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The Centers for Medicare & Medicaid Services (CMS) initially intended to transition gradually to EDS-based payments, basing 25% of plan payments on EDS in 2018.¹ Following stakeholder concerns about the accuracy of EDS, CMS proposed to limit payments based on EDS to 15% in 2018.

CMS has said EDS should capture the same diagnoses identified in RAPS, but our initial research using plan data for 2015 and 2016 payment years found that this transition would significantly reduce the identification of diagnoses used to calculate the risk scores that reflect the disease burden of the plan’s membership. Average risk scores resulting from the EDS process were 26% lower in the 2015 payment year (based on 2014 claims data) and 16% lower in the 2016 payment year (based on 2015 claims data) compared to RAPS. The lower risk scores were the result of up to 40% fewer Hierarchical Condition Category (HCC) diagnoses identified in EDS compared to RAPS.

Since our initial study, CMS has continued to make improvements in the EDS processing and Medicare Advantage (MA) plans received new reports in late summer 2017. We were able to update the analysis of the impact of EDS on risk scores for the 2016 payment year based on the new reports from six MAOs representing 30 plans and 760,000 beneficiaries. The revised results show a significantly smaller gap of only 3% in average risk scores resulting from RAPS versus EDS, compared to the 16% gap we found using EDS reports released in early 2017.

This report presents the findings from the updated analysis of revised 2016 risk scores resulting from EDS based on the recently released MAO reports.

Background

CMS uses a risk adjustment process to modify MA plan payments to better reflect the relative risk of each plan’s enrollees. Payments to each MA plan are adjusted based on risk scores that reflect enrollees’ health status and demographic characteristics derived from member claims data. MA plans are currently transitioning from the traditional RAPS—where risk adjustment filter rules are applied by health plans—to the new EDS—where MAOs submit their members’ claims and CMS applies the filtering logic.

The transition to EDS is expected to be revenue and budget neutral because the change in format to the encounter data collection process was intended to result in the same risk scoring.³ However, the two approaches involve very different levels of information in their respective processes. The RAPS system involves only five necessary data elements (dates of service, provider type, diagnosis code and beneficiary Health Insurance Claim [HIC] number), while the EDS system utilizes all elements from the claims (i.e., HIPAA standard 5010 format 837).

CMS initially expressed the intention to transition gradually to EDS-based payments, starting with 10% of the payment based on EDS scoring in 2016, increasing to 25% in 2017, and 50% in 2018.^1,4 However, in recognition of the ongoing operational challenges and other concerns about the accuracy of EDS, CMS proposed to revert to a lower 15% EDS in 2018.²

MAOs seek a solution where RAPS and EDS submissions are in complete alignment, ensuring accurate recognition of their members’ chronic conditions in EDS risk scores to receive appropriate reimbursement to cover their health care needs.

Objective

The goal of this research was to test the risk score neutrality theory of the transition from RAPS to EDS using sample data from a large national sample of MAOs. The study aimed to evaluate the risk score and financial impact of the transition by comparing plan results from running the same set of claims data through the RAPS and EDS.

Methodology

For our initial analysis, eight MA health plans submitted their 2014 and 2015 dates of service (DOS) claims for the 2015 and 2016 payment years to CMS and provided Avalere, with the results from the two sources of data used for risk adjustment. We received (1) the RAPS Return files that inform plans of the disposition of diagnosis clusters submitted to CMS; and (2) the MAO-004 reports that inform plans of risk adjustment eligible diagnoses resulting from the EDS. Avalere researchers aggregated and analyzed results from the RAPS Return versus MAO-004 files and compared resulting risk scores. Risk score differences were investigated for the sample as a whole, as well as subset analyses examining differences by age, region, dual eligible status and across plans. Finally, we compared the most common HCCs identified using RAPS to those identified with the new EDS.

CMS subsequently worked to make additional improvements to the EDS during 2017, and plans resubmitted their 2015 claims in late summer. For the updated analysis, six plans provided their results to us so we could reevaluate the impact of the transition to EDS based on the changes.

References

1. CMS 2017 Final Rate Announcement (April 4, 2016): 61; https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/Announcement2017.pdf.
2. https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/Announcement2018.pdf.
3. Impact of Medicare Advantage Data Submission System on Risk Scores; https://avalere.com/press-releases/impact-of-medicare-advantage-data-submission-system-on-risk-scores.
4. CMS Advance Notice and Draft Call Letter (February 1, 2017); accessed on February 19, 2017;https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2017-Fact-Sheet-items/2017-02-01.html.