4 Steps to Turn Risk Adjustment into a Strategic Advantage

Christina Sung ImageMost organizations view risk adjustment as a necessity, but not as a strategic asset. With the right organizational alignment, risk adjustment can be leveraged as a competitive advantage. Accurate risk adjustment not only improves revenue accuracy, but also provides a snapshot of population health that can be used to direct care delivery efforts and improve quality ratings. Plans that are able to accurately risk adjust at a lower cost may be able to decrease bid rates or premiums, enabling them to increase their competitiveness in the market.  The following four recommendations can be pursued independently or collectively depending on the organizational readiness and resource availability.

  1. Take a Holistic Approach to Capturing Risk – Most health plans think about prospective and retrospective risk adjustment as two autonomous initiatives, with separate project plans, budgets, and performance metrics. But why not look at it more holistically? Prospective and retrospective risk adjustment are two sides of the same coin, and the efforts must be coordinated. For example, plans should perform retrospective reviews to follow up on members whose suspected risk conditions were not confirmed as a result of prospective-driven encounters, ensuring that no diagnoses slip through the cracks. Conversely, retrospective reviewers can piece together the patient story and identify unaccounted conditions that can be prospectively captured going forward. Rather than being concerned with how risk capture is credited to each program’s ROI – prospective or retrospective – it would be more fruitful to approach risk adjustment in a member-centric manner with the goal of capturing all of the risk present in that member.
  1. Align Your Organization – There are many synergies that a health plan can capture involving risk adjustment: HEDIS reporting and Medicare Advantage Star ratings come to mind. First, plans should align resources to ensure that retrieved charts can be leveraged across all departments. Furthermore, a plan’s priorities for chart retrieval should take into account all areas of needs so that resources are spent for the betterment of the entire organization rather than an individual department. Physician engagement and education, as well as member outreach and assessments can also be coordinated across all initiatives to kill two or three birds with one stone.
  1. Optimize Your Investments For Longevity – I believe that health plans rely too much on the retrospective process to capture risk rather than focusing on doing the prospective part really well. If all of the budget allocated to retrospective risk adjustment were instead invested in resources and incentives that encourage providers to document and code more accurately in the first place, there would be significantly less need for comprehensive retrospective reviews, save for ensuring compliance and verification of conditions reported on claims. Furthermore, if the right incentives were in place, health plans would no longer need to spend valuable resources on physician engagement and member outreach. Many plans succumb to shelling out to help patients schedule and show up for appointments, but why not incent the provider offices to do that instead?
  1. Challenge the Status Quo – Risk adjustment has always been a niche domain of health plans, requiring intricate knowledge of the regulatory requirements and processes. As a result, there hasn’t been much change to the way it is done. Much of the available vendor services have been commoditized, as plans view them as fulfilling necessary processes but not requiring much strategy. Technology advancements, however, are being made to enable systematic improvements to the risk adjustment processes; health plans should look to these as they advance their own risk adjustment strategies beyond what they’re simply used to doing.

By taking a systematic approach to risk adjustment, health plans can incrementally improve performance that impacts revenue and quality. Plans who embrace this approach to risk adjustment will outpace their competitors in the transition to value-based care models.