CMS planning to fully rely on encounter data for Medicare Advantage risk adjustment in 2022

The Centers for Medicare & Medicaid Services said it plans to begin in 2022 using solely encounter data to calculate risk adjustment in Medicare Advantage and Part D.

CMS released Part I of its annual Advance Notice on Monday evening, and the agency said it intends to have both parts finalized no later than April 5.

In the regulation, CMS said it plans to fully phase in the CMS-HCC model for risk adjustment as outlined in the 21st Century Cures Act. Harnessing that model in full means that for 2022, a plan's risk scores would be calculated completely using encounter data, which is a controversial measure among insurers.

For 2021, CMS deployed a hybrid approach for risk adjustment, in which it said 75% of the data it used was encounter data.

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The change will certainly draw ire from payers, who have repeatedly expressed concern about the quality of encounter data and the impact its use could have on their risk scores. Encounter data, or information on patient conditions that comes from physicians and hospitals, are frequently inaccurate or incomplete, insurers say.

A risk score that is lowered artificially by incorrect data would lead to lower federal payments to the plan.

In 2019, encounter data accounted for just 25% of the data used in risk adjustment. As its use has increased, payers have pushed the feds to take steps to ensure the data are accurate.

CMS has incrementally increased its use of encounter data in risk adjustment since 2016.

CMS also said it released the regulation several months early to allow plans more time to prepare bids due to the uncertainty around COVID-19.