The Centers for Medicare & Medicaid (CMS) recently released the Final Rule and Rate Announcement for 2024, bringing an updated payment model, coding changes, modifications that impact Star ratings, and much more. The changes coming with this new version (2024 CMS HCC Version 28) are significant, and the announcement has resulted in concern among Medicare Advantage (MA) plans. Note that at the present time, this will not impact Programs of All-Inclusive Care for the Elderly (PACE). The 2024 Announcement states that PACE will continue to use the 2017 CMS-HCC Model (Version 22). However, this new announcement, though it will be challenging, also brings changes that are long overdue. And while CMS will not make additional changes at this point, there is much that health plans can do to remain successful and positively impact future updates.
What are the positives?
The Advance Notice announced in February elicited a heavy response from health plans, and, based on those responses, CMS released the Final Rule with a few modifications.
CMS announced that Version 28 will remain in place but will be phasing in the new payment model over the next three years, which will help MA plans better adjust to the new payment model and will not impact reimbursement as harshly. With the Advance Notice, the expected average change in revenue was reduced to 1.03%. With the blend of the two models, however, the expected change for 2024 is 3.32%.1 While not as high as it would be under the current model, the phased-in approach is beneficial for health plans.
There are three major features incorporated into Version 28 that are important to know. First, CMS updated the years used to formulate the model. Instead of using 2014 data (ICD-9 codes) affecting 2015 expenditures, CMS will use 2018 data (ICD-10 codes) affecting 2019 expenditures. With the rapidly changing landscape of how medicine is practiced, this will improve the accuracy of the model.
Additionally, the previous 2014 data was submitted with ICD-9 codes. The U.S. adopted ICD-10 in October 2015. Using 2018 data with ICD-10 means that there is greater granularity in disease specificity. The result of this was an increase in the number of HCCs from 86 to 115.
Lastly, CMS highlighted the importance of Version 28 adhering to CMS’ “Principle 10.” In part, this states that “diagnoses that are particularly subject to intentional or unintentional discretionary coding variation or inappropriate coding by health plans/providers, or that are not clinically or empirically credible as cost predictors, should not increase cost predictions.”2 This meant the elimination of 2,027 codes that previously mapped to a Hierarchical Condition Category (HCC). Though this drew considerable criticism, CMS noted in the Final Announcement that Principle 10 was only responsible for 3% of the codes that no longer map to HCCs.
What are the greatest challenges?
With the application of Principle 10, and the subsequent elimination of so many ICD-10 codes subjected to variable documentation, many commentators raised objection to the continued application of the MA coding factor of 5.9%. They argued that the statutory reduction in risk score of 5.9% was no longer required with the elimination of codes associated with variable coding. CMS noted that MedPACE estimated that MA risk scores for 2020 were 9.5% higher than fee for service (FFS), and in 2021 MA risk scores were 10.8% higher than FFS. Therefore, even with the variable ICD-10 codes eliminated, continued application of the MA coding factor is still warranted.
Another objection to the Final Rule is that the removal of more than 2,000 codes that map to HCCs will have a disproportionate impact on those plans with a high proportion of patients with partial or full Medicaid eligibility (“dual-eligibles”). CMS noted that since implementing the 2017 model (Version 22), it ensured dually eligible beneficiaries have unique adjustments for every HCC based on their dual eligibility that result in higher payments for those conditions than for non-dual eligibles. CMS notes that with Version 28, risk scores for dually eligible beneficiaries in the community are on average 49% higher compared to non-dually eligible beneficiaries in the community, which accurately reflects the difference in cost caring for that population.
Where do we go from here?
Quality patient care is always the top priority in healthcare, and it’s important to remember that these recent updates do not prevent your organization from providing care-driven services. Fair and proper reimbursement is integral to every organization’s ability to properly care for its patients, but while the updated repayment model may pose some challenges, it does not stop that.
The other good news is that this is not the last final rule; CMS is constantly revising the HCC Model. Therefore, it is critical that healthcare organizations submit comprehensive data on all patients. With ongoing analysis of updated data submission, CMS will be able to identify diagnoses that now have a cost differential leading to newer versions in years to come. Until then, the best thing that your organization can do is provide CMS with as much detailed data as possible. Comprehensive and specific documentation is critical to quality patient care and will help CMS identify emerging conditions with distinguishable cost, informing future payment model updates.
CMS’ Final Rule and Rate Announcement have been met with many reservations. MA plans and PACE plans as well need to brace for many incoming adjustments over the next few years. But by focusing on the positives and remembering what’s most important in caring for patients, health plans can help foster the right change to better the future of healthcare.
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