Department of Health and Human
Services
Health Care Financing
Administration
Operational Policy Letter
#96
OPL99.096
You may download the main body of this OPL in either WordPerfect 6.1 or in PDF format viewable in Adobe Acrobat.
DATE: June 21, 1999
TO: All Medicare Managed Care OrganizationsSUBJECT: Changes to the HCFA Managed Care Systems to Reflect the Risk Adjustment Payment Methodology
PURPOSE
The purpose of this OPL is to provide information regarding the changes that will be implemented in HCFA's managed care system to reflect the risk adjustment payment methodology mandated by the Balanced Budget Act of 1997 (BBA). Please note that the information regarding report and screen changes described in this document apply to all Managed Care Organizations (MCOs). Risk adjustment payment changes, however, apply only to members of Medicare+Choice (M+C) organizations. (See the section on Exclusions in this document for more specific information.)
Many of the changes described in the OPL have been shared with MCO representatives and the industry associations. As expected, the majority of the systems changes for CY2000 involve the Monthly Membership Report. There will also be minor revisions to the Plan Payment Report and to several online MCCOY rate and factor screens.
BACKGROUND
MCOs were notified regarding payment methodology changes resulting from the implementation of risk adjustment in the January 15, 1999 Advance Notice of Methodological Changes for the CY2000 M+C Payment Rates and in the March 1, 1999 Final Announcement of CY2000 M+C Payment Rates. The risk adjustment methodology described in these prior documents has not changed. This OPL focuses on how M+C payment information will appear beginning in CY2000 and presents the new version of the Monthly Membership Report.
For CY2000, risk adjustment is based on diagnostic data related to the inpatient hospital stays of M+C organization members. Additional data related to other medical services, e.g., outpatient, physician, etc., will be included as soon as collection methods are finalized and implemented. MCOs were required to submit inpatient hospital data (i.e., encounter data) beginning with July 1, 1997 discharges.
Risk adjustment factors will be calculated for each Medicare managed care and fee-for-service beneficiary. They will be used, along with the risk adjustment rate book and modified by applicable health statuses, to determine the risk adjustment capitated amount. A transition strategy will be utilized that involves blending the risk adjusted payment amounts with the risk demographic payment amounts. Based on the current schedule, this transition is expected to cover a 4-year period, after which full implementation of comprehensive risk adjustment will occur in CY2004.
SYSTEMS CHANGES
Overview
HCFA's managed care systems will be revised to compute monthly risk adjustment payments beginning with CY2000. These revisions are consistent with the method outlined in the January 15, 1999 Advance and in the March 1, 1999 Final Notices and include:
Exclusions
As stated previously, risk adjustment applies only to M+C organizations. For CY2000, some MCOs with Demonstration contracts are excluded from payment under risk adjustment. HCFA, however, may include some of these entities as soon as CY2001. MCOs with Cost or HCPP contracts will also be excluded from payment under risk adjustment, but risk adjustment rates will be reported to these organizations as "risk equivalent" rates. This will replace the current reporting of the "risk equivalent" demographic rates to the Cost and HCPP MCOs.
At the beneficiary-level, M+C organization members who are capitated at the Hospice or at the ESRD rate will be excluded from payment under risk adjustment. M+C organizations will receive the demographic payment applicable to these types of members.
Monthly Capitation Payments
CY2000 monthly payments to M+C organizations will consist of a blend of 90% demographic rate and 10% risk adjustment rate. The full demographic and risk adjusted rates will be computed at 100% for each member and then the appropriate blend percentage will be applied based on the transition schedule (see the Timeframes section for the 5-year schedule). It should be noted that monthly payments to M+C organizations will reflect ongoing, current-month and prospective-month membership. For example, the January 1, 2000 payment will reflect ongoing members and enrollments effective December 1, 1999 and January 1, 2000. Members enrolling December 1 will be capitated at 100% demographic rate for the month of December. Members enrolling January 1 and ongoing membership will be capitated at the blend of 90% demographic/10% risk adjustment beginning with the month of January.
