100-16 Medicare Managed Care Manual: Chapter 7 - Risk Adjustment

Medicare Managed Care Manual
Chapter 7 – Risk Adjustment
Table of Contents
(Rev. 118, 09-19-14)
Transmittals for Chapter 7
10 – Introduction
20 – Purpose of Risk Adjustment
30 – Statutory and Regulatory Authority for Risk Adjustment
40 – Role and Responsibilities of Plan Sponsors
50 – History of Risk Adjustment
60 - Annual Schedule
70 – Risk Adjustment Models- Overview
70.1 – Calibration of the CMS-HCC Risk Adjustment Models
70.2 – CMS-HCC Risk Adjustment Model
70.2.1 – Community, Institutional, and New Enrollee Segments
70.2.2 – Risk Score for Long Term Institutionalized Beneficiaries
70.2.3 – Demographic Factors in the CMS-HCC Model
70.2.4 – Original Reason for Entitlement Code (OREC)
70.2.5 – Medicaid
70.2.6 – Disease Hierarchy
70.2.7 – Disease and Disabled Interactions
70.3 – End Stage Renal Disease (ESRD)
70.3.1 – Dialysis
70.3.2 – Transplant
70.3.3 – Post-Transplant (Functioning Graft)
70.3.4 – New Enrollee Factors for Beneficiaries in ESRD Status
70.4 – Prescription Drug Hierarchical Condition Categories (RxHCC)
70.4.1 – RxHCC Risk Adjustment Model Segments
70.4.2 – Low Income Status
70.4.3 – Long Term Institutional Status
70.5 – CMS RxHCC Risk Adjustment Model Compared with the CMS-HCC Risk
Adjustment Model
70.5.1 – Model Similarities
70.5.2 – Model Differences
80 – Frailty Adjuster
90 – Normalization Factor

100 - MA Coding Adjustment
110 – Risk Adjustment Process and Payment
120 – Operations
120.1 – Data Collection to Support Risk Adjustment
120.1.1 – Sources of Data
120.2 – Submission and Flow of Risk Adjustment Data
120.2.1 – Data Exchange Requirements
120.2.2 – Format
120.2.3 – Diagnosis Cluster
120.2.4 – Valid Diagnosis Codes
120.2.5 – Tips for Reducing Duplicate Diagnosis Cluster Errors
120.2.6 – Health Insurance Portability and Accountability Act (HIPAA)
120.2.7 – Submission Timeline
120.2.8 – Status Reports of Risk Adjustment Submissions
120.3 – Risk Score Verification Tools
120.3.1 – RAPS Reports
120.3.2 – MARx Reports
120.3.3 – Risk Adjustment Model Software
130 - Glossary of Terms

10 - Introduction
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
This manual chapter addresses the policies and operations related to the data collection for,
calculation of, and use of risk scores in Part C and Part D payments through 2011. For detailed
information on payment policies and formulas, refer to Chapter 8 for Part C payment (a chapter
for Part D payment is forthcoming). CMS risk adjusts Part C payments made to Medicare
Advantage (MA) plans and Program of All Inclusive Care for The Elderly (PACE)
organizations, and Part D payments made to Part D sponsors, including Medicare Advantage-
Prescription Drug plans (MA-PDs) and standalone Prescription Drug Plans (PDPs).
20 - Purpose of Risk Adjustment
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
Risk adjustment allows CMS to pay plans for the risk of the beneficiaries they enroll, instead of
an average amount for Medicare beneficiaries. By risk adjusting plan payments, CMS is able to
make appropriate and accurate payments for enrollees with differences in expected costs. Risk
adjustment is used to adjust bidding and payment based on the health status and demographic
characteristics of an enrollee. Risk scores measure individual beneficiaries’ relative risk and risk
scores are used to adjust payments for each beneficiary’s expected expenditures. By risk
adjusting plan bids, CMS is able to use standardized bids as base payments to plans.
30 - Statutory and Regulatory Authority for Risk Adjustment
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
The Medicare Advantage (MA) program provides Parts A and B services under Part C of Title
XVIII of the Social Security Act (“the Act”). CMS administers risk adjusted payments to MA
organizations in accordance with Subpart G of 42 CFR §422.304. This regulatory provision is
based on sections 1853, 1854, and 1858 of the Act. CMS risk adjusts Part C payments made to
MA plans under Section 1853(a) (3) of the Act; these rules are codified at 42 CFR 422.310.
CMS risk adjusts payments to PACE organizations under 1894(d) (2).
MA plans include MA-only plans, MA-PD plans, regional plans, employer group health plans,
and Special Needs Plans (SNPs). CMS risk adjusts certain demonstration plan payments, such as
the Part C payments made to the dual demonstration plans (Wisconsin Partnership Program,
MassHealth Senior Care Options, and Minnesota Senior Health Options and Minnesota
Disability Health Options), and Social Health Maintenance Organizations (SHMOs).
CMS risk adjusts Part D payments to Medicare Advantage Prescription Drugs plans (MA-PDs),
standalone Prescription Drug Plans (PDPs), and PACE organizations under 1860(d); these rules
are codified at 42 CFR 423.
40 - Role and Responsibilities of Plan Sponsors
(Rev. 118; Effective: ICD-10: Upon Implementation of ICD-10, ASC X12: January 1, 2012
(for ASC X12 5010); Implementation: ICD-10: Upon Implementation of ICD-10, ASC X12:
January 1, 2012 (for ASC X12 5010))

MA organizations, PACE organizations, 1876 Cost HMOs/Competitive Medical Plans (CMPs),
and starting in 2012, Health Care Prepayment Plans (HCPPs) like the United Mine Workers of
America Health and Retirement Funds, must submit risk adjustment data, as required by CMS.
This section provides a high-level checklist of plan requirements. Detailed information about
risk adjustment data collection, submission, reporting, and validation are outlined in later
sections within this chapter.
Risk Adjustment Data Submission Requirements – Plan Sponsors (Medicare Advantage
Organizations (MAOs), PACE organizations, and 1876 Cost HMO/CMPs) must:
• 	Ensure the accuracy and integrity of risk adjustment data submitted to CMS. All
diagnosis codes submitted must be documented in the medical record and must be
documented as a result of a face-to-face visit. The diagnosis must be coded according to
International Classification of Diseases, (ICD) Clinical Modification Guidelines for
Coding and Reporting.
• 	Implement procedures to ensure that diagnoses are from acceptable data sources. The
only acceptable data sources are hospital inpatient facilities, hospital outpatient facilities,
and physicians. Plan sponsors are responsible for determining provider type based on the
source of the data.
• 	Submit the required data elements from acceptable data sources according to the coding
guidelines.
• 	Submit all required diagnosis codes for each beneficiary and submit unique diagnoses at
least once during the risk adjustment data-reporting period. Submitters must filter
diagnosis data to eliminate the submission of duplicate diagnosis clusters.
o 	For Part B-only beneficiaries enrolled in a plan, the plan sponsor must submit
diagnosis codes under the same rules as for a beneficiary with both Parts A and B.
The plan should also submit diagnosis codes for Part A services provided under a
non-Medicare contract.
If upon conducting an internal review of submitted diagnosis codes, the plan sponsor
determines that any diagnosis codes that have been submitted do not meet risk adjustment
submission requirements, the plan sponsor is responsible for deleting the submitted
diagnosis codes as soon as possible.
• 	Receive and reconcile CMS Risk Adjustment Reports in a timely manner. Plan sponsors
must track their submission and deletion of diagnosis codes on an ongoing basis.
• 	Once CMS calculates the final risk scores for a payment year, plan sponsors may request
a recalculation of payment upon discovering the submission of inaccurate diagnosis
codes that CMS used to calculate a final risk score for a previous payment year and that

had an impact on the final payment. Plan sponsors must inform CMS immediately upon
such a finding.
50 - History of Risk Adjustment
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
The Balanced Budget Act of 1997 (BBA) mandated that a risk adjustment payment
methodology, incorporating information on beneficiaries’ health status, be implemented in the
Medicare+Choice (M+C) program (now the Medicare Advantage program) no later than January
2000. Under the BBA, risk adjustment of M+C payments was initially to be based only on data
from enrollees’ inpatient hospital stays, with later implementation of risk adjustment based on
data from additional sites of care. CMS selected the Principal Inpatient Diagnostic Cost Group
(PIP-DCG) model as the risk adjustment method to be implemented in 2000. This model
recognizes diagnoses for which inpatient care is most frequently appropriate and which are
predictive of higher future costs.
To assist managed care organizations, CMS provided for a gradual phase-in of risk adjusted
payment, initially adjusting only a portion of the total payment based on the PIP-DCG
methodology - and later the CMS Hierarchical Condition Category (HCC) methodology - with
the remainder still adjusted under the pre-BBA method based only on demographic information.
This phase in was intended to provide more stable payments to M+C organizations.
The phase in schedule was as follows:
Payment
year
MA plans 	Evercare* 	SHMO* 	PACE and dual
demonstrations*
2000-2003 	10% risk/90%
demographic
100%
demographic
100%
demographic
100%
demographic
2004 	30% risk/70% demographic 	10% risk/90%
demographic
2005 	50% risk/50% demographic 	30% risk/70% demographic
2006 	75% risk/25% demographic 	50% risk/50% demographic
2007 	100% risk/0% demographic 	75% risk/25% demographic
2008 and
later
100% risk/0% demographic
*Note: For MA plans (formerly M+C plans), the demographic-only portion of the payment was
adjusted for age, gender, Medicaid eligibility, institutional status, and working aged status. For
certain demonstrations, the non-risk portion of the payment may have involved a demonstration-
specific payment methodology.
ESRD risk adjustment was implemented at 100% in 2005. Part D risk adjustment was
implemented at 100% in 2006.

