Depending on how stakeholders play their cards, the U.S. Centers for Medicare & Medicaid Services’ (CMS) updated risk adjustment policy could lead to tightened belts — or a golden opportunity — for palliative care providers in Medicare Advantage.

Much of the palliative care delivered to U.S. patients is now reimbursed through risk-based models like Medicare Advantage and Accountable Care Organizations (ACOs). And those payments are determined in part by risk adjustment, a system that CMS plans to change next year in an effort to rein in spending.

Though reactions will likely differ from plan to plan, this could potentially mean that providers could see lower payments, according Dr. Sachin Jain, CEO of the Medicare Advantage organization The SCAN Group.

“The way Medicare Advantage works is that we receive a risk adjusted, per-member, per-month payment in addition to revenue bonuses for [star ratings], which then fuels our ability to purchase services on behalf of our members,” Jain told Palliative Care News. “It just goes to reason that if we start getting paid less in aggregate, then our downstream entities are likely going to either see smaller increases or lower payments.”

If [MA plans] start getting paid less in aggregate, then our downstream entities are likely going to either see smaller increases or lower payments.”

-Dr. Sachin Jain, CEO, SCAN Group

CMS initiated the changes to its risk adjustment process earlier this year through its 2024 final rule for Medicare Advantage plans.

The agency is implementing a 3.3% base rate increase for MA plans, but it also will begin a three-year phase-in of an updated approach to risk adjustment.

The nuts and bolts of risk adjustment

In a nutshell, the agency is transitioning the code system from Internal Classification of Diseases (ICD)-9 to ICD-19. It also removed more than 2,000 of the diagnosis codes that MA plans use. The affected codes “focused on conditions that are subject to more coding variation,” according to CMS.

The goal for CMS is to reduce what it sees as excessive payments to Medicare Advantage. For instance, CMS will overpay MA plans by $28 billion in 2023, due largely to “coding intensity,” research from the University of Southern (USC) California Schaeffer Center for Health Policy and Economics found.

“Paying Medicare Advantage plans more accurately for the care they provide is how we ensure that people enrolled in Medicare Advantage, especially populations with the highest health disparities and people in underserved communities, can continue to access the care they deserve,” said CMS Administrator Chiquita Brooks-LaSure in a statement.

These diagnostic codes are used to determine a patient’s Hierarchical Condition Category (HCC) score. This represents the sum total of all of their underlying health conditions, comorbidities or diagnoses, according to Fred Bentley, managing director for ATI Advisory’s Medicare Innovation Team.

Essentially, each beneficiary gets an HCC score and CMS uses that factor to determine how much it should pay an MA plan per month for that patient.

“There’s been a lot of concern and scrutiny around this. If that’s the incentive [that] you get paid more the sicker your patients are, then you are going to document any and all underlying conditions to maximize your reimbursement,” Bentley told Palliative Care News. “It has resulted in a lot of concerns around upcoding.”

There are other concerns, too, he added.

“You’ve documented all these conditions,” Bentley explained. “And even if they are completely accurate and comprehensive, are you the Medicare Advantage plan actually developing care plans and providing the care and paying for the care that is appropriate, given that members’ complexity and their needs?”

If you get paid more the sicker your patients are, then you are going to document any underlying conditions to maximize your reimbursement. It has resulted in a lot of concerns around upcoding.

-Fred Bentley, managing director, ATI Advisory

These kinds of concerns have led CMS to consolidate and streamline its diagnosis codes. Some conditions, such as major depression, for example, can have as many as 300 different codes associated with it.

Eliminating some of those codes could result in lower payments from CMS to MA plans, which could in turn lead to payment reductions or reduced benefits for providers and consumers, according to MA proponents, such as the advocacy group Better Medicare Alliance (BMA).

“As we continue to assess the impact of the CY 2024 Medicare Advantage Advance Notice, we want to express concern over proposed risk adjustment changes jeopardizing progress made in advancing health equity, preventing disease progression, and delivering high-value, high-quality care, “ BMA indicated in a letter to CMS earlier this year. “We are concerned the biggest impact could be on our most vulnerable seniors, including beneficiaries dually eligible for Medicare and Medicaid and those in chronic condition special needs plans.”

The silver lining

The impact on individual palliative care providers will largely be determined by the terms of their current agreements with MA plans and how they apportion risk between the payer and provider entities.

For example, SCAN Health Plan delegates most risk to its downstream provider entities, with about 92% of its beneficiaries in full-risk deals, according to Jain. He said he expects that these groups will likely look at ways to manage medical and administrative costs differently.

Speculatively, the possibility also exists that MA plans and their provider networks could invest more heavily in palliative care, because of the cost savings those services are known to generate.

“They may see greater adoption of health plans trying to avoid costly inpatient hospitalizations by providing more pain and symptom relief in the outpatient setting,” Jain said. “If I were a palliative care group or physician I wouldn’t see this as positive or negative. I tend to be somebody who sees every obstacle as an opportunity. I would lean into this and I would try to provide more palliative care services for more of the right patients to actually help plans manage costs in a shrinking revenue environment.”