Unlike the demographic rates, risk adjustment rates utilize a beneficiary-specific factor which is effective for a calendar year. The risk adjustment factor includes age group, gender, PIPDCG category and, if applicable, Medicaid and Previously Disabled statuses. This factor will not apply to members with ESRD and Hospice health statuses; i.e, payment will not reflect risk adjustment. In addition, institutional corrections will not be applied to the risk adjustment portion of the blended payment amount (they will continue to be applied to the demographic portion). Working Aged, if applicable, will impact both the demographic and the risk adjustment portions of the payment amount at the appropriate percentages.
Adjustments
Demographic payment adjustments (i.e., those applicable to the demographic portion of the blended payment amount) will be processed as they occur, to reflect changes in:
Risk adjusted adjustments (i.e., those applicable to the risk adjustment portion of the blended payment amount) will be processed as they occur, to reflect changes in:
NOTE: Institutional status is not applicable to the risk adjustment rates.
Some adjustments to the risk adjustment portion of the blended payment amount will not occur during the payment year (as the demographic adjustments do). Changes that impact the computation of the risk adjustment factor will be resolved through a reconciliation process which will occur after the end of the payment year. This means that for changes in the date of birth, gender, Medicaid status, Previously Disabled status and/or late submittal of encounter data, a new risk adjustment factor will be computed.
Reconciliation Process
The reconciliation process will be utilized until HCFA systems are able to process changes that impact the factors as they occur during the payment year. In the interim, the process will work as follows. Information that could result in risk adjustment factor changes will be collected during the payment year. This includes updates to:
NOTE: Medicaid status is applied prospectively to the risk adjustment rates; i.e., if the beneficiary is in this status for only one month during the encounter data collection period, it is applied during the entire payment year. In contrast, Medicaid status is applied concurrently to the demographic rates; i.e., if the beneficiary is in this status for only one month during the payment year, it is applied for only that one month during the payment year.
During the second quarter of the calendar year following the payment year, the factors for members impacted by such changes will be recalculated. This revised factor will be utilized in adjusting the previous calendar year's payments; i.e, the risk adjustment portion of the blended payment. Adjustment processing would be completed during the third quarter of the calendar year following the payment year.
REPORT CHANGES
For CY2000, the following reports will be revised to reflect pertinent risk adjustment information (see attached examples). Please note that, for the reports described below, these will be the only versions created. HCFA systems will not maintain M+C and non M+C reports. MCOs with Demonstration, Cost or HCPP contracts (i.e., non M+C organizations) will receive the revised monthly membership report and must utilize it to access their payment information.
1. Transaction Reply/Monthly Activity Report
There will be no changes to
this report for CY2000. Note that the "AAPCC Rates" column will continue to
contain demographic rate data, as it does today.
2. HCFA Plan Payment Report
The only change to this report is the deletion
of the word "Demo" from "Demo Factor" (line F in section 3 - Health Status
Adjustments to Prior Months). The information on this line of the report will
now reflect both Demonstration and Risk Adjustment Factor changes.
3. Monthly Membership Report- Summary
The only change to this report is
the deletion of the word "Demo" from adjustment reason code #23. This code will
now reflect adjustments relating to both Demonstration factors and Risk
Adjustment factors.
4. Monthly Membership Report- Detail
The Monthly Membership Report- Detail
(MMR) will be revised and it will continue to be generated as a data file and as
a formatted report.
4a. MMR - Data File
The data file will contain all of the current
information relating to the demographic portion of the payment as well as that
associated with the risk adjustment portion of the payment. There will be a Risk
Adjustment Components section with indicators for Previous Disabled and Medicaid
along with the PIPDCG Category. There will also be a Default Factor Indicator
which will be set to "Y" for members for which a default factor was utilized.
Risk Adjustment Factors for Part A and B will also be included, although both
factors will be the same.