The Benefits Improvement and Protection Act of 2000 (BIPA) required the implementation of a
risk adjustment model using not only diagnoses from inpatient hospital stays, but also from
ambulatory settings beginning in 2004. The draft CMS-HCC risk adjustment payment model
was released on March 29, 2002. The CMS-HCC risk adjustment payment model incorporates
disease groups that have a significant impact on Part C expenditures. Submission of ambulatory
risk adjustment data (physician and hospital outpatient) began on October 1, 2002 for dates of
service beginning July 1, 2002. On March 28, 2003, CMS announced the proposed final version
of the CMS-HCC risk adjustment model for use in payment beginning in January 2004.
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) was
enacted in December 2003, extending prescription drug coverage to Medicare enrollees. With
the passage of the MMA, "Medicare+Choice" plans became known as Medicare Advantage
(MA) plans. In 2006, the MMA made it possible for Medicare Advantage plans to offer Part D
coverage to beneficiaries in addition to coverage comparable to Part A and Part B. The MMA
also established a bidding methodology for MA organizations and drug plans in 2006. With the
enactment of the MMA, risk adjustment was also established for the Part D program.
60 - Annual Schedule
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
Table 1 provides key dates associated with risk adjustment, and provides an illustration of the
data collection periods and related payment months. The most current dates can be found in the
annual combined Call Letter posted on the CMS Web site at,
http://www.cms.gov/MedicareAdvtgSpecRateStats/AD/list.asp#TopOfPage.
Key Payment dates are:
Mid-February: 45 days prior to the release of the Rate Announcement, CMS releases the
Advance Notice of Methodological Change for the following payment year.
First Monday in April: CMS releases the Rate Announcement for the following payment year.
First Monday in June: Plan bids are due.

70 - Risk Adjustment Models - Overview
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
The CMS-HCC risk adjustment models are used to calculate risk scores, which predict
individual beneficiaries’ health care expenditures, relative to the average beneficiary.
Risk scores are used to adjust payments and bids based on the health status (diagnostic
data) and demographic characteristics (such as age and gender) of an enrollee. Both the
Medicare Advantage and Prescription Drug programs include risk adjustment as a
component of the bidding and payment processes. CMS uses risk adjustment to:
• 	Standardize bids so that each plan has a bid for the average Medicare beneficiary
• 	Compare bids based on populations with different health statuses and other
characteristics
• 	Adjust plan payment based on the characteristics of the enrolled population
CMS has developed separate risk adjustment models for the Parts A and B benefits
offered by plans under Part C and for the Part D benefits offered by prescription drug
plans. Within each benefit, CMS also developed segments of the models for
subpopulations with distinct cost patterns.
The Part C model has segments for the following subpopulations of beneficiaries:
• 	Aged/disabled Community
• 	Aged/disabled Institutional
• 	Aged/disabled New enrollee
• 	ESRD Dialysis
• 	ESRD Dialysis New Enrollee
• 	ESRD Transplant
• 	ESRD Functioning Graft – Community
o 	Add-on for 4-9 months
o 	Add-on for 10+ months
• 	ESRD Functioning Graft – Institutional
o 	Add-on for 4-9 months
o 	Add-on for 10+ months
• 	ESRD Functioning Graft – New Enrollee
o 	Add-on for 4-9 months
o 	Add-on for 10+ months
From 2006 through 2010, the Part D model uses a base model with multipliers for:

• 	Low Income (partial)
• 	Low Income (full)
• 	Long Term Institutional (aged)
• 	Long Term Institutional (disabled)
Starting in 2011, the Part D model has the following segments:
• 	Aged, non-low income
• 	Aged, low income
• 	Disabled, non-low income
• 	Disabled, low income
• 	Institutional
• 	New Enrollee, non-low income
• 	New Enrollee, low income
• 	New Enrollee, institutional
Table 2 below summarizes the common characteristics across all HCC-based risk
adjustment models.
Table 2. HCC Specific Characteristics
Characteristic 	Descriptions
Selected Significant
Disease (SSD)
Model
Model considers serious manifestations of a condition rather than all levels
of severity of a condition.
Include most body systems and conditions.
Models are Additive 	Individual risk scores are calculated by adding the coefficients associated
with each beneficiary’s demographic and disease factors.
Prospective Model 	Uses diagnostic information from a base year to predict Medicare benefit
costs for the following year.
Site Neutral 	Models do not distinguish payment based on a site of care.
Diagnostic Sources 	Models recognize diagnoses from hospital inpatient, hospital outpatient, and
physician settings.
Multiple Chronic
Diseases Considered
Risk adjusted payment is based on assignment of diagnoses to disease
groups, also known as Condition Categories (CCs).
Model is most heavily influenced by Medicare costs associated with chronic
disease.
Hierarchies 	Condition Categories are placed into hierarchies, reflecting severity and
cost dominance. Beneficiaries get credit for the disease with the highest
severity or that subsumes the costs of other diseases. Hierarchies allow for
payment based on the most serious conditions when less serious conditions
also exist.
Disease and
Disabled
Interactions
Interactions allow for higher risk scores for certain conditions when the
presence of another disease or demographic status, e.g., disabled status, is
indicative of higher costs. Disease interactions are additive factors and

increase payment accuracy.
Demographic
Variables
Models include five demographic factors: age, sex, disabled status, original
reason for entitlement, Medicaid or low income status.
These factors are typically measured as of the data collection period.
70.1 - Calibration of the CMS-HCC Risk Adjustment Models
(Rev. 118; Effective: ICD-10: Upon Implementation of ICD-10, ASC X12: January 1,
2012 (for ASC X12 5010); Implementation: ICD-10: Upon Implementation of ICD-10,
ASC X12: January 1, 2012 (for ASC X12 5010))
The CMS-HCC risk adjustment model is used to adjust payments for Part C benefits
offered by MA plans and PACE organizations to aged/disabled beneficiaries. The CMS-
HCC model includes both diseases and demographic factors. There are separate sets of
coefficients for beneficiaries in the community, beneficiaries in long term care
institutions, and new enrollees. The CMS-HCC model was first used for payment in
2004 and has been recalibrated two times since then (2007 and 2009).
When CMS recalibrates the CMS-HCC risk adjustment model, it uses data from fee-for-
service (FFS) claims, using one year’s diagnoses to predict the following year’s
expenditures. When developing the model, CMS consulted with a panel of outside
clinicians to review the diagnosis codes in order to group them with other clinically
similar diagnosis codes. These diagnosis groupings were then mapped to condition
categories based on similar clinical characteristics and severity, and cost implications.
Both the panel of clinicians and analyses of cost data informed the creation of condition
categories.
Coefficients for condition categories were estimated by regressing the total expenditure
for Medicare Parts A and B benefits for each beneficiary onto their demographic factors
and condition categories, as indicated by their diagnoses. Resulting dollar coefficients
represent the marginal (additional) cost of the condition or demographic factor (e.g.,
age/sex group, Medicaid status, disability status).
While all diagnosis codes are mapped to a condition category, not all condition categories
are included in the model used in payment. The decision to include a condition category
in the model is based on each category’s ability to predict costs for Medicare Parts A and
B benefits. Condition categories that don’t predict costs well – because the coefficient is
small, the t-value is low, the number of beneficiaries with a certain condition is small so
the coefficient is unstable, or the condition does not have well specified diagnostic coding
– are not included in the model.
In a final step, hierarchies were imposed on the condition categories, assuring that more
advanced and costly forms of a condition are reflected in the risk score.
In order to use the risk adjustment model to calculate risk scores for payment, CMS
creates a relative factor for each demographic factor and HCC in the model. CMS does

this by dividing all the dollar coefficients by the average per capita predicted expenditure
for a specific year (i.e., the “denominator year”). See Table 3 below for a list of data
years and denominator years in each version of the risk adjustment model. The relative
factors are used to calculate risk scores for individual beneficiaries, which will average
1.0 in the denominator year for the FFS population.
Each time the risk adjustment model is recalibrated, the relative factors can change.
Changes in the dollar coefficients resulting from the regression – the marginal cost
attributable to an HCC – can change relative to the average cost. For example, the
coefficient for diabetes can increase, reflecting higher costs for the disease; but if the
average cost for Medicare beneficiaries has increased even more than for diabetes, then
the relative cost of diabetes will decrease. This decrease in relative cost will be reflected
in a decrease in the relative factor, even though the costs associated with diabetes have
increased.
Although recalibrated models retain an average 1.0 risk score, individual beneficiaries’
risk scores may change, as may plan average risk scores, depending on each individual
beneficiaries’ combination of diagnoses.
Table 3. Data Years and Denominator Years
Payment Years 	Diagnoses Year 	Costs Year 	Denominator Year
2004, 2005, 2006 	1999 	2000 	2000
2007, 2008 	2002 	2003 	2005
2009, 2010, 2011 	2004 	2005 	2007
70.2 - CMS-HCC Risk Adjustment Model
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
The CMS-HCC risk adjustment model is used to calculate risk scores for aged/disabled
beneficiaries and is used in bidding and payment for Part A and B benefits, under the Part
C program. In this section, CMS will discuss in detail the specific characteristics of the
CMS-HCC risk adjustment model.
70.2.1 - Community, Institutional, and New Enrollee Segments
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
MA uses separate models for aged/disabled (non-ESRD) community and long-term
institutional residents. CMS created the separate models because there are significant
cost differences between the community-based Medicare beneficiaries and the long-term
institutionalized beneficiaries with the same disease profile. Adjusting payment for place
of residence improves payment accuracy.
Long-term institutionalized MA enrollees are individuals residing in an institution for
more than 90 days as identified using 90-day assessments in the Minimum Data Set

