Adjustment Models
Each of the CCA adjustments aim to improve the accuracy of how the risk adjustments predict which beneficiaries require more (and less) health care resources. An evaluation by the Medicare Payment and Advisory Commission (MedPAC) found that adding indicators for mental health disorders, substance abuse disorders, and CKD improves how well the MA risk adjustment models predict the resource use of beneficiaries who have these conditions. This is consistent with the analysis conducted by CMS.
In many cases, the improvements in predictive accuracy also means that enrollees with these conditions will be associated with higher payments for the MA plans. For example, under the prior risk adjustment models without the additional CCA HCCs, enrollees with unspecified psychosis were associated with risk adjustment model results that underpredicted their resource use by up to 20 percent. This meant that MA plans may have been underpaid relative to the services and resources utilized by those enrollees. Those underpayments were significantly reduced and often eliminated by including HCC 58 (Reactive and Unspecified Psychosis) into the risk adjustment models.
Impact to MA Plans
The CCA additions of HCCs will make it even more important for plans to capture all of an enrollee’s conditions. Not only will plans need to educate providers on potential changes in medical documentation that will be required to accommodate new HCCs, but they will also need to adjust their internal auditing processes to make sure all of the appropriate diagnosis codes are being documented on medical records, including new mental health, substance abuse, and CKD codes. CMS is likely to put more emphasis on the new HCCs during auditing processes.
Moreover, in its evaluations of which HCCs to add for mental health, substance abuse, and CKD, CMS also considered changes to definitions of related HCCs that were already included as part of the MA risk adjustment models prior to the CCA changes. Thus, the changes were not limited to the additional HCCs. For example, after considering changes to substance abuse HCCs, CMS ended up adding diagnoses to HCC 55 (Substance Use Disorder Moderate/Severe, or Substance Use with Complications) to better account for the costs related to accidental overdose. It will be critical for MA plans and providers to understand and monitor the changes for the new and existing HCCs to ensure correct coding and appropriate payment levels, particularly as there are now multiple years of data available since the changes were made.
In its evaluation of the impact of the CCA adjustments, MedPAC warns CMS that adding HCCs to the MA risk adjustment models can provide additional opportunities for MA plans to increase revenue by coding more medical conditions. Such increases in coding may be especially likely when the additional diagnoses represent conditions that are diagnosed using relatively discretionary standards. In fact, HCC 138 (Chronic Kidney Disease, Moderate, Stage 3) had previously been eliminated from the MA risk adjustment models due to concerns of being aggressively coded by plans. During trainings with physicians, plans should emphasize the need to be as specific as possible, particularly for the new mental health diagnoses. For example, for depression diagnoses such as “Major depressive disorder, single episode,” physicians should avoid using the catch-all “unspecified” qualifier. Instead, physicians should detail the episode as mild, moderate, severe, in partial or full remission, and with or without psychosis.
Looking Forward
Future blogs in this series will address adjustments for different types of MA enrollees eligible for Medicaid benefits and the potential expansion of the amount of diagnosis data available for risk adjustment calculations.