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Making sense of new risk adjustment filtering logic

CMS recently released the long awaited risk adjustment filtering logic for the Medicare Advantage Encounter Data Processing System, requesting comment by August 21. This logic is an important factor in the future of risk adjustment.

The following paper outlines the filtering logic and discusses some issues around the proposed logic for Medicare. We also compare the proposed CMS Medicare Advantage filtering logic to the previously published filtering logic for the Commercial (HHS) risk adjustment model used in the Exchange Market.

Impact on Medicare risk adjustment

It is critical that health plans understand this logic as it determines which diagnoses codes are accepted from EDPS claims submission for processing in CMS' risk adjustment system. Once implemented this change will put CMS in the driver seat for determining which claim types, provider types, and places of service will be accepted for calculating risk scores. This in turn will adjust Medicare Part C payments of approximately $13 billion per month.

In 2016, ten percent of payment will be impacted by the new filtering logic as CMS transitions to using EDPS for risk adjusted payments. The proposed filtering logic determines how diagnoses from medical claims are selected into the risk adjustment system. The logic is broken down into rules for facility (inpatient and outpatient) and professional claims.

Inpatient claims

The filtering logic for hospital inpatient claims is quite straightforward. The service "through" date must be in the data collection year (e.g., in 2014 for payment year 2015) and the latest version of the claim is used (original or replacement). Acceptable sources of data are determined by facility bill type (TOB). All subsets of hospital inpatient bill type 11x--hospital inpatient and 41x--religious hospital inpatient are accepted. The hospital inpatient 11x series includes zero claims, interim claims (first, continuing and last), adjustment claims and replacement claims in addition to the basic "admit through discharge" claim.

All diagnoses codes in the header record of acceptable bill types are extracted and no other filters apply. The major contrast to the HHS commercial filtering logic is that under the HHS logic the claim must be final within the data collection year to be included. If the claim is final, then all the diagnoses for interim bills are also included, otherwise they are not. This distinction is due to differences in the rules used in risk adjustment model calibration and CMS' adherence to the principle of paying according to how the models are calibrated.

Outpatient claims

The Medicare filtering logic for Outpatient claims also adheres to the service "through" date being in the data collection period and uses the most recent claim (original or replacement). However, for outpatient claims, procedure codes (CPT/HCPCS) are used in addition to the facility type to determine acceptable risk adjustment diagnoses. The allowed facility types are listed in table 1 (CAH)

The allowed outpatient facility types for Medicare are more expansive then those allowed for the HHS commercial risk adjustment model for a number of reasons. The HHS commercial filtering logic includes only a subset of the Medicare facility types, including hospital outpatient facilities (a subset of 13x), Rural Health Clinics (71x), Free Standing Health Clinics (73x), and Community Mental Health Centers (76x).

On a technical note, it appears that that the HHS list mislabels facility code 73x as Federally Qualified Health Centers. The National Uniform Billing Committee labels TOB 73 as "Free Standing Health Clinics". This minor issue aside, the logic for the HHS model to filter out diagnoses from Federally Qualified Health Clinics is not apparent as claims from these Centers should provide valid diagnostic information. The list of acceptable procedures (CPT/HCPCS) is the same for outpatient and professional, which is addressed below under professional claims.

Professional claims

For professional claims the same rules about data collection period and use of the most recent claim (original or replacement) apply. Acceptable procedure codes for the purpose of risk adjustment models are those that indicate a "face-to-face" encounter with a physician or physician practitioner (e.g., nurse practitioner/physician assistant).

The procedure codes are evaluated at the line level on the encounter (claim) to determine if the CPT/HCPCS codes are acceptable, based on the applicable Medicare Code list: If there is at least one acceptable service line on the record, CMS will use all the header diagnosis, and if there is no acceptable service lines on the record, CMS will not use any of the diagnoses for risk adjustment.

We have categorized the 7,113 distinct CPT/HCPCS codes in the Medicare EDPS and/or HHS filters. There is a large amount of overlap in the lists but also some variance that is hard to explain. Table 2 below compares the two lists.

Note that 369 of the 852 codes that appear only in the HIM list are meant to be used "in addition to" a primary code. Since "in addition" codes would only appear in the presence of another code that is also on the list, their presence has no real impact on claims filtering.

As noted in Table 2, the vast majority of codes are common (allowed ) in both lists (87.2%), most of the codes that are allowed on only one list appear on the HHS list (12.0%), with a very small percentage only appearing on the EDPS list (0.9%).

A Look at Primary Procedure Codes allowed by the HHS Filter but Not Medicare EDPS

Among the 483 primary procedure codes found only in the HHS claims submission filter, a broad variety of clinical areas are represented, although about 58% of them are related to surgery, endoscopy, and cardiac catheterization. The following 22 groups include 80% of those primary codes.

1. Mental Health/Substance Abuse (41 codes): Individual psychotherapy using behavior modification, play therapy, physical devices or a language interpreter; alcohol/drug services.