(MDS). Short term institutionalized MA beneficiaries are included in the community
population.
During the payment year, CMS assigns a new enrollee factor to any beneficiary who does
not have 12 months of diagnoses to support a risk score. Operationally, CMS identifies
new enrollees as those beneficiaries with less than 12 months of Medicare Part B
entitlement during the data collection year.
Part A only enrollees are defined as beneficiaries with 12 months of entitlement to
benefits under Part A and less than 12 months of Part B enrollment during the data
collection period and are treated as new enrollees, unless the enrolling organization elects
to have them treated as a full risk enrollee.
Starting in payment year 2006, organizations may elect to have CMS determine payments
for all “Part A-only” enrollees using either new enrollee factors or full risk adjustment
factors. The organization’s decision is applied to all “Part A-only” enrollees in the plan.
Plans may not elect to move some eligible “Part A-only” enrollees into risk adjustment,
while retaining others as new enrollees.
• 	If an organization elects the option, it remains turned "on" until CMS is notified
otherwise. Notification must occur prior to August 31st of any successive year.
• 	CMS will apply the option only during final reconciliation for a payment year,
and not prospectively.
• 	Plans interested in the option must contact CMS at Andrew.Keenan@cms.hhs.gov
by August 31st prior to each payment year to elect the option.
Table 4 provides information on which risk adjustment factor applies to payment.
Table 4. Which Risk Adjustment Factor Applies to Payment*
Time Period Beneficiary Has
Been Enrolled in Part B
Medicare**
Time Period Beneficiary Has Been Entitled
to Benefits Under Part A Medicare**
0 - 11 months 	≥ 12 months
0 – 11 months 	new enrollee factors 	Plan’s option: new enrollee
or full risk adjustment
factors
≥ 12 months 	full risk adjustment
factors
full risk adjustment factors
*Applies to Part C and D payments for MA plans, demonstrations, and PACE
organizations. Note that Medicare beneficiaries must be entitled to benefits under Part A
and enrolled in Part B to enroll in an MA plan.
**During data collection period. The data collection year is a lagged year for initial risk
scores and is the previous calendar year for mid-year and final risk scores.

70.2.2 - Risk Score for Long Term Institutionalized Beneficiaries
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
The Part C risk adjustment model applies a beneficiary’s institutional risk score to
payment in those payment months when the enrollee has long term institutional (LTI)
status. Unlike most factors in CMS-HCC risk adjustment models, which are recognized
in the year prior to the payment year, institutional status is recognized in the payment
year itself; this concurrent approach more accurately reflects treatment patterns upon
which costs are based.
To determine a beneficiary’s LTI status for payment purposes, CMS uses the reporting of
a 90-day assessment. This information is collected routinely from nursing homes, which
report to the States and CMS on at least a quarterly basis. This data is stored in the
Minimum Data Set (MDS). Payment at the long-term rate starts in the month following
the assessment date. Once persons are identified, they remain in long-term status until
discharged to the community for more than fourteen days. The costs of the short term
institutionalized (less than 90 days) are recognized in the community model.
Note that the institutional marker used for demographic payments is used differently from
the institutionalized marker that is used in the CMS-HCC risk adjustment model. The
institutional marker that was used in demographic payments increased payments over a
demographic base and had the effect of capturing the higher costs of older and sicker
people who go into skilled or unskilled levels of care. In the risk adjustment model, the
health status markers capture most of these characteristics.
Because CMS calculates initial and mid-year risk scores before it has complete data on
beneficiaries’ LTI status in the payment year, CMS uses the presence of a 90-day
assessment reported for any one month during the 12-month data collection period as a
proxy for LTI in the payment year. At the final payment reconciliation that takes place
post-contract year, CMS uses each beneficiary’s actual month-by-month LTI status in the
payment year to determine which risk score or multiplier to apply.
CMS turns on the LTI flag and applies an institutional risk score for initial payments
starting January of the payment year when a beneficiary has had a 90-day assessment
reported for any one month during July - June prior to the payment year (e.g., July 2008
through June 2009 for 2010 – this is the data collection period for initial payments).
CMS would apply this same score until it calculates the mid-year risk scores, at which
time CMS will update the LTI flag and institutional risk score if the person had a 90-day
assessment reported for any one month during data collection year (e.g., 2009 for 2010
payment year) for mid-year updates. (Mid-year scores take effect in July, and remain in
effect through the end of the contract year.)
Membership Monthly Report (MMR) fields specific to LTI status.

1. 	Part C LTI FLAG (field 20; position 67) - This flag means that the beneficiary has
been institutionalized for at least 90 days as of the payment month. CMS will turn on
LTI for risk adjustment when a beneficiary has a reported 90-day assessment. It
continues to be populated until the beneficiary has a more than 14-day absence from
the facility.
2. 	RA Factor Type Code (field 47; positions 189-90) – A value of "I" means that the
enrollee has been institutionalized 90+ days as of the payment month.
70.2.3 - Demographic Factors in the CMS-HCC Model
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
The CMS-HCC model is a combination of demographic and disease-based factors.
The demographic variables include:
• 	Age as of February 1 st of the payment year.
• 	Sex of the beneficiary.
• 	Disabled Status results in the inclusion of additional factors in the risk scores of
community residents who are disabled beneficiaries under 65 years old.
• 	Original Reason for Entitlement results in the inclusion of a factor in the risk
score for beneficiaries 65 years of age or older who were originally entitled to
Medicare due to disability; the factor differs by the age and sex of the beneficiary.
• 	Medicaid Eligibility results in the inclusion of an additional factor in the risk
score.
70.2.4 - Original Reason for Entitlement Code (OREC)
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
In CMS’ calculation of the MA payment, CMS includes an additional factor in the risk
score based on the original reason the beneficiary became eligible for Medicare. Table 5
outlines the application of the factor based on original reason for entitlement. The
Monthly Membership Report reflects the OREC identified in MARx.
Table 5. Original Reason for Entitlement Codes and Descriptions
OREC 	Description 	Factor Application
0 	Beneficiary insured due to age 	CMS applies no additional factor.
1 	Beneficiary insured due to disability 	CMS applies the same factor for OREC 1 and
3.

2 	Beneficiary insured due to ESRD 	CMS applies no additional factor under the
CMS-HCC model.
3 	Beneficiary insured due to disability
and current ESRD
CMS applies the same factor for OREC 1 and
3.
Example (example uses the CMS-HCC risk adjustment model used in payment for
years 2009 through 2011):
• 	An 83 year old man who originally became entitled to Medicare as disabled is
diagnosed with pneumococcal pneumonia (ICD-9 code 481, HCC112).
• 	Originally insured due to disability, OREC = 1
• 	Originally disabled, male = 0.168
Pneumococcal Pneumonia, Emphysema, Lung Abscess, HCC112 = 0.249
• 	Risk Score = (demographics) + 0.168+0.249
Example (example uses the CMS-HCC ESRD dialysis risk adjustment model used
in payment for years 2008 through 2011):
• 	A 72 year old man who became had originally been entitled to Medicare as
disabled is diagnosed with End-Stage Renal Disease (ESRD) with renal dialysis
status (ICD-9 code V451, HCC130).
• 	Originally insured due to disability with current ESRD, OREC = 3
• 	Male, originally entitled due to disability (non-ESRD) = 0.032
Renal Dialysis Status, V451, HCC130 = 0.0000
• 	Risk Score = (demographics) + 0.032+0.000
70.2.5 - Medicaid
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
The CMS-HCC and ESRD risk adjustment models include a Medicaid factor. If a
beneficiary has Medicaid status in the appropriate time period, the relative factor
associated with Medicaid is included in the calculation of the beneficiary risk score.
Medicaid is defined as being eligible for Title XIX under an approved Medicaid State
Plan, including eligibility for full Medicaid benefits as well as those who are eligible only
under one of the Medicare Savings Program categories, e.g., Qualified Medicare
Beneficiary (QMB), Specified Low-Income Medicare Beneficiary (SLMB).
Full risk beneficiaries:

