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As we discussed in our first blog post on ACO REACH, one of the concerns about Direct Contracting was patient risk coding abuse (also called “coding intensity”). Risk coding, or risk scoring, is used by Medicare Advantage (MA) to determine the payment an MA plan will receive for a given beneficiary. Risk scoring is also used by the Medicare Shared Savings Program (MSSP) to determine benchmarks, which in turn determine how much savings an MSSP Accountable Care Organization (ACO) receives each year. Global and Professional Direct Contracting (“Direct Contracting”) also uses risk scoring to determine the amount each Direct Contracting Entity (DCE) receives to manage a beneficiary’s care.
Aligning incentives for medical care payments is a complex issue. Fee for service incentivizes more services to generate more fees, for example. Moving to value-based care arrangements also surfaces issues of incentive alignment. There is a long-standing concern surrounding risk scoring. Since risk scoring is one of the factors that determines how much money an MA plan, MSSP ACO, and DCE receives each year, higher risk scores can mean more money for providers. This strategy only works, however, if the risk scores are artificially higher and the patient’s care costs less than the risk score predicts. For MSSP ACOs, this additional money comes in the form of higher savings since higher risk scores yield higher benchmarks. For MA plans and DCEs, this comes in the form of higher capitation payments, some of which, in theory, go unused because costs are lower than predicted.