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Risk Adjustment Factor Basics

Risk adjustment provides a way for the Centers for Medicare & Medicaid Services (CMS) to pay health plans for the risk of the beneficiaries they enroll. By risk adjusting payments, CMS can make different payments for patients based on expected costs. Risk Adjustment Models are predictive, based on actuarial data that forecasts the cost of health care based on the health status for those covered in the plan.

The Risk Adjustment Model accounts for known health conditions across all settings. It allows for comparison of health and wellness across an entire patient population. The model can help facilities isolate risk by using ICD-10-CM diagnosis codes. It also assists in protecting patients as it prevents providers from only enrolling patients with better than average health.

Once a plan forecast has been developed, the Risk Adjustment Factor (RAF) identifies the health status of the beneficiary. The RAF score is based on factors including: age, gender, chronic conditions, etc. A patient’s RAF score applies to the individual for the entire calendar year across inpatient, outpatient, and physician office settings. The patient’s RAF score is re-set each calendar year.

The Risk Adjustment Model allows for higher payments for enrollees at risk for being sicker (higher RAF scores) and consequently lower payments for enrollees predicted to be healthier (lower RAF scores). In this manner, it allows CMS to pay plans based on the risk of the beneficiaries they enroll, instead of an average amount for Medicare beneficiaries.

Under a Risk Adjustment Payment Model, it is important for the provider entity to understand the health characteristics of their managed patient population. Understanding and ensuring accurate RAF scores is the key to accurate reimbursement.

Need help evaluating or capturing accurate RAF scores? UASI has helped clients across the country ensure accurate risk adjusted reimbursement. Contact us now at to get started.