The Medicaid factor is included in the risk score when CMS has data indicating that the
beneficiary is Medicaid eligible for one month or more in the data collection year. For
example, when calculating final 2009 risk scores, the beneficiary will have Medicaid
included in their risk score if they were eligible for Medicaid at least one month in 2008.
(Note: When calculating initial and mid-year risk scores, CMS may look to early time
periods to determine whether or not to assign Medicaid status in the risk score.)
New enrollees:
For individuals with less than 12 months of Part B enrollment in the data collection
period the Medicaid factor is included in the calculation of the risk score when the
beneficiary is Medicaid for one or more months in the payment year. For example, when
calculating final 2009 risk scores, the beneficiary will have Medicaid included in their
risk score if they were eligible for Medicaid at least one month in 2009.
In order to appropriately assign Medicaid status to beneficiaries, CMS obtains data on
Medicaid eligibility from several sources. For payment year 2008 and later, the
following data sources are used:
1. 	MMA Medicare/Medicaid Dual Eligible monthly file (MMA State files): These
files provide monthly identification of each actively enrolled Medicare/Medicaid
dual eligible beneficiary, including a person-month record for each
Medicare/Medicaid dual eligible in a State Medicaid program in the reporting
month. The MMA State files also report information on changes in the
circumstances for individuals in a prior month. The files include those eligible for
comprehensive Medicaid benefits (whether eligible through the state plan or a
section 1115 demonstration), as well as those for whom the State pays Medicare
premiums and/or cost sharing (Qualified Medicare Beneficiaries, Specified Low-
Income Medicare Beneficiaries, and Qualifying Individuals). CMS also uses this
data to identify low income beneficiaries under Part D.
2. 	Puerto Rico monthly submission file: CMS has arranged with Puerto Rico to
submit files similar to the MMA State files for beneficiaries who are Medicaid
eligible in Puerto Rico.
3. 	Point-of-Sale data: Submitted to assist pharmacies in identifying low income
beneficiaries under Part D.
4. 	Plan-reported Medicaid status: Plans can report retroactive Medicaid status via
the Retro Processing Contractor (RPC). The RPC requires documentation of
Medicaid eligibility and confirmation that the beneficiary is not already in CMS
data systems prior to updating the beneficiary record based on plan submissions.
Please note that plan-reported Medicaid status must be posted to the CMS data
systems in time for risk score calculation runs. For more information on plan-
reported updates of Medicaid status, including timing and documentation needs,
please refer to the Standard Operation Procedure (SOP) for the RPC.

CMS changed the sources used to identify beneficiaries as Medicaid with the 2008
payment year. Table 6 below shows the data sources used by payment year:
Table 6. Data sources for identifying the Medicaid eligibility of Medicare
beneficiaries:
Payment year 2007
and earlier years
Payment year 2008 	Payment year
2009 and later
years
New enrollees 	1. 	Third Party Buy-
In file
2. 	Plan-reported
Medicaid
• 	Batch “01”
transactions
• 	Retroactive
updates through
the Retro
Processing
Contractor
(RPC)
1. 	MMA State files
2. 	Plan-reported
• 	Retroactive
updates through
the RPC
1. MMA State
files
2. Plan-reported
• 	Retroactive
updates
through the
RPC
Full risk
enrollees
1. 	MMA State files
2. 	Third Party Buy-
In file
3. 	Plan-reported
Medicaid
• 	Batch “01”
transactions
• 	Retroactive
updates through
the RPC
Notes: CMS considers full risk Medicare beneficiaries as dually-eligible if
they were eligible for Title XIX during any month in the year prior to the
payment year. Full risk Medicare beneficiaries have 12 months of Part B
enrollment in the year prior to the payment year. CMS assigns Medicaid
status for new enrollees on a concurrent basis, i.e., if a newly-enrolled
Medicare beneficiary is eligible for Title XIX during any month during the
payment year, they are considered Medicaid for that year.
Checking Medicaid status used in payment:
While plans are permitted to submit Medicaid status for their enrollees who are not
otherwise reported as Medicaid, plans first must conduct analyses of the available data
from CMS to confirm that CMS does not already have Medicaid status reported for the
beneficiary.
Table 7 below illustrates how to use the MMR to determine Medicaid status. For a
description of fields 19, 21, 23, and 47, please see the latest version of the Monthly
Membership Report.

Table 7. Using the MMR to identify Medicaid status
If the enrollee is a “full risk” enrollee, i.e.,
has 12 months of Part B in the data
collection period
Field 47 (RA Factor Type code) = C, C1, C2, D, G1, G2, I,
I1, or I2
and
Field 23 (Default Risk Factor code) = blank
Medicaid is used in calculating the risk
score if enrollee was Medicaid for at
least one month in the data collection
period
Field 19 = blank
Use Field 21 to determine Medicaid status –
Field 21 = Y
Indicates that Medicaid status was used in calculating the
risk score, i.e., at least a one month period of Medicaid
eligibility during the data collection period was established
in CMS systems at the time that risk scores were calculated.
Field 21 = blank,
Indicates that no Medicaid period of eligibility was
established in CMS systems during the data collection
period.
If the enrollee is a “new enrollee,” i.e., does
not have 12 months of Part B in the data
collection period –
And they were present in the Medicare
Beneficiary Database at the time that the
Risk Adjustment System (RAS) pulled data
for calculating risk scores…
A “new enrollee” risk score will be assigned
in RAS.
Field 47 (RA Factor Type code) = E, ED, E1, or E2
and
Field 23 (Default Risk Factor code) = blank
Medicaid is used in assigning the
new enrollee risk score if the
enrollee was Medicaid for at least
one month in the payment year.
Field 19 = blank
Use Field 21 to determine Medicaid status –
Field 21 = Y
Indicates that Medicaid status was used in assigning the new
enrollee risk score, i.e., at least a one month period of
Medicaid eligibility during the payment year was established
in CMS systems at the time that the risk score was assigned.
Field 21 = blank

Indicates that no Medicaid period of eligibility was
established in CMS systems during the payment year.
Note: The application of Medicaid status based on Medicaid
periods during the payment year will happen at final
payment reconciliation (conducted in the year following the
payment year). New enrollees who are assigned a RAS risk
score during the initial risk score run are assigned Medicaid
status if they are Medicaid for at least one month during the
lagged data collection period (July-June prior to the payment
year) or during any one month after June, but prior to the risk
score run. New enrollees who are assigned a RAS risk score
during the mid-year risk score run are assigned Medicaid
status if they are Medicaid for at least one month during the
year prior to the payment year or any one month during the
payment year. At final payment reconciliation, Medicaid
status will be applied to the final risk score if there is a
Medicaid period of at least one month during the payment
year.
If the enrollee does not have a RAS-
generated risk score, either because –
o the enrollee was not present in the
Medicare Beneficiary Database at the time
that RAS pulled data for calculating risk
scores, i.e., they were neither entitled to
Part A nor enrolled in Part B at the time of
the risk score run, or
o the enrollee has RAS factors for
community and institutional, but has a
newly-reported ESRD status (RAS did not
know to generate a CMS-HCC ESRD risk
score for the beneficiary) –
The payment system will not have the
appropriate risk score passed to it from RAS
for these beneficiaries; the payment system
will assign the appropriate default risk score
in these cases (aged/disabled, ESRD).
Field 23 is populated with 1, 2, 3, 4, 5, 6, or blank depending
on type of default score used (see the PCUG for more
information about the MMR file layout).
Prior to 2009:
Field 47 (RA Factor Type code) = blank
and
Field 23 (Default Risk Factor code) = Y (indicates that a
default risk score was assigned by the payment system)
Note: Default risk scores may be needed throughout the
payment year, since RAS may not be able to generate the
appropriate risk scores during the initial and mid-year risk
score runs. At final payment reconciliation (conducted in the
year following the payment year), all beneficiaries enrolled
during the payment year – both full risk and new enrollees -
will receive RAS-generated risk scores, i.e., no default risk
scores are assigned at final payment reconciliation.
Medicaid is used in assigning the
default risk score if the enrollee was
Medicaid for at least one month in
the payment year.
Field 21 = blank
Use Field 19 to determine Medicaid status –
Field 19 = Y

