Understanding Today's Risk Adjustment Model

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    The Risk Adjustment (RA) model uses a patient’s demographics and diagnoses to determine a risk score, which is a relative measure of how costly that patient is anticipated to be. Healthy patients have a below-average Risk Adjustment Factor (RAF) score so revenue from the insurance premium is transferred from healthy patients to patients with an above-average RAF score. CMS uses HCCs to reimburse Medicare Advantage plans based on the health of their members. It pays accurately for the predicted cost expenditures of patients by adjusting those payments based on demographic information and patient health status. The risk assessment data used is based on the diagnosis information pulled from claims and medical records which are collected by physician offices, hospital inpatient visits and in outpatient settings.

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