What Is a Risk Adjustment Score?

A risk adjustment score, also known as a ‘risk adjustment factor,’ is an analytical method used by the Centers for Medicare and Medicaid Services (CMS) to help estimate the total and ongoing costs of healthcare treatments and interventions required by Medicare beneficiaries.

They are calculated using different types of status codes, which might indicate a prevalent familial condition or previous medical procedure logged using the appropriate HCC codes and extracted through data collection processes to form an accurate picture. Risk adjustment scores are important because they influence the amount contributed by the CMS to the healthcare plan of a beneficiary during each payment year and can impact multiple other aspects of health insurance for payers and claimants.


How Do Healthcare Organizations and Services Incorporate Risk Adjustment Scoring?

As well as a process adopted by the CMS, risk adjustment is also relevant in many other areas of healthcare provision, where service providers and managers need to ascertain the correct ways to reduce potential risk and work towards better long-term outcomes for patients and demographics. Individualized risk scores are assigned based on HCCs (Hierarchical Condition Categories), with the top HCC categories including widespread conditions such as specified heart arrhythmia, morbid obesity, and congestive heart failure.

Risk scoring is commonly calculated by the government body or funder providing coverage. Still, risk calculation and HCC codes also apply to treatment and intervention policies, where some programs or protocols are unsuitable for patient cohorts presenting with one or more HCC categories due to limited efficacy.


Risk Adjustment Scores and Healthcare Revenue Management

Some healthcare providers and medical coders base their financial management on a fee-for-service model, which means the insurer reimburses the provider or healthcare service based on the services delivered to the patient. In most cases, this process uses standardized CPT codes (Current Procedural Terminology Codes), which indicate the intervention, treatment, or patient education delivered, with the claimable value dependent on the location of the practice and patient.

However, risk adjustment is an alternative approach where participating health insurance providers–who are enrolled in appropriate programs–calculate reimbursements based on the ongoing management of the healthcare needs of a scheme member, based on the risk adjustment score and diagnoses indicated by the relevant HCC codes. 

Risk adjustment scores can, of course, change when calculated in the subsequent year. The healthcare provider or service should report any changes to diagnoses, conditions, and other aspects of the patient’s health status, providing timely updates.

If a chronic condition were included within the risk analysis in the previous period and is not now present, the risk score assigned to the individual will decrease. In contrast, if a healthcare service has reported additional or reemerging conditions, the patient will present with a higher risk score. Either outcome supplies the healthcare provider, payer, or insurance provider with a more accurate prediction of the costs of providing suitable levels of healthcare for the patient for the twelve months ahead.


What Are Demographic Factors in Risk Adjustment Scores?

Numerous variables contribute to the risk profile of an individual. As well as conditions, diagnoses, and underlying medical issues, risk adjustment scores are affected by the following:


  • The age and gender of the patient
  • Whether they have a registered disability
  • Their socioeconomic status
  • Eligibility for Medicaid


These elements are extracted from the enrollment process into either Medicare, Medicare, or another commercial or private insurance program. The insurance body will collate demographic factors through questionnaires to help determine the right risk adjustment score.

Health statuses and diagnoses are then assessed, although not every one of the over 70,000 available HCC codes is used in risk analysis. Instead, only those HCC codes that indicate a condition likely to incur healthcare or treatment costs due to medications or interventions are normally used in risk adjustment modeling.

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