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  • Prior to 2003, payments to the health plan were based on demographics - male, female, age, and zip code.
  • Medicare Risk Adjustment payment methodology was started in 2003 and was mandated by the Balanced Budget Act of 1997.
  • Risk Adjustment model was then phased in between 2003 and 2007.


To pay Medicare Advantage plans accurately for the risk of the beneficiaries they enroll. Risk Adjustment (RA) is a methodology of adjusting estimated or perceived risks as they relate to diagnosis codes of patients. Risk Adjustment identifies patients who may need disease management interventions and RA establishes the financial allotment from CMS toward the annual care of each patient; with more dollars allocated for those with higher risk scores. Payment methodology is based on the enrollee health status, demographic characteristics, and the Hierarchical Condition Category (HCC) Model.


Providers have long attempted to establish the seriousness and severity of the patients treated through the use of E&M CPT® codes. Higher level E&M codes identify serious encounters, utilizing more medical decision making, and are reimbursed at a higher rate.

In Risk Adjustment scenarios, these CPT® codes have no significance. Instead, specific diagnosis codes communicate the seriousness of medical decision making. Specific ICD Diagnosis Codes will help convey the true seriousness of the conditions being addressed in each visit. Click here for ICD-10 Documentation Guidelines.

  • Families or hierarchical groups/categories are used in risk adjustment.
  • Category of medical conditions that map to a corresponding group of ICD-10 diagnosis codes.
  • More severe or complicated illnesses (by ICD code) in the family or hierarchy will override all others in the category or family.
  • The current ICD10 HCC diagnosis model maps to 79 HCC codes and over 12,000 ICD-10 codes

  • Specific diagnoses must be documented in a face-to-face visit by the treating licensed provider (showing credentials: MD, DO, PA, NP, OT, CRNA, MSW, and similar master's level providers), and the documentation must be signed by the treating provider to be accepted.
  • Diagnoses should not be collected from radiological or other diagnostic test orders or reports or laboratory requests or results with the exception of pathology, which is considered a consult.

  • Provider should document and code to the highest level of specificity.
  • Providers must report all diagnoses (not just primary diagnosis) that impact the patient's evaluation, care, and treatment.
  • Diagnosis specificity is very important and in many diagnoses, use of the word "chronic" can change the chosen diagnosis code (and its subsequent risk value). Chronic conditions include A Fib, CHF, CKD, RA, DM, COPD/Asthma, and Cardiomyopathy. Note: All chronic conditions must be assessed and reported no less than once a year.
  • Document history of heart attack, any amputations, status codes, ostomy, etc.
  • Only document diagnoses as "history of" or "PMH" when they no longer exist.
  • Documenting complications and comorbidities is also important for risk adjustment purposes.
  • Each note needs a date, signature, and credentials (MD, DO, NP, PA, etc.)


A diabetic patient who comes in for a sore throat and is diagnosed with strep throat:

Many offices will only use the strep diagnosis code, yet diabetes is still a current diagnosis, and one that surely was considered during treatment options as a part of the Medical Decision Making.

Vague Documentation Examples of Concise Documentation
Bronchitis Acute or Chronic bronchitis
DVT History of DVT or chronic DVT
CVA History of CVA with no lasting effects
Neuropathy Peripheral neuropathy of feet due to type 2 DM
Depression Major depression disorder, single episode, mild
Hepatitis C Chronic Hepatitis C


The Centers for Medicare and Medicaid Services (CMS) performs RADV audits to validate the accuracy of the HCC (Hierarchical Condition Category) codes submitted by MA (Medicare Advantage) plans for payment. The audit examines whether health plans obtain overpayments by exaggerating the severity of conditions or by reporting conditions that may not have any impact on medical care or health. These audits measure organization-level payment error rates related to risk adjustment data for payment recovery. RADV is a corrective action that is expected to help reduce the Part C error rate.

The RADV audits consist of:

  • National Audits that involve random sampling of Medicare Advantage health plans.
  • Contract-Level RADV Audit that involves targeting specific health plans which must be audited.

Contract-Level Audits

  • Thirty plans are selected.
  • CMS selects 201 members.
  • Plans are required to provide support for every HCC via medical record submissions to CMS.

The Risk Adjustment and Connect for Quality departments at VIVA MEDICARE conduct chart reviews to substantiate the Risk Score of the VIVA MEDICARE member. Audits of the claims billed vs. the documentation in the chart is necessary to delete diagnoses that are billed incorrectly.

Common billing errors in place of service 11 are acute diagnoses such as MI, CVA, PE- Most of the time these are "history of" diagnoses billed as if they occurred in the office that visit. As an error in billing is discovered, diagnoses are deleted from CMS submission files.