What is Risk Adjustment Coding?

Risk adjustment coding is part of a payment model that was mandated by the Centers for Medicare & Medicaid Services (CMS) in 1997. This model identifies 79 categories of individuals with serious or chronic illnesses. Each of these illnesses (such as diabetes or HIV/AIDS) have specific risk adjustment codes that must be documented in a patient’s medical record and submitted with a corresponding claim. The process of identifying these risk adjustment codes is called risk adjustment coding.


What is the purpose of the risk adjustment score?

Insurance carriers assign each patient a risk factor score -- called a risk adjustment factor -- based on a combination of their risk adjustment codes and demographic details. 

In the past, medical costs were predicted solely on the demographics of a group. Using risk adjustment scores enables insurance providers to more accurately predict medical costs based on each member’s specific health issues. This information is used by Medicare and Managed Care providers to allocate funds for patient health care for the following year. It is also used by Accountable Care Organizations (ACOs) to establish benchmarks for the purpose of generating savings.

Who is responsible for risk adjustment coding?

Risk adjustment coding is the responsibility of the treating physician. Risks should be properly documented in each patient’s record and correctly identified on their insurance bill.

Why should you care about risk adjustment coding?

Medicine is rapidly changing. Although risk adjustment coding is now only used to determine funding, its role will increase. In the future, documentation and coding will play a larger role in physician reimbursement. If you participate in an ACO, correct risk adjustment coding will positively impact shared savings.

What happens if my risk adjustment codes are incorrect or incomplete?

Managed care providers can request and audit patient charts to make sure that the risk adjustment codes are correct. These audits may occur virtually or in your office. An audit requires attention and places an additional burden on your busy staff. Making sure that risk adjustment codes are documented correctly during the patient visit will ultimately save you time and money.

How can I make sure my risk adjustment codes are correct?

Insurance carriers typically  offer training about how to properly select risk adjustment codes. You can also work with a member of the American Association of Professional Coders, who are highly trained specialists in medical coding, billing and health care compliance.

About the Author

Nancy Rowe CPC, CPMA, CRC is the founder and president of Practice Providers Corporation. Her highly-trained staff provide personal and comprehensive medical practice management services – including Coding, clinical documentation training, risk adjustment management coding and managed hosting services. For more information, please call 1-800-959-6628