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Three ways to draw competitive advantage from risk adjustment


Risk adjustment has great potential if you follow these three simple rules.

For most payers, risk adjustment is viewed as a necessity, not as a strategic lever from which one draws competitive advantage. Yet as a means for risk-bearing organizations to improve operationally, clinically, and financially, risk adjustment has enormous potential.

Related: Opinion: 4 ways to improve the ACA risk-adjustment model

To be sure, the expertise and effort needed to accurately capture risk is significant. Viewing it only as a burden, however, is short-sighted. Risk adjustment has a number of strategic advantages. It can drive more accurate premiums, ensuring that plans are priced accordingly and profitability is not jeopardized. It enables plans to better design plan offerings that best fit the needs of the market. It provides a valuable snapshot of population health that can be used to direct care delivery and improve quality ratings. Most importantly, it ensures that plans receive reimbursements commensurate to the costs of care required for its members.

Getting the most out of the risk adjustment process requires perspective, organizational will, and the resolve to share information across departments and disciplines. Here are three tips that can help any health plan leverage its risk adjustment efforts:

#1. Take a holistic approach. It’s easy to think about prospective and retrospective risk adjustment as two separate activities. Prospective risk adjustment uses historical claims data to predict and communicate gaps in care, assessment, and disease documentation to providers. Retrospective risk adjustment, in contrast, uses the medical records generated from physician-patient encounters to identify documented diagnoses that have not yet been coded.

While prospective and retrospective risk adjustments are different, they are two sides of the same coin. For maximum benefit, their efforts should be coordinated. As an example, plans can use retrospective review to follow up on members with conditions that were suspected, but not confirmed, during the prospective risk adjustment process. This will ensure that no diagnoses slip through the cracks.

Another benefit to a holistic mindset is that it encourages decisions that will improve care and information gathering over the long haul. Incentivizing providers to document and code more accurately reduces the need for administratively burdensome medical record review; similarly, it may make more sense to incentivize providers so that they, instead of payers, bear the burden of making sure patients show up for tests or follow-up exams.

#2. Align your organization. Beyond financial benefits, other synergies can accrue from risk management given proper alignment. Most obvious alignment is between risk adjustment and HEDIS measures. Both utilize a similar process to identify gaps, prioritize opportunities, and communicate those opportunities to providers. Both departments may use incentive programs for physicians to close gaps, and both require retrieval of medical records to report on the closure of such gaps.

To realize these potential synergies, first ensure that charts retrieved in the risk adjustment process are utilized in other departments, and vice versa. In the long run, chart retrieval prioritization should take into account all areas of needs so that resources are spent for the betterment of the entire organization instead of a single department. Physician engagement and education, as well as member outreach and evaluations, can also be coordinated to improve both risk adjustment performance and HEDIS measures. This level of alignment will also decrease administrative costs and physician abrasion.

Next: Adapt your processes



#3. Adapt your processes. Until now, risk adjustment processes have continued to rely largely on people rather than scalable automation. Lack of technology-enabled solutions across healthcare settings has forged manual and disparate workflows. As a result, health plans often outsource their risk adjustment to vendors that staff inexpensive offshore labor services. There is significant room for improving the accuracy and efficiency of risk adjustment.

One critical reason behind this current state is because much of risk adjustment data doesn’t reside in easily analyzable formats. Physician notes, lab reports, admission/discharge notes, and nurse call logs are just a few of the data sources that are considered “unstructured” and inaccessible by typical data analysts because they require humans to read and interpret the information. As such they cannot be analyzed using traditional database technology. It’s important to explore new solutions-specifically, natural language processing (NLP) software designed specifically for the healthcare environment. This technology can recognize industry-specific terminology and phrases in clinical narratives and process them into various coding standards such as SNOMED, ICD-9, ICD-10, LOINC, RxNorm, etc. Organizations should consider adapting their current processes to leverage new technologies such as NLP.

The path to healthcare efficiency is rarely an easy one. Competing interests, partisan politics and obscure regulatory requirements make the journey bumpy and circuitous. Risk adjustment, however, has the ability to improve an organization’s competitive advantage as well drive top- and bottom-line growth. It’s evident that risk adjustment is here to stay-so it’s worth the effort to leverage this discipline for maximum benefit to patients, providers and payers alike.


Christina Sung is the director of product marketing and strategy of San Mateo, California-based Health Fidelity, a provider of technology solutions for risk-bearing healthcare organizations.

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