Indicates that Medicaid status was used in assigning the new
enrollee risk score, i.e., at least a one month period of
Medicaid eligibility during the payment year was established
in CMS payment system at the time that the default risk
score was assigned.
Field 19 = N
Indicates that no Medicaid period of eligibility was
established in CMS systems during the payment year.
Note: For default risk scores assigned to beneficiaries at the
beginning of a payment year, the payment system assigns
default risk scores using Medicaid if the beneficiary has
Medicaid for at least one month in the year previous to the
payment year (since payment-year Medicaid status is
unknown). During the payment year, the payment system
checks quarterly for updates to the Medicaid status of default
beneficiaries and adjusts their Medicaid status according to
the rules for default enrollees.
Notes: The data collection period is the 12 month period from which CMS uses
diagnoses when calculating risk scores. For mid-year and final risk scores, the data
collection period is the calendar year prior to the payment year (2007 for 2008 payment
year). For initial risk scores (those used for prospective payments from January – June in
a payment year), the data collection period is the July (two years prior) – June (in the year
prior to payment year). For example, for 2010 initial risk scores, CMS used July 1, 2008
– June 30, 2009 for the data collection period.
70.2.6 - Disease Hierarchy
(Rev.114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
Disease hierarchies address situations when multiple levels of severity for a disease, with
varying levels of associated costs, have been reported for a beneficiary. The hierarchies
prioritize the inclusion in a risk score of multiple HCCs where diagnoses are clinically
related and ranked by costs. In the case of a disease hierarchy, Part C payment is based
only on the most severe and costly manifestation of the disease. Hierarchies are
published in the Rate Announcement for the years when CMS recalibrated the CMS-
HCC model.
The following example demonstrates how the hierarchy logic is applied in the CMS-
HCC risk adjustment model used for payment. :
An individual residing in the community with diabetes, which progresses over a year
from having no complications (ICD-9 code 2500, HCC19) to having diabetes with
ketoacidosis (ICD-9 code 2501). Diabetes with ketoacidosis is in the HCC for diabetes

with acute complications (HCC17). The progression of the disease would trigger the
payments for HCC17, but not for HCC19. HCC17 is the more severe manifestation of
the disease and the payments for HCC17 are higher than for HCC19.
CMS-HCC DISEASE HIERARCHIES
If the Disease Group is Listed in This
Column…
…Then Drop the Associated Disease Group(s)
Listed in This Column
HCC Disease
Group
Label 	HCC Disease
Group
Label
17 	Diabetes with
Ketoacidosis
19 	Diabetes without
Complications
Factor 1: Diabetes with Ketoacidosis, HCC17 = 0.339
Factor 2: Diabetes without Complications, HCC19 = 0.162
Risk Score = (demographics) + 0.339
70.2.7 - Disease and Disabled Interactions
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
Disease Interactions - Certain combinations of coexisting diagnoses for an individual
can increase medical costs more than the additive nature of the CMS-HCC model
reflects. The CMS-HCC model recognizes these higher costs by incorporating disease
interactions in the model.
Disabled Interactions - Interactions between certain diseases and disabled status for an
enrollee can increase medical costs. 	The CMS-HCC model recognizes these higher
costs by incorporating disease and disabled interactions in the model.
In calculating the interaction part of the risk score for an individual, the disease or
disabled interaction factor is added to the remaining factors.
The following example uses the CMS-HCC risk adjustment model used in payment
for years 2009 through 2011:
An individual who is disabled, lives in the community, and has been diagnosed with
rheumatoid arthritis (ICD-9 code 7140, HCC38) and cystic fibrosis (ICD-9 code 2770,
HCC107).
Factor 1: Rheumatoid Arthritis and Inflammatory Connective Tissue, HCC38 = 0.346
Factor 2: Cystic Fibrosis, HCC107 = 0.399
Factor 3: Disabled * Cystic Fibrosis, D_HCC107 = 1.097
Risk Score = (demographics) + 0.346 + 0.399 + 1.097

70.3 - End Stage Renal Disease (ESRD)
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
In addition to the CMS-HCC model used to improve payment accuracy for aged/disabled
beneficiaries enrolled in MA plans and PACE organizations, CMS implemented the
ESRD model to improve accuracy for enrollees with ESRD, including those in dialysis
status, having transplants, and in post-graft status. The CMS-HCC ESRD model is based
on the CMS-HCC model for aged/disabled beneficiaries: it uses the same HCCs and
therefore retains the characteristics of the CMS-HCC model. The coefficients differ as
they are estimated for the ESRD dialysis and transplant populations, which have different
costs for their Part A and B benefits and different cost patterns among the various
diagnoses.
The following are the segments of the ESRD model:
• 	Dialysis,
• 	Transplant, and
• 	Post-Graft/Functioning Graft
70.3.1 - Dialysis
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
Dialysis Status – Payments for beneficiaries are made using CMS-HCC ESRD dialysis
risk scores when CMS has notification from a dialysis facility that the beneficiary is
receiving dialysis in a Medicare certified facility. The dialysis facility submits the
notification to CMS on the CMS-2728 form and the payment system uses this
information to apply an ESRD dialysis risk score.
Payment for Medicare beneficiaries in dialysis status is made using the ESRD State
ratebook: the risk score is multiplied by the appropriate State rate. See Chapter 8:
Payments to Medicare Advantage Organizations.
70.3.2 - Transplant
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
Another component of the CMS-HCC ESRD model are the transplant factors. CMS pays
for the high one-time cost of a transplant by making payments over three months to cover
the costs for the transplant and the immediate subsequent services.
To estimate the factors for the month of the transplant and the two following months,
CMS uses fee-for-service expenditures in these three months and attributes 50% of the
costs to the first month, and half of the remaining costs to each of the second and third
months following the transplant. The factors are calculated by dividing by the
denominator for the CMS-HCC ESRD model.

CMS will make payment by determining the month of transplant and paying the three
lump sum monthly amounts over the three-month period starting with the transplant
month. The payments are calculated by multiplying the transplant factor by the
applicable State rate. See Chapter 8: Payments to Medicare Advantage Organizations.
70.3.3 - Post-Transplant (Functioning Graft)
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
In addition to dialysis and transplant, post-transplant (functioning graft) is a component
of the ESRD model. CMS defines these enrollees as those who received a kidney
transplant at least three months before the payment month and have not returned to
dialysis status since the transplant. This model segment includes additional factors in the
risk score that account for the extra costs of immunosuppressive drugs and higher
intensity of care for this group. These additional factors differ for months 4-9 after a
transplant, and for months 10 onward. CMS calculates payments for functioning graft
enrollees with risk scores calculated using the aged-disabled CMS-HCC model
coefficients, with the exception of the coefficient for HCC174 (Major Organ Transplant).
MA organizations may locate the ratebook used to calculate payments to transplant
enrollees on the CMS website at:
http://www.cms.gov/MedicareAdvtgSpecRateStats/RSD/list.asp#TopOfPage.
70.3.4 - New Enrollee Factors for Beneficiaries in ESRD Status
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
The dialysis and functioning graft models have new enrollee factors for enrollees who do
not have 12 months of Part B enrollment in the data collection period and for whom full
risk scores cannot be determined. CMS uses a new enrollee risk adjustment factor based
on the beneficiary’s demographic characteristics, including age, disability, and ESRD
status when a beneficiary is too new to Medicare to have a risk adjustment factor. New
enrollees with transplants receive the same transplant factors as full risk enrollees.
For ESRD enrollees who do not have an ESRD risk score calculated for them before the
payment month (which may happen prior to final reconciliation), a default risk score is
used in payment. Beginning in November 2008, plans can determine the payment model
CMS used for the new enrollee beneficiary by reviewing the “Default Risk Factor Code”
CMS communicated on the Monthly Membership Report in field 23. Table 8 outlines the
Default Risk Factor Codes.

Table 8. Default Risk Factors
[Field 23 on the Monthly Membership Report]
Default Risk
Factor Code
Definition
1 	Default Enrollee – Aged/Disabled
2 	Default Enrollee – ESRD Dialysis
3 	Default Enrollee ESRD with Kidney Transplant, Month 1
4 	Default Enrollee – ESRD with Kidney Transplant, Months 2 – 3
5 	Default Enrollee – ESRD Post Graft, Months 4 – 9
6 	Default Enrollee – ESRD Post Graft, Months 10 +
Blank 	Not a default enrollee - Risk Adjustment Factor calculated by CMS
MA organizations may locate the ratebook used to calculate payments to transplant
enrollees on the CMS website at
http://www.cms.hhs.gov/MedicareAdvtgSpecRateStats/RSD/list.asp#TopOfPage.
70.4 - Prescription Drug Hierarchical Condition Categories (RxHCC)
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
Starting in 2006, with the implementation of the Part D program, CMS introduced a
second major HCC-based risk adjustment model. Created with the passage of the
Medicare Modernization Act (MMA) of 2003, the Medicare Part D Prescription Drug
benefit became the second major Medicare capitated payment system. CMS developed
the Part D RxHCC risk adjustment model to apply to monthly capitated payments to both
Medicare Advantage (MA-PDs) and standalone prescription drug plans (PDPs). The Part
D RxHCC risk adjustment model implemented in 2006 was developed using a structure
similar to the CMS-HCC model, in that it included demographic and diagnosis
information clustered into hierarchical condition categories. CMS obtains diagnoses for
all Medicare beneficiaries from either fee-for-service claims or Medicare Advantage
reporting. In 2011, CMS implemented an updated Part D RxHCC risk adjustment model,
incorporating program data derived from prescription drug event (PDE) data. The data
used to calibrate this updated model was more recent cost and utilization data, resulting
in a model that reflects more recent drug cost and utilization patterns.
70.4.1 - RxHCC Risk Adjustment Model Segments
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
The RxHCC model includes some of the same characteristics as the CMS-HCC Model:
it is a prospective model with additive coefficients subject to the application of
hierarchies, and contains a model for new enrollees based on demographics. However, to
address cost patterns that differ for subgroups of Part D eligible beneficiaries, the RxHCC
model has segments that differ from those in the CMS-HCC model.
For the RxHCC risk adjustment model used in all years, the following rules apply:

• 	Beneficiaries can be either LTI or LIS, but the beneficiary cannot be both for
purposes of risk adjustment.
• 	When a beneficiary has both LTI and LIS status, the LTI status is used for risk
adjustment.
RxHCC Model from 2006 through 2010
The RxHCC model in place from 2006 through 2010 differs from the CMS-HCC model
by incorporating LTI or LIS multipliers for qualifying beneficiaries (if applicable) to
account for the incremental costs associated with each. These multiplicative factors are
applied to a benficiary’s base risk factor, when appropriate. Table 9 describes the LTI
and LIS multipliers. Table 10 provides the LTI and LIS factors.
Table 9. LTI and LIS Multipliers: 2006 – 2010 Payment Years
Multiplier 	Description
General
Rules
The demographic and disease factors are additive; the LTI and LIS factors are
multipliers.
After adding the demographic and disease factors for a total score in the base
RxHCC model, the score is multiplied by the LTI or LIS factor, if applicable.
LTI
LTI factor is assigned to the risk scores of beneficiaries with 90 days of residence
or greater in a nursing home and reported by the Minimum Data Set (MDS).
LTI status is determined based on the data collection period.
Accounts for higher overall spending because it is expected that the prices for
specific packages of drugs beneficiaries receive are somewhat higher in the
institution than the same drugs in the community.
LIS
Two LIS factors (full subsidy and partial subsidy) – one or the other is assigned to
the risk score for enrollees based on their Part D determined LIS status.
LIS status is determined during the payment year.
Table 10. LTI and LIS Factors: 2006 – 2010 payment years
Long-Term Institutional 	Low Income
Aged
≥ 65
Disabled
< 65
Group 1
Full subsidy eligible
Group 2
Partial subsidy eligible
(15%)
1.08 	1.21 	1.08 	1.05
RxHCC Model Segments from 2011 to present:
• 	Aged, non-low income
• 	Aged, low income
• 	Disabled, non-low income

• 	Disabled, low income
• 	Institutional
• 	New Enrollee, non-low income
• 	New Enrollee, low income
• 	New Enrollee, institutional
70.4.2 - Low Income Status
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
From 2006 through 2010, the Part D risk adjustment model used a multiplier to adjust
risk scores when the beneficiary had low income subsidy eligibility. Under the 2006-
2010 RxHCC model, the multiplier differed if the beneficiary was full subsidy eligible or
partial subsidy eligible. Starting in 2011, the Part D risk adjustment model no longer
uses multipliers and instead uses a separate risk score for beneficiaries who have low
income status. This new model applies an aged low income or disabled low income risk
score when the beneficiary has either full or partial low income status and does not have
long term institutional status. Low income status is determined as of the payment month.
70.4.3 - Long Term Institutional Status
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
From 2006 through 2010, the Part D risk adjustment model used a multiplier to adjust
risk scores when the beneficiary enrolled in the Part D plan had Long Term Institutional
status. Starting in 2011, the Part D risk adjustment model no longer uses multipliers and
instead uses a separate risk score for beneficiaries who have LTI status. Regardless of
payment year and risk model used, the Part D risk adjustment model will consider a
beneficiary’s LTI status in the payment year, not the data collection year; this approach
more accurately reflects treatment patterns upon which costs are based.
CMS uses information from the Minimum Data Set (MDS), collected routinely from
nursing homes, to identify the population of long-term institutionalized. MDS
assessments are sent to CMS on at least a quarterly basis. CMS uses the presence of a
90-day assessment to identify the long-term residents for payment purposes. Payment
using a long term institutional risk score will begin at the start of the month following the
90-day assessment. Once persons are so identified, they remain in long-term status until
discharged to the community for more than fourteen days. The costs of the short term
institutionalized (less than 90 days) are recognized in the community model.
At the final payment reconciliation that takes place post-contract year, CMS uses each
beneficiary’s actual month-by-month LTI status in the payment year to determine which
risk score or multiplier to apply. Because CMS calculates initial and mid-year risk scores
before it has complete data on beneficiaries’ LTI status in the payment year, it uses the
presence of a 90-day assessment reported for any one month during the 12-month data
collection period as a proxy for LTI in the payment year.

MMR fields specific to LTI status.
• 	RA Factor Type Code (field 47; positions 189-90) – A value of "I" means that the
enrollee has been institutionalized 90+ days as of the payment month.
• 	Part D Long Term Institutional Indicator (field 70; position 325) - Values are A
(aged), D (disabled), or blank. The enrollee has been in an institution for 90+
days as of the payment month. The Part D LTI multiplier is applied on a
concurrent basis and based on the person’s current Medicare entitlement status
(aged, or disabled). For example, “LTI Aged” means that an Aged (65+)
beneficiary has a 90+ day assessment during the month that the LTI Aged
multiplier was applied for payment.
70.5 - CMS RxHCC Risk Adjustment Model Compared with the CMS-
HCC Risk Adjustment Model
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
This section describes the similarities and differences between the Part D RxHCC risk
adjustment model and the Part C CMS-HCC risk adjustment model.
70.5.1 - Model Similarities
(Rev. 118; Effective: ICD-10: Upon Implementation of ICD-10, ASC X12: January 1,
2012 (for ASC X12 5010); Implementation: ICD-10: Upon Implementation of ICD-10,
ASC X12: January 1, 2012 (for ASC X12 5010))
The CMS-HCC and the CMS RxHCC risk adjustment models are constructed and
calibrated using the same methodology and many of the same data sources.
Source of diagnoses: Individual ICD diagnosis codes, both for the calibration of the
models, and to calculate risk scores for payment, are taken from FFS claims and MA-
reported diagnosis data.
Regression model to predict expenditures: The models for continuing enrollees and new
enrollees are calibrated using a multiple regression analysis of actual expenditures. Both
models predict benefit costs for which the plans are responsible for covering. The CMS-
HCC model predicts full Part A and B Medicare expenditures. The RxHCC model
predicts those expenditures for which Part D sponsors are responsible, i.e., drug costs
excluding cost sharing amounts for which the enrollee or the government is responsible
for paying. This RxHCC model is sometimes referred to as the plan liability model, to
distinguish it from the total spending model, which has been calibrated for analytic
purposes only.
Additive and hierarchical model: The two models generate enrollee risk scores by
adding relative risk weights for individual risk markers that have been assigned to the
beneficiary. This allows more than one disease to impact the final risk score. Both of the
models use diagnostic hierarchies. Hierarchies prevent multiple diagnoses in the same

disease group from inappropriately increasing the risk score. In this way, someone with
metastatic cancer and breast cancer receives credit only for the former, rather than both.
This is clinically appropriate and lessens the impact of variations in diagnosis coding
completeness.
Used to adjust capitated payment amounts: Risk adjustment is intended to adjust
capitated payment amounts to pay plans fairly and accurately, thereby decreasing
incentives for health plans to avoid enrolling sicker beneficiaries. Both of these models
adjust standardized payments for the underlying health status of the beneficiaries enrolled
in the plan. The RxHCC model adjusts the monthly Part D direct subsidy. The CMS-
HCC model adjusts Part C monthly payments to Medicare Advantage plans and PACE
organizations.
Risk scores are relative and reflect the standard benefit: Each beneficiary’s risk score is
calculated to estimate that specific beneficiary’s expected costs, relative to the average
beneficiary. For each model, a risk score of 1.0 reflects the Medicare-incurred
expenditures of an average beneficiary. An RxHCC risk score of 1.0 indicates the
beneficiary is expected to incur the average liability amount for prescription drugs when
covered by the standard Part D Medicare benefit. A CMS-HCC risk score of 1.0
indicates the beneficiary is expected to incur the average Medicare program expenditure
for Parts A and B services.
70.5.2 - Model Differences
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
While both the CMS-HCC and the RxHCC models use health status (diagnoses) to
predict expenditures, the total expenditures that each model is predicting are quite
different (medical versus prescription drug) and, therefore, may result in different
weights on similar HCCs, as well as different risk scores for an individual beneficiary.
Risk adjustment attempts to account for the differences in expenditures incurred by a plan
due to differences in the health status of the beneficiaries enrolled in the plan. Since the
impact of health status factors, and the benefit design, are different between Parts C and
D, two risk adjustment models have been designed.
80 - Frailty Adjuster
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
The Balanced Budget Act of 1997 (BBA) mandated that Medicare capitated payments to
Program of All-Inclusive Coverage for the Elderly (PACE) organizations be based on
MA payment rates, adjusted to account for the comparative frailty of PACE enrollees.
The frailty adjuster is included as part of risk adjusted payments for PACE organizations
and, between 2004 and 2011, for certain demonstration organizations.
The frailty adjustment approach that was implemented in 2004 is to be applied in
conjunction with the CMS-HCC risk adjustment model. Risk adjustment predicts (or