2. Vascular Surgery (34 codes): Aneurism repair; laparoscopy; transluminal balloon angioplasty of major arteries; bypass grafts; various trans-catheter interventions.

3. Musculoskeletal Procedures (29 codes): Bone, muscle, and soft tissue biopsies; injection procedures; vocal cord chemo-denervation.

4. General Surgery (29 codes): Skin debridement; skin grafts; breast biopsies; placement of stereotactic guidance implants in breast; breast reconstruction.

5. Cardiothoracic Surgery (28 codes): Ventricular assist device implantation; ventricular defect repairs; heart valve procedures; lung biopsies; diaphragmatic hernia repair; minimally invasive coronary artery bypass.

6. Cardiac Catheterization Procedures includes stents (23 codes): Stent placement; angioplasty; heart catheterization; imaging supervision.

7. Transplant - Solid Organ Donor (23 codes): Preparation of harvested organs.

8. GI Surgery (20 codes): Fundoplasty; GI/liver/pancreas biopsies; peritoneal catheter insertion; injection procedures.

9. ENT Surgery (19 codes): Nasal, oral, nasopharangeal biopsies; labyrinthotomy; hearing device implantation; sinus ostium enlargement.

10. Gastroenterology - Endoscopic w/wo Biopsy (15 codes): Esophagoscopy, upper GI endoscopy; ERCP; esophageal dilation; endoscopic gastric biopsy.

11. Ophthalmologic Surgery (15 codes): Choroid lesion destruction; macular photocoagulation; aqueous outflow canal dilation; ocular, peri-ocular biopsies; LASIK; keratotomy.

12. Neurosurgery (13 codes): Burr holes; stereotactic brain biopsy; electrode implantations; nucleus pulposus aspiration; chemo-denervations; nerve biopsies.

13. Orthopedic Surgery; exclude endoscopic (13 codes): Vertebral biopsies; removal of foreign bodies; total hip resurfacing; intervertebral disc decompressions.

14. Gynecology (12 codes): Contraceptive capsule implantation and removal; vulvar and vaginal biopsies; colposcopies; annual gynecological examinations.

15. Maternity - Other (11 codes): Repairs of maternal birth trauma, IVF procedures.

16. Male Reproductive/Prostate Surgery (11 codes): Biopsies of male genitalia, prostate; prostate exposure for radioactive substance insertion.

17. Transplant - Solid Organ Recipient (10 codes): Pancreatic islet cell transplants; small intestine, lung, kidney, other organ transplant; adrenal-tissue transplant to brain.

18. Other Professional Services (10 codes): Medical conferences; genetic counseling; house calls; insulin pump initiation; intensive multidisciplinary services for children.

19. Pulmonary Endoscopy w/wo Biopsy (8 codes): Bronchoscopy procedures; thoracoscopy procedures.

20. Other Radiology (7 codes): Injections for various diagnostic radiology procedures requiring contrast material.

21. Nuclear Medicine Therapy (7 codes): Guidance device implantation; medical physics; custom treatment device design and construction.

22. Otolaryngology (6 codes): Biopsies; evaluations; vocal cord denervation; nasal endoscopy for post-operative debridement

This list of Medicare exclusions due to filtering is interesting and indicates that for EDPS some thought went into excluding procedures and or services where a "face-to-face" encounter may not have taken place or the services may have been carried out by a non-physician practitioner (e.g., collection of capillary blood specimens).

Having acknowledged that there may be some logic to these exclusions from the Medicare list, the exclusions seem somewhat arbitrary when other procedures in the same category are included. This is particularly true of surgical procedures, which make up the majority of the HHS exclusions. It is hard to imagine how prostrate surgery could be conducted any other way than "face-to-face" or that the associated diagnosis on the claim would not be valid.

Primary procedure codes allowed and not

Sixty primary procedure codes (plus one secondary code) are found only in the Medicare EDS filter list. The following four groups include 80% of those primary codes:

1. Ophthalmology (27 codes): Measurements; evaluations; examinations; fluorescein and indocyanine-green angiography; retinography; color vision evaluation; dark adaptation evaluation; ocular photography.

2. Other Cardiology (13 codes): Implantable device evaluations.

3. Cardiac Catheterization Procedures - includes stents (5 codes): Transcather/transluminal stent placement, angioplasty, and myocardial revascularization.

4. Skin substitute application (4 codes)

These codes seem to indicate situations where a "face-to-face" encounter with a physician, leading to evaluation and diagnosis, would take place. In this author's opinion, these codes should be added to the HHS filtering logic.

CMS should reconcile the two filtering lists and provide one list that does not exclude procedures and services that clearly meet the requirements to be valid sources of risk adjustment diagnosis. This would be accomplished by expanding the EDPS list to incorporate the procedures allowed under the HHS filtering logic and vice-versa.

Sean Creighton is vice president for risk adjustment solutions at Verisk Health.

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