Why Risk Adjustment Is Needed
Risk adjustment models statistically account for differences in patient population characteristics, such as age, comorbidities, and severity of illness, to allow fair comparisons of outcomes or costs across providers, plans, or time periods. RHIA candidates should understand that without risk adjustment, a provider treating sicker patients would appear to have worse outcomes even when providing excellent care.
Common Risk Adjustment Applications
- Medicare Advantage payment based on Hierarchical Condition Category, or HCC, risk scores
- Hospital quality measure adjustment, such as risk-adjusted mortality and readmission rates
- All Patient Refined DRGs adjusting for severity of illness and risk of mortality
- Population health management stratifying patients by predicted future risk
How HCC Risk Adjustment Works
The HCC model assigns risk scores based on demographic factors and diagnosis codes reported during a defined period, grouping related diagnoses into hierarchical condition categories that reflect similar cost and severity implications. Only the most severe condition within a hierarchy typically counts toward the score to avoid double counting related conditions.
Coding Accuracy and Risk Adjustment
Because risk scores are directly driven by reported diagnosis codes, complete and accurate documentation and coding of chronic conditions is essential. Under-coding chronic conditions can understate a patient's risk profile, potentially resulting in inadequate payment for a health plan managing that patient's care, while inappropriate code capture without clinical support raises fraud and abuse concerns.
Compliance Considerations
Risk adjustment coding has become a significant compliance focus area, with government audits scrutinizing whether reported diagnoses are properly supported by clinical documentation. HIM professionals involved in risk adjustment coding must ensure the MEAT criteria, meaning conditions are monitored, evaluated, assessed, or treated, are documented to support each reported diagnosis.
All Patient Refined DRGs
APR-DRGs extend the base DRG system by adding subclasses for severity of illness and risk of mortality, providing more granular risk adjustment for quality reporting and internal analytics beyond standard reimbursement DRGs.
Exam Tips
Expect questions on the purpose of risk adjustment, the mechanics of HCC hierarchies, and the compliance risks associated with inaccurate or unsupported risk adjustment coding.