NOTE: Although the Part A and B factors are identical, the risk adjustment rates will differ. A Part B risk adjustment rate is computed to allow capitation of Part B-only members. HCFA's Office of the Actuary computes combined A/B/Aged/Disabled rates for each county. For CY2000, these rates are split by .4367 to derive the Part B rate and by .5633 to derive the Part A rate.
The MMR data file will contain the following payment information:
The MMR data file will only be provided in this format, even for non M+C organizations. For MCOs with Cost and HCPP contracts, all of the information presented above will be included in the file as "risk-equivalent" data. For MCOs with Demonstration contracts, no risk adjustment information will be provided. The applicable Demonstration payment rate data will be populated in the Blended Payment Rate fields.
4b. MMR - Formatted Report
The formatted report will include all of the
information contained on the MMR- Data File. Due to space considerations,
however, each member's prospective payment information will be displayed
on three detail lines. Line one will include the member's
identifying information along with the risk adjustment indicator and the 100%
Part A and Part B demographic payment rates. Line two will
contain the PIPDCG category, Part A and B risk adjustment factors and the 100%
Part A and Part B risk adjustment rates. Line three will
contain the Part A, Part B and Total blended payment amounts. Each member's
adjustment payment information will be netted out and will be displayed
on one line as blended payment amounts with the applicable reason code.
The MMR formatted report will only be provided in this version, even for non M+C organizations. For MCOs with Cost and HCPP contracts, the information will be presented as described above and will be "risk-equivalent" data. For MCOs with Demonstration contracts, no risk adjustment information will be included. The applicable Demonstration payment rate data will be populated in Line three.
5. Demographic Report
This report will continue to be produced in it's
current format. The dollar amounts, however, will reflect the risk
adjustment/demographic payment amounts.
SCREEN CHANGES
The following MCCOY online screens will be revised to reflect risk adjustment information (see attached examples).
1. View Rates by State and County Code (SCC)
This screen will be expanded
to display risk adjustment rates for Part A and Part B by specified date, state
and county code. Note that these rates will only be available for dates
beginning 1/1/2000.
2.View Age-Sex Underwriting Factors
The contents of this screen will not
change; only the title. It was formerly identified as "View AAPCC Demographic
Cost Factors", which is incorrect.
3. View Risk Adjustment Default Factors
A new screen will be added to
display the information from the Factors for New Enrollees table that was
presented in the March 1, 1999 Final Announcement of CY2000 M+C Payment Rates.
These are the rates that will be utilized when no risk adjustment factor
information is available for a member. The screen will display the Base and
Medicaid Add-on rates by gender, age group and date. Note that this screen will
be unavailable for dates prior to 1/1/2000.
4. View Payment Calculation
This screen, which displays rates calculated
based on input criteria, will be expanded. It will include risk adjustment "Part
A factor" and "Part B factor" as input parameters and the Medicaid Flag item
will be renamed "Demographic Medicaid Flag". Based on the items selected, the
screen will display:
Note that for specified process months prior to 1/2000, the calculation will not include risk adjustment information.
5. View Factors
This screen will be revised to display factor information
based on the user. The plan-level demonstration factor will be displayed if the
member is enrolled in an associated demonstration organization. The
beneficiary-level risk adjustment factor will be displayed if the member is
enrolled in an M+C MCO. Security will prevent viewing of factor data other then
that for a particular MCO's membership.
TIMEFRAMES
The following are important dates relating to the systems implementation of risk adjustment.
- CY2001 blend is 70%/30%,
- CY2002 blend is 45%/55%,
- CY2003 blend is 20%/80% and
- CY2004 is 100% comprehensive risk adjustment.
This OPL describes systems changes to be made in 1999 to implement risk adjustment for CY2000 payments. HCFA expects to refine this process during the transition period as the managed care systems are redesigned and the risk adjustment factor computation interface is solidified. Most of the current reports and screens will need to be updated to reflect comprehensive risk adjustment and to provide additional information as needs are identified.
CONTACT:
If you have questions regarding this OPL, please contact Kim Miegel (410-786-3311, KMIEGEL@HCFA.GOV) or Bob Fortenbaugh (410-786-6359, RFORTENBAUGH@HCFA.GOV).
