Revenue cycle leaders face increasing pressure to manage costs, optimize revenue, and improve revenue cycle functions. This has included more responsibility in understanding the intersection between risk adjustment coding and social determinants of health (SDOH). This intersection is critical to ensuring accurate reimbursement and optimizing revenue cycle outcomes, especially for Medicare Advantage and Medicaid populations, where SDOH significantly influences health outcomes and
We’ve assembled the latest news for healthcare revenue cycle leaders to help you stay on top of industry challenges and adapt your revenue cycle management services.
Correction to Final Rulemaking and Comment Period for Ambulatory Surgical Center Payment
CMS has released correction to technical and typographical errors in a final rule (with comment period). This rule appeared in the Federal Register on November 27, 2024 under the title: “Medicare and Medicaid Programs: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems; Quality Reporting Programs, including the Hospital Inpatient Quality Reporting Program; Health and Safety Standards for Obstetrical Services in Hospitals and Critical Access Hospitals; Prior Authorization; Requests for Information; Medicaid and CHIP Continuous Eligibility; Medicaid Clinic Services Four Walls Exceptions; Individuals Currently or Formerly in Custody of Penal Authorities; Revision to Medicare Special Enrollment Period for Formerly Incarcerated Individuals; and All-Inclusive Rate Add-On Payment for High-Cost Drugs Provided by Indian Health Service and Tribal Facilities” [1].
Payment Year 2019 Rerun for Payment Recovery
CMS has notified all Medicare Advantage organizations and pertinent entities that have a practice of submitting risk adjustment data, that the agency will be running risk scores under payment year 2019 for the purpose of payment recovery during 2025. Entities have an obligation to delete incorrect data regardless of whether the Medicare Advantage organization identifies incorrect diagnosis data prior to the risk adjustment deadline [2]. This could impact revenue cycle management companies around the country.
HHS Guidance for Evaluation of Sex Differences
The agency has published guidance on the opinions of the FDA on the topic of evaluation of sex differences in clinical investigations. Among other things, it lifts a restriction on women with childbearing potential from Phase 1 and Phase 2 trials [3]. Leaders involved in medical billing should take note.
OIG Audit Reveals Improper Payment for Urinary Catheters
The report results were part of an audit spanning 2014 to 2021, in which CMS identified high levels of improper payments for urological supplies. These included intermittent urinary catheters. Of $303.3 million paid by Medicare, about $35.1 million was found to be paid improperly [4]. Hospital accounts receivable professionals could be impacted by this audit.
50 New ICD-10-PCS Codes To Watch
CMS has announced an April release of an expansion of 50 additional ICD-10-PCS codes. They will be effective for any procedures performed between April 1, 2025 and September 30, 2025. The codes, which can impact hospital coding and healthcare revenue cycle solutions, will include both OR and non-OR procedures [5].
Release of 2025 PDE
CMS announced the planned release of the 2025 Prescription Drug Event Participant Guide. Available as of January 2025, the agency will release the guide broken into individual modules throughout the calendar year. These modules will be released sequentially and include Part D Payment Methodology, Data format, Employer Group Wavier Plans and Reports [6]. Physician revenue cycle management professionals should consider reviewing the guide.
PDE Analysis Website News
CMS has provided information regarding the withheld and invoiced outliers, data quality review outliers, and reviews of manufacturer disputes related to postings on the Prescription Drug Event Analysis website. The memorandum updates any existing guidance, accounting for the Manufacturer Discount Program [7].
PDE Reports and Analysis Reporting Initiatives for 2025
CMS has provided an update on their continuing reporting initiatives for the 2025 benefit year. These initiatives support the agency’s efforts in improving the accuracy of sponsor PDE data. The agency is encouraging sponsors to take an “active and consistent approach” to addressing the accuracy of submitted PDE data and the work to resolve errors that lead to rejections of PDEs [8].
