Overcoming the Risk Adjustment Payment Challenge John G. Lovelace, President July 2010

2  A UPMC Heath Plan Medical Assistance Program  Medical Assistance Managed Care Organization located in Western and Central Pennsylvania  Approximately 132,000 members, with nearly 59% under age 21  Ranked #1 in Pennsylvania and in top fifteen in the country in terms of quality of care as determined by US News & World Report  Almost all of the contracted providers paid via FFS. UPMC for You

3 Approaches to Risk Adjustment  Prospective – Member-Centric  Prospective – Provider-Centric  Retrospective – Member-Centric  Retrospective – Provider-Centric

4 Prospective Approach - Member  Member-centric strategy identifies top quartile of beneficiaries with potential for risk score improvement  Key processes focus on prior claims history for beneficiaries to determine key diagnoses that were coded in past but are not present on current year claims  Approach only looks at diagnoses for chronic conditions that are considered persistent by clinical staff  Generate member specific risk profile report – containing member risk score and MLR (inverse relationship)  Strategy for current period typically begins in the first quarter of the risk adjustment period.

5 Key Questions for Member-Centric Strategies –What is the difference between the beneficiaries’ actual score and best expected score based on historical data? –Has the member been seen for a visit in the past six months by their PCP? –Is the member new to the Managed Care Organization? –If a risk category was once present for a beneficiary but is now missing, what was the volume of claims that were submitted previously for that diagnosis?

6 Prospective Approach - Provider  This strategy focuses on finding provider groups that have poor risk scores associated with their membership panels  Program can be based on historical data, predictive modeling or a combination  Developing key reporting for providers that show key diagnoses that need to be reviewed and coded is key to successful implementation  Determination the “Medical Home” for the member is key to get member and provider “buy-in”  It is important to develop strong working relationships with your provider network (support staff).

7 Prospective Approach - Provider Some Questions to Ask: –What kinds of relationships does plan have with providers? –What types of providers submitted claims previously for the missing diagnoses? –Are there certain pockets of providers that have shown a significant declining in the overall scoring of their panel over time? –Which providers do you have to work with where you have access to electronic medical records (EMR)? –What provider is the true Medical Home for the beneficiary?

8 Strategic Similarities to Medicare  Depending on the structure of your State’s Medicaid risk adjustment program, you may be able to utilize similar strategies that may be done for Medicare HCC’s  While not a 1:1 correlation, Pennsylvania’s Medicaid risk adjustment process (CDPS Rx 5.1) utilizes many diagnoses codes for chronic conditions that also tie to risk adjustment payments for Medicare HCCs  If both processes are diagnosis based, reporting may be developed in a way that makes the two programs seamless to the provider  Note that for the Medicaid program, it may be imperative that the diagnosis be submitted on an encounter/ claim.

9 Incentive Strategies  Depending on state guidelines and regulations, you may be able to offer members an incentive to seek an annual full health assessment/ evaluation  Develop incentive strategies for providers to properly submit diagnoses on claims, as well as properly document all information in medical charts  UPMC for You provides payments ranging from $50 - $130 for completion of full medical assessments and submission of diagnoses on a claim  Gain-sharing arrangements can also be implemented for larger providers that are a part of a Patient-Centered Medical Home, Provider Pay for Performance or another quality incentive program.

10 Incentive Strategies  The incentive strategy needs to ensure that the provider will be compensated to change the way that patient assessments are conducted and the proper diagnosis coding on the claim submission occurs  The Health Plan can work collaboratively with the provider by providing them real-time information about the members that need to come in for annual assessments. This can include diagnosis history on the members from other providers  Outreach efforts to members by the Health Plan on behalf of the providers, along with offering incentives to the members to have a comprehensive annual assessment, can help to foster a stronger relationship with the network providers.

11 Retrospective Processes  Real-time determination of what members and what medical charts to review is key  Scheduling the order of medical chart reviews with providers is critical  Determination of best medical records will benefit prospective processes in upcoming years  Full documentation of findings and ruling out diagnoses as valid will improve future reviews  You may be required to have physician attestation or the provider to resubmit claims with other diagnoses that should have been included previously  These reviews allow for provider education opportunities.

12 Integration with Care Management  As data from care management processes can be utilized in developing a risk-adjustment outreach strategy, the results can then be funneled back into the care management program for improved quality of care  The program may uncover areas where better integration with the member’s PCP/ medical home may result in better overall care being delivered to the member  This can then result in better quality scoring for the health plan  In addition, timely assessments may result in care management receiving information necessary to proactively work with a member and their provider before the members health deeply worsens.

13 Return on Investment  Understanding resource allocation to project is key to long-term success.  Need to consider any increased medical costs in short-term due to enhanced medical assessments  Budget neutrality may be imposed in your state depending on how the risk adjustment process is conducted (normalization factors)  Probability models can be utilized to focus on disease categories that are more likely for members with certain historical utilization and demographic characteristics  There is more incentive to go after certain disease states as they may be risk adjustment drivers.

14 Return on Investment  Depending on how the risk adjustment process works, the financial return for the process may occur in a future period.  It is important to consider full-time equivalent (FTE) costs, incentive payouts, potential increases in medical costs and reporting costs when determining the overall return.  Focusing on the high acuity members of the Health Plan may be the best course of action due to staff resource restrictions and/or incentive budgets.  Your return will only be as good as the data that you provide to the providers, the level of education that your network staff and coding staff provide, and you effectiveness in providing follow-up to the stakeholders in the process.