This OPL was prepared by the Center for Health Plans and Providers.
Most of the attachments to this OPL are not yet available in softcopy. The item most critical to the MCOs is the data file format and the formatted report format of the Monthly Membership Report. These items are included as attachments with this OPL.
Attachments
Monthly Membership Report Format (19990329)
Field Name Length Location Description
LINE #1 Prospective Payments
Filler 3 1-3 Spaces
HIC 12 4-15 Beneficiary's Health Insurance
Claim Number
Surname 7 16-22 Beneficiary's Surname
First Initial 1 23 Beneficiary's First Initial
Filler 1 24 Space
Sex 1 25 M = Male
F = Female
Filler 1 26 Space
Date of Birth 8 27-34 Format of YYYYMMDD
Filler 1 35 Space
Age Group 4 36-39 Demographic Age Grouping
Filler 1 40 Space
State & County Code 5 41-45 Beneficiary's State & County Code
Filler 2 46-47 Spaces
Out of Area Indicator 1 48 Y = Out of Service Area
Filler 2 49-50 Spaces
Part A Entitlement 1 51 Y = Entitled to Part A
Filler 1 52 Space
Part B Entitlement 1 53 Y = Entitled to Part B
Filler 1 54 Space
Health Status Indicators
Hospice 1 55 Y = Hospice
Filler 1 56 Space
ESRD 1 57 Y = ESRD
Filler 1 58 Space
Working Aged 1 59 Y = Working Aged
Filler 1 60 Space
Institutional 1 61 Y = Institutional
Filler 1 62 Space
Nursing Home Certifiable 1 63 Y = Nursing Home Certifiable
Filler 1 64 Space
Medicaid 1 65 Y = Medicaid
Filler 3 66-68 Spaces
Risk Adjusters Components
Previous Disabled 1 69 Y = Previous Disabled
Filler 1 70 Space
Medicaid Add-on 1 71 Y = Medicaid Status during last
Risk Adjuster encounter period
Filler 1 72 Space
Default Factor Indicator 1 73 Y = Default Factor Used
Number of Part A Payment 2 74-75 Number of Payment Months
Months Used in Calculation (Part A)
Number of Part BPayment 2 76-77 Number of Payment Months
Months Used in Calculation (Part B)
Filler 5 78-82 Spaces
Payment Start Date 6 83-88 YYYYMM of Payment Start Date
Filler 1 89 Space
Payment End Date 6 90-95 YYYYMM of Payment End Date
Filler 2 96-97 Spaces
Demographic Part A Dollars 10 98-107 Value up to $99,999.99
At 100 Percent of Part A Payment
Filler 2 108-109 Spaces
Demographic Part B Dollars 10 110-119 Value up to $99,999.99
At 100 Percent of Part B Payment
Filler 13 120-132 Spaces
Monthly Membership Report Format (19990329)
Field Name Length Location Description
LINE #2 Prospective Payments
Filler 75 1-75 Spaces
PIP-DCG Category 2 76-77 Value of PID-DCG Category
Filler 4 78-81 Spaces
Part A Risk Adjustment Factor 7 82-88 Value of Part A Risk Adjuster Factor
used in Payment calculation
Filler 1 89 Space
Part B Risk Adjustment Factor 7 90-96 Value of Part B Risk Adjuster Factor
used in Payment calculation
Filler 1 97 Space
Risk Adjuster Part A Dollars 10 98-107 Value up to $99,999.99
At 100 Percent of Part A Payment
Filler 1 108 Space
Risk Adjuster Part B Dollars 10 109-118 Value up to $99,999.99
At 100 Percent of Part B Payment
Filler 14 119-132 Spaces