CMS Publishes MLN Fact Sheet
CMS has released the fact sheet for Complying with Documentation for Lab Services. The sheet describes Comprehensive Error Rate Testing program errors with medical documentation. It was created to help providers better understand their options in providing accurate and supportive documentation for the lab orders they create [9]. Billing companies and other revenue cycle management companies could find this useful.
References
[1] CMS, “Ambulatory Surgical Center Payment- Correction Notice to Final Rulemaking with Comment Period,” 2025. Available: https://www.cms.gov/medicare/payment/prospective-payment-systems/ambulatory-surgical-center-asc/asc-regulations-and-notices/cms-1809-cn.
[2] CMS, “Rerun of Payment Year (PY) 2019 for Purposes of Payment Recovery,” 17 January 2024. Available: https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/CMS/rerun_of_payment_year_2019_for_purposes_of_payment_recovery_g.pdf.
[3] U.S. Department of Health and Human Services, “Evaluation of Sex Differences in Clinical Investigations,” January 2025. Available: https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/FDA/evaluation_of_sex_differences_in_clinical_investigations_january_2025.pdf.
[4] HHS Office of Inspector General, “Medicare Improperly Paid Suppliers for Intermittent Urinary Catheters,” 6 February 2025. Available: https://oig.hhs.gov/reports/all/2025/medicare-improperly-paid-suppliers-for-intermittent-urinary-catheters/.
[5] C. Geiger, “BEWARE: Fifty New ICD-10-PCS Codes are Coming!,” RACmonitor, 10 February 2025. Available: https://racmonitor.medlearn.com/beware-fifty-new-icd-10-pcs-codes-are-coming/.
[6] CMS, “2025 Prescription Drug Event Participant Guide,” 14 January 2025. Available: https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/CMS/2025_prescription_drug_event_participant_guide_g.pdf.
[7] CMS, “Prescription Drug Event (PDE) Analysis Website for CMS Data Quality Review Outliers, Withheld and Invoiced Outliers, and Reviews of Invoiced Data Disputed by Manufacturers,” 17 January 2025. Available: https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/CMS/prescription_drug_event_analysis_website_for_cms_data_quality_review_outliers_withheld_and_invoiced_outliers_and_reviews_of_invoiced_data_disputed_by_manufacturers_g.pdf.
[8] CMS, “Continuation of the Prescription Drug Event (PDE) Reports and PDE Analysis Reporting Initiatives for the 2025 Benefit Year,” 17 January 2025. Available: https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/CMS/continuation_of_the_prescription_drug_event_reports_and_pde_analysis_reporting_initiatives_for_the_2025_benefit_year_g.pdf.
[9] U.S. Department of Health and Human Services, “Complying with Documentation Requirements for Lab Services,” December 2024. Available: https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/CMS/mln909221_complying_documentation_requirements_lab_services.pdf.
Value-based reimbursement is driving expanded complexity in the healthcare industry, increasing the need for revenue cycle leaders to ensure patient conditions are captured accurately. One of the primary ways to do this is through hierarchical condition category (HCC) risk adjustment coding.
To help you keep your HCC risk adjustment coding up with the challenges of 2025, 3Gen Consulting has put together this update of the latest research and findings in HCC risk adjustment.
One of the primary reasons that research in HCC risk adjustment coding is so important is that differences in calculations can shift incentives for different healthcare stakeholders. These codes are based on the complexity of a patient’s health condition, so coding can make a significant difference in reimbursement received.
For example, highly complex patients will often receive higher reimbursement, so accurate coding of a patient’s chronic condition can increase their risk score, resulting in higher reimbursement. This is considered acceptable since the provider is assumed to be expending more time and resources managing more complex patients that require greater care.
