News: HHS risk adjustment data validation program final rule released

CMS has released the final rule for the Department of Health and Human Services’ risk adjustment data validation (HHS-RADV) program. The rule finalized changes to the error rate calculation and the application of HHS-RADV results.

Currently, HHS-RADV only adjusts risk scores when the failure rates exceed a certain threshold. The final rule makes three modifications to the error rate calculation. The rule makes changes

• To the way CMS groups medical conditions in HHS-RADV within the same HCC coefficient estimation groups in risk adjustment to determine failure rates for those HCCs.
• That would reduce the magnitude of risk score adjustments for issuers close to the threshold used to determine whether an issuer is an outlier.
• To the error rate calculation in cases where certain outlier issuers have a negative failure rate.

The first modification aims to better account for difficulty categorizing certain conditions, therefore refining “how the error rate calculation measures risk differences within and between condition groupings.”

The second modification aims to mitigate the effect of a “payment cliff” that is created by issuers whose failure rates are not significantly different form issuers just inside the threshold, who may see significant changes to their risk scores.

The third modification aims to refine “the error rate calculation to mitigate the impact of adjustments that result from error rates driven by these newly found conditions.”

CMS says that the changes intend to strengthen program integrity by reducing possible incentives for issuers to underreport diagnoses, and that they changes will also promote fairness by insuring issuers are not penalized in HSS-RADV when a difference in diagnosis for an enrollee has no effect on risk.

Editor’s note: The CMS fact sheet about the final rule can be found here. To read more about RADV audits, click here.