explains) the future Medicare expenditures of individuals based on diagnoses and
demographics. But risk adjustment may not explain all of the variation in expenditures
for frail community populations. The purpose of frailty adjustment is to predict the
Medicare expenditures of community populations with functional impairments that are
unexplained by risk adjustment.
CMS calibrates the frailty factors by regressing the residual, or unexplained, costs from
the CMS-HCC risk adjustment model on counts of activities of daily living (ADLs).
CMS uses the number of functional limitations represented by the Activities of Daily
Living (ADL) scale to calibrate the frailty model and then to determine the relative
organization-level frailty of those in the community that are 55 years of age and older.
There are six ADLs:
• 	Bathing and showering
• 	Dressing
• 	Eating
• 	Getting in or out of bed or chairs
• 	Walking
• 	Using the toilet
CMS obtains ADLs from surveys of the general Medicare population. The frailty model
used during payment years 2004-2007 was calibrated using ADLs from the Medicare
Current Beneficiary Survey (MCBS). The frailty model used 2008 onward was
calibrated using ADLs from the Fee-For-Service (FFS) Consumer Assessment of Health
Providers & Systems (CAHPS).
The MCBS is a face-to-face survey, while the FFS CAHPS data is a mail survey with a
telephone follow-up. By using the FFS CAHPS ADL results to calibrate the frailty
factors, CMS uses methodologically-similar surveys for both calibrating the frailty model
and for calculating annual frailty scores. The annual frailty scores are calculated using
results from the Health Outcomes Survey – Modified (HOS-M), which is an anonymous
mail-in survey with telephone follow-up.
In addition, the CAHPS frailty calibration sample is much larger than the MCBS sample.
The CAHPS data can better determine the relationship between frailty and costs given
Medicaid and non-Medicaid status in the general Medicare population. As a result,
starting in 2008, the frailty model includes separate factors for Medicaid and non-
Medicaid beneficiaries. The result is more accurate payment because Medicaid and non-
Medicaid frail populations show differences in the relationships between unexplained
expenditures (in the CMS-HCC model) and functional impairments.
Contract-level frailty scores are calculated by multiplying the proportion of respondents
in each ADL category by the factor for that category, and then summing the products
across each category. In some cases, a transition blend or phase out factor has been used

(see below) to transition from one frailty model to another. See below for examples of
calculations of frailty scores.
At payment, CMS adjusts the payment for an enrollee in an eligible organization, if that
beneficiary is age 55 and over, and living in the community. Because the CMS-HCC
model has been designed to pay appropriately for the long-term institutionalized
population, frailty adjustments are added to the risk scores only for community-based and
short-term institutionalized enrollees (i.e., the frailty adjustment for long-term
institutionalized enrollees is zero).
For PACE organizations and demonstrations between 2004 and 2011, the frailty score
that is added to the beneficiary’s risk score is calculated at the contract-level, using the
aggregate counts of ADLs among survey respondents enrolled in a specific organization.
Updated frailty factors are published in the Rate Announcement for the payment year in
which they are first used.
Example – how to calculate a frailty score:
CMS calculates PACE organizations’ frailty scores at the contract level. Below is an
example of the calculation of a PACE frailty score for payment year 2009.
Frailty factors used to calculate 2009 frailty scores for PACE organizations:
2007 	2009
Non-
Medicaid 	Medicaid
0 ADLs 	-0.141 	-0.093 	-0.180
1-2 ADLs 	0.171 	0.112 	0.035
3-4 ADLs 	0.344 	0.201 	0.155
5-6 ADLs 	1.088 	0.381 	0.200
The following table provides an example of results from the Health Outcome Survey-
Modified (HOS-M) for a sample PACE organization:
ADL count among
respondents to HOS-
M
Medicaid 	Non-Medicaid 	Total
0 	13 	15 	28
1-2 	35 	32 	67
3-4 	40 	22 	62
5-6 	36 	33 	69
Total respondents 	226
1. 	Calculate the organization’s frailty score using 2007 frailty factors

Frailty score =
28/226*(-0.141) + 67/226*(0.171) + 62/226*(0.344) + 69/226*(1.088)
=0.460
2. 	Calculate the organization’s frailty score using the 2009 frailty factors:
Frailty score =
13/226*(-0.180) + 15/226*(-0.093) + 35/226*(0.035) + 32/226*(0.112) +
40/226*(0.155) + 22/226*(0.201) + 36/226*(0.200) + 33/226*(0.381)
=0.139
3. 	Calculate blended frailty score for use in payment:
2009 blend: 70% of the frailty score calculated using pre-2008 frailty factors and
30% of the frailty score calculated using 2009 frailty factors
Frailty score for payment = 0.460*0.7 + 0.139 * 0.3 = 0.364
Example – how to calculate payment with a frailty adjustment
For calendar year 2009, a PACE member resides in the community and is aged 82. The
payment to the PACE organization will be calculated with a risk score that is the sum of
the regular CMS-HCC risk score plus the organization’s frailty score.
Beneficiary’s risk score = 2.3
PACE organization’s frailty score = 0.364
Risk score used in payment for the beneficiary = 2.664 = 2.3 + 0.364
Frailty Adjustment Transition for PACE Organizations
PACE Organizations are transitioning from the pre-2008 frailty model to the updated
frailty model from 2008-2012 payment years. Frailty adjustment will be applied to
payment to PACE organizations using the transition schedule published in the 2008 –
2011 Rate Announcements. The full transition schedule is as follows:
• 	In 2008 (year 1): 90% of the frailty score calculated using the pre-2008 frailty
factors and 10% of the frailty score calculated using the 2008 frailty factors.
• 	In 2009 (year 2): 70% of the frailty score calculated using the pre-2008 frailty
factors and 30% of the frailty score calculated using the 2009 frailty factors.
• 	In 2010 (year 3): 50% of the frailty score calculated using the pre-2008 frailty
factors and 50% of the frailty score calculated using the 2009 frailty factors.
• 	In 2011 (year 4): 25% of the frailty score calculated using the pre-2008 frailty
factors and 75% of the frailty score calculated using the 2009 frailty factors.
• 	In 2012 (year 5): 100% of the most recently calibrated frailty factors.
Frailty Adjustment Transition for Certain Demonstrations

Frailty adjustments will be applied to payments for certain MA plan types using a phase-
out schedule between 2008 and 2012. For 2008 – 2010, plans that were participating in
the following demonstrations received frailty payments under the schedule below: Social
Health Maintenance Organizations (S/HMOs), Minnesota Senior Health Options
(MSHO)/ Minnesota Disability Health Options (MnDHO), Wisconsin Partnership
Program (WPP) and Massachusetts Senior Care Options (SCO) plans. For 2011, a subset
of these plans continued to receive frailty payments. The full phase out schedule is as
follows:
• 	In 2008: 75% of the frailty score calculated using the pre-2008 frailty factors.
• 	In 2009: 50% of the frailty score calculated using the pre-2008 frailty factors.
• 	In 2010: 25% of the frailty score calculated using the pre-2008 frailty factors.
• 	In 2011: 25% of the frailty score calculated using the pre-2008 frailty factors.
• 	In 2012: 0% paid under demonstration authority
90 - Normalization Factor
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
Each time CMS calibrates a risk adjustment model, it will produce a fixed set of dollar
coefficients that are appropriate to the population and data for that calibration year.
When CMS divides the dollar coefficients by the average expected expenditures in a
given year, CMS converts the dollar coefficients into relative factors in such a way that
CMS ensures that the average risk score in the denominator year is 1.0. When the model
with fixed coefficients is used to predict risk scores for other years, predictions for prior
years are less than 1.0 and predictions for succeeding years are higher than 1.0. Because
average predicted FFS risk scores increase after the model calibration year due to coding
and population changes, CMS applies a normalization factor to adjust beneficiaries’ risk
scores so that the average risk score is 1.0 in subsequent years.
The normalization factor is calculated by first using the model to predict risk scores for
the FFS population over a number of years. Next, CMS estimates the annual average
trend in the risk scores over these years. This annual trend is then compounded by the
number of years between the model denominator year and the payment year to produce
the normalization factor for the payment year.
CMS uses a standard of five years of data in the normalization trend. Each year, CMS
drops the earliest year and adds a new year of risk scores to the trend data to create the
five-year dataset. By using a standard number of years, CMS calculates risk score trends
based on recent trends in coding, while maintaining stability in the year-to-year trends
used.
Normalization factors are downward adjustments to risk scores and are applied to risk
scores when they are calculated (prior to 2007, CMS applied the normalization factor to
the ratebook). Risk scores on the Monthly Membership Report (MMR) are always
normalized. Each year’s normalization factors are announced in that year’s Rate