While this dynamic can be used for unethical purposes, not all coding differences are used illegally. Sometimes, there is an issue of coding simply being applied differently between Medicare and Medicare Advantage (MA) programs, which should ideally be similar in coding practices and reimbursement. This is of particular concern to government agencies since Medicare Advantage is growing at a significant rate. The Congressional Budget Office (CBO) has projected that the share of beneficiaries of Medicare Advantage will increase from 54% of eligible Medicare beneficiaries in 2024 to around 64% 10 years from now. Today, it is believed that Medicare Advantage plans are significantly overpaid in comparison to traditional Medicare plans. The Medicare Payment Advisory Commission (MedPAC) has estimated that, in 2024, MA payments were 22% higher than traditional Medicare, a difference of $83 billion [1]. These overpayments tend to benefit plans rather than beneficiaries, meaning that there is a financial incentive for plans to restrict care after members are enrolled, something that can result in delays and denials of service and ultimately, poorer outcomes for patients.
As things stand now under the existing Medicare Advantage risk-adjustment system, participating plans face questionable incentives. These include incentives to report diagnosis codes on their enrollee medical claims that reflect more severe health conditions and additional conditions. This action increases enrollee risk scores and payments. With the goal of improving risk adjustment integrity, some researchers have released a proposal including four alternative methods for constructing risk scores [2]:
They compared the predictive accuracy of each of these strategies against the standard HCC risk adjustment coding approach. The researchers did this using 2016–19 medical and pharmaceutical claims linked to Consumer Assessment of Healthcare Providers and Systems survey responses gathered from 151,432 Medicare Advantage enrollees. They found that, in relation to the standard HCC risk adjustment model, the models that combined survey responses with risk scores did a better job of predicting healthcare use. This approach explained 5.8-6.0 percent of the individual variation in total price-standardized Medicare Advantage utilization in comparison to 5.1%. The findings suggest that diagnosis codes can be used in conjunction with survey responses to improve Medicare Advantage risk adjustment results.
Research from HealthAffairs has revealed that risk-score gaps could be attributable to differences in capture of diagnostic codes [3].
Medicare Advantage payments are adjusted using a risk-score model calibrated on demographic data and diagnostic data from traditional Medicare beneficiaries. This data is in turn applied to Medicare Advantage beneficiaries. If Medicare Advantage plans are capturing more diagnostic codes in comparison to traditional Medicare, they can receive higher payments in comparison.
Researchers analyzed Medicare Advantage encounter data and Medicare claims from 2017-2019 to compare persistence of diagnostic coding under sixteen chronic conditions. Analysis found that the difference accounted for 2.85 percentage points (22.3%) of the Medicare/MA risk-score gap in 2020, amounting to $8.1 billion in Medicare spending.
As the complexity of HCC risk adjustment scoring increases and the need for certified risk adjustment coders grows, 3Gen Consulting is here to help support your revenue cycle needs. Schedule a call today to discuss how we can improve the efficiency and effectiveness of your risk adjustment efforts.
[1] P. N. Van de Water, “Growth in Medicare Advantage Raises Concerns,” Center on Budget and Policy Priorities, 10 January 2025. Available: https://www.cbpp.org/research/health/growth-in-medicare-advantage-raises-concerns.
[2] M. Bellerose, H. O. James, J. Shroff, A. M. Ryan and D. J. Meyers, “Combining Patient Survey Data With Diagnosis Codes Improved Medicare Advantage Risk-Adjustment Accuracy,” Health Affairs, vol. 44, no. 1, 2025.
[3] N. Ghoshal-Datta, M. E. Chernew and J. M. McWilliams, “Lack Of Persistent Coding In Traditional Medicare May Widen The Risk-Score Gap With Medicare Advantage,” Health Affairs, vol. 43, no. 12, 2024.
For years, vendor partners were icing on the cake for many healthcare providers – medical coding outsourcing services were something leadership considered under specific circumstances or in response to certain external pressures in the industry. This, though, has changed. Innovation and disruption in the industry now mean
Understanding Hierarchical Condition Category (HCC) coding should be a priority for any revenue cycle leader. This is because risk adjustment coding is critical to estimating costs