Monthly Membership Report Format (19990329)
Field Name Length Location Description
LINE #3 Prospective Payments
Filler 97 1-97 Spaces
Part A Blended Amount 10 98-107 Value up to $99,999.99
of Part A Payment
Filler 2 109 Space
Part B Blended Amount 10 110-119 Value up to $99,999.99
of Part B Payment
Filler 2 120-121 Spaces
Blended TOTAL Payment 10 122-131 Value up to $99,999.99
Filler 1 132 Space
Monthly Membership Data File
| # | Field Name | Len | Pos | Description |
| 1 | Plan Number | 5 | 1-5 | Plan Number |
| 2 | Run Date | 8 | 6-13 | YYYYMMDD |
| 3 | Payment Date | 6 | 14-19 | YYYYMM |
| 1 | HIC | 12 | 20-31 |
| 2 | Surname | 7 | 32-38 | |
| 3 | First Initial | 1 | 39-39 | |
| 4 | Sex | 1 | 40-40 | M = Male, F = Female |
| 5 | Date of Birth | 8 | 41-48 | YYYYMMDD |
| 6 | Age Group | 4 | 49-52 | |
| 7 | State & County Code | 5 | 53-57 | |
| 8 | Out of Area Indicator | 1 | 58-58 | Y = Out of Area Always Spaces on Adjustment |
| 9 | Part A Entitlement | 1 | 59-59 | Y = Entitled to Part A |
| 10 | Part B Entitlement | 1 | 60-60 | Y = Entitled to Part B |
| Health Status Indicators: | ||||
| 11 | Hospice | 1 | 61-61 | Y = Hospice Always Spaces on Adjustment |
| 12 | ESRD | 1 | 62-62 | Y = ESRD Always Spaces on Adjustment |
| 13 | Working Aged | 1 | 63-63 | Y = Working Aged |
| 14 | Institutional | 1 | 64-64 |
Y = Institutional |
| 15 | NHC | 1 | 65-65 | Y = Nursing Home Certifiable Always Spaces on Adjustment |
| 16 | Medicaid | 1 | 66-66 | Y = Medicaid Status Always Spaces on Adjustment |
| Risk Adjuster Components: | ||||
| 17 | Previous Disable | 1 | 67-67 | Y = Original Reason of Entitlement Always Spaces on Adjustment |
| 18 | Medicaid Add-on | 1 | 68-68 | Y = Entitled to Medicaid Add-on Always Spaces on Adjustment |
| 19 | PIP-DCG Category | 2 | 69-70 | PIP-DCG Category Always Spaces on Adjustment |
| 20 | Default Factor Indicator | 1 | 71-71 | Y = Default Factor Used Always Spaces on Adjustment |
| 21 | Risk Adjuster Factor A | 7 | 72-78 | NN.DDDD |
| 22 | Risk Adjuster Factor B | 7 | 79-85 | NN.DDDD |
| 23 | Number of Paymt/Adjustmt Months Part A | 2 | 86-87 | 99 |
| 24 | Number of Paymt/Adjustmt Months Part B | 2 | 88-89 | 99 |
| 25 | Adjustment Reason Code | 2 | 90-91 | 99 Always Spaces on Payment |
| 26 | Paymt/Adjustmt Start Date | 8 | 92-99 | YYYYMMDD |
| 27 | Paymt/Adjustmt End Date | 8 | 100-107 | YYYYMMDD |
| 28 | Demographic Paymt/Adjustmt Rate A | 9 | 108-116 | -$$$$$.¢¢ |
| 29 | Demographic Paymt/Adjustmt Rate B | 9 | 117-125 | -$$$$$.¢¢ |
| 30 | Risk Adjuster Paymt/Adjustmt Rate A | 9 | 126-134 | -$$$$$.¢¢ |
| 31 | Risk Adjuster Paymt/Adjustmt Rate B | 9 | 135-143 | -$$$$$.¢¢ |
| 32 | Blended Paymt/Adjustmt Rate A | 9 | 144-152 | -$$$$$.¢¢ |
| 33 | Blended Paymt/Adjustmt Rate B | 9 | 153-161 | -$$$$$.¢¢ |
| 34 | Total Paymt/Adjustmt | 9 | 162-170 | -$$$$$.¢¢ |
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Last Updated June 23, 1999
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