Announcement, published in April prior to the payment year. Table 11 supplies the
normalization factor by payment year.
Table 11. Normalization factors used in payment years
CMS-HCC 	RxHCC 	Dialysis/Transplant 	Functioning
Graft
2007 	1.029 	NA 	NA 	1.029
2008 	1.040 	1.065 	1.010 	1.040
2009 	1.030 	1.085 	1.019 	1.058
2010 	1.041 	1.146 	1.039 	1.072
2011 	1.058 	1.029 	1.060 	1.088
100 - MA Coding Adjustment
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
Because CMS calibrates the CMS-HCC model using FFS data, the relative factors reflect
the FFS pattern of coding. CMS adjusts for the trend in the rate of increase of diagnosis
codes submitted by FFS providers with the application of a normalization factor that is
updated annually and that reduces risk scores with the goal that the average remains 1.0
in each payment year. Because MA coding patterns differ from those in FFS, MA risk
scores increase more quickly and are, therefore, higher than they would be if MA plans
coded in the same manner as FFS providers.
Beginning in 2010, CMS instituted a separate adjustment to the Part C risk scores to
account for differential coding patterns between MA and FFS. The adjustment for 2010
of 3.41% was based on our estimate of how much lower plans’ 2010 risk scores would
have been if the disease scores (the portion of the risk score attributable to diagnostic
coding) for MA enrollees who stayed in an MA plan during the period 2007 to 2010
(“MA stayers”) had grown at the same rate as FFS beneficiaries’ risk scores during this
period. In calculating the adjustment for MA coding differences, CMS removed the
impact of differences in rising risk scores that are attributed to enrollment into and
disenrollment out of MA plans, aging and other demographic changes, and adjusted for
age and sex effects on disease coding changes. For a description of the coding
adjustment for 2011-2013 please see the 2010 Rate Announcement.
110 - Risk Adjustment Process and Payment
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
The risk adjustment process incorporates demographic and diagnostic data.
Demographic data includes:
• 	HICN, age, original reason for entitlement (e.g., disability), and Medicaid status
• 	Long Term Institutional status
• 	Primary payer information

• 	ESRD status
Diagnostic Data is used in risk score calculations and is obtained from both plans and
FFS providers.
• 	The Risk Adjustment Processing System (RAPS) Database contains the
diagnostic data submitted by Medicare Advantage plans, PACE organizations,
and cost plans.
• 	The National Medicare Utilization Database (NMUD) contains the diagnostic
data submitted by fee-for-service providers.
The Risk Adjustment System (RAS) calculates risk scores for all Medicare beneficiaries,
which are sent to the payment system for use in calculating payment.
Figure 1 illustrates the systems and databases that provide data used in risk score
calculations and ultimately in payment calculations in MARx. The components of the
process are described in further detail throughout the chapter.

Figure 1. Risk Adjustment Payment Process
MDS Long Term
Institutional File
Beneficiary
Diagnosis Input
File
Beneficiary
Demographic Input
File
Minimum Data Set (MDS)
(Long Term Institutional Data)
Common Medicare
Environment
(Demographic Data)
National Medicare Utilization
Database (NMUD)
(Fee-for-Service Diagnosis Data)
Risk Adjustment Processing
System (RAPS) Database
(Diagnosis Data)
Risk Adjustment System
(RAS)
(Risk Score Calculation)
Health Plan Management
System (HPMS)
(Bid Data)
Medicare Advantage
Prescription Drug System
(MARx)
(Payment Calculation)

120 - Operations
(Rev. 118; Effective: ICD-10: Upon Implementation of ICD-10, ASC X12: January 1,
2012 (for ASC X12 5010); Implementation: ICD-10: Upon Implementation of ICD-10,
ASC X12: January 1, 2012 (for ASC X12 5010))
CMS requires Medicare Advantage plans to collect hospital inpatient, hospital outpatient,
and physician risk adjustment data and submit the data to CMS at least quarterly for
calculation of the risk score for use in the payment calculation and payment
reconciliation. Each quarterly submission should represent approximately one-fourth of
the data a plan submits during a data collection year.
Once plans have collected the data and verified the data came from an acceptable data
source, the plans submit the data using the Risk Adjustment Processing System (RAPS)
format and provide the five required data elements in the cluster. Table 12 lists the five
required elements and a description for each.
Table 12. Five Required Data Elements/Descriptions
Required Data Element 	Description
Health Insurance Claim
(HIC) Number
Beneficiary identification number issued by the Railroad
Retirement Board (RRB) or the Social Security
Administration (SSA).
Diagnosis code 	International Classification of Diseases (ICD) codes are
used to describe the clinical reason for a patient’s
treatment.
Service from date 	The dates of service define when a beneficiary received
medical treatment from a physician or medical facility. For
outpatient and physician services, the From Date and
Through Date may be identical. For inpatient services,
these dates are usually different from each other, and reflect
the dates of admission to and discharge from a facility.
Service through date
Provider type 	The types of providers, for the purpose of risk adjustment,
MA organizations must collect data from are:
• 	Hospital Inpatient facilities
• 	Hospital outpatient facilities
• 	Physicians
Plans submit the five data elements in the RAPS format (or the Direct Data Entry, an
online data entry application for the RAPS format) to the Front End Risk Adjustment
System (FERAS) for initial edit checks. FERAS transmits files successfully passing the
initial edit checks to RAPS for detailed editing and processing.
The FERAS and RAPS systems generate Transaction Reports describing the status of the
transaction and any errors that occurred during processing. RAPS also provides
Management Reports that identify the disposition of the submitted data so plans can
verify their data and project their payment.

Finalized diagnosis clusters are stored in the RAPS database and used for calculation of
risk scores. The Risk Adjustment System (RAS) extracts the diagnostic data from the
RAPS database to calculate risk scores by executing the CMS-HCC payment model.
RAS sends the risk scores to the Medicare Advantage Prescription Drug System (MARx)
for use in calculation of plan payments and payment reconciliation.

Figure 2 illustrates the risk adjustment collection, submission, and payment process.
Figure 2. Operations Overview
MA Plan Collects Hospital Inpatient/Hospital
Outpatient/Physician
MA Plan Verifies Data Source is Acceptable
Risk Adjustment System (RAS) extracts diagnostic data
from RAPS Database and calculates risk score
Risk Adjustment Processing System (RAPS)
conducts detailed edit checks
Front End Risk Adjustment System (FERAS)
conducts initial edit checks
Risk Adjustment Processing System (RAPS) Database
stores diagnosis clusters
MA Plan Submits Risk Adjustment Data to CMS
in RAPS Format or Direct Data Entry (DDE)
Medicare Advantage Prescription Drug System (MARx)
calculates plan payment and reconciliation payments

120.1 - Data Collection to Support Risk Adjustment
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
According to 42 CFR 422, MA organizations must collect and submit to CMS the data
necessary to characterize the context and purposes of each service provided to a Medicare
enrollee by a provider, supplier, physician, or other practitioner. CMS may also collect
data necessary to characterize the functional limitations of enrollees of each MA
organization.
120.1.1 - Sources of Data
(Rev. 118; Effective: ICD-10: Upon Implementation of ICD-10, ASC X12: January 1,
2012 (for ASC X12 5010); Implementation: ICD-10: Upon Implementation of ICD-10,
ASC X12: January 1, 2012 (for ASC X12 5010))
CMS requires that MA organizations collect data for the purposes of risk adjustment
from the following provider types:
• 	Hospital inpatient facilities
• 	Hospital outpatient facilities
• 	Physicians
Unacceptable Data Sources
It is important for MA organizations to note that regardless of the type of diagnostic
radiology bill (outpatient department or physician component), the diagnostic data
associated with these services are not acceptable for risk adjustment. Diagnostic
radiologists typically do not document confirmed diagnoses. The diagnosis confirmation
comes from referring physicians or physician extenders and is, therefore, not assigned in
the medical record documentation from diagnostic radiology services alone.
Excluded Providers
Medicare will not pay for items or services rendered to beneficiaries and recipients by an
excluded provider or by entities owned or managed by an excluded provider. Therefore,
MA organizations should not submit risk adjustment data if it was submitted by an
excluded provider. Providers are excluded for the following reasons: a program related
crime, patient abuse or neglect, health care fraud in any health care program, and
convictions relating to controlled substances.
The HHS monthly exclusion notification can be found at
http://oig.hhs.gov/fraud/exclusions.asp.
Hospital Inpatient

A hospital inpatient service is one provided by a hospital during which a patient is
admitted to the facility for at least one overnight stay. Table 13 identifies covered and
non-covered facilities with regard to risk adjustment diagnoses data collection.
Table 13. Hospital Inpatient Sources of Diagnostic Data
RAPS Provider
Type Covered Facilities 	Non-Covered Facilities*
Hospital
Inpatient
Short-term (general and specialty)
Hospitals
Religious Non-Medical Health
Care Institutions (formerly
Christian Science Sanatoria)
Long-term Hospitals
Rehabilitation Hospitals
Children’s Hospitals
Psychiatric Hospitals
Medical Assistance Facilities/
Critical Access Hospitals
Skilled Nursing Facilities (SNFs)
Hospital Inpatient Swing Bed
Components
Intermediate Care Facilities
Respite Care
Hospice
*These are examples of non-covered facilities and not a comprehensive list.
NOTE: When submitting hospital inpatient data, MA organizations must make a
distinction between the principal diagnosis and other diagnoses. Section 120.2
Submission and Flow of Risk Adjustment Data covers the details of submitting data.
Hospital Outpatient
Hospital outpatient services are therapeutic and rehabilitative services provided for sick
or injured persons who do not require inpatient hospitalization or institutionalization.
Table 14 identifies covered and non-covered hospital outpatient facilities. MA
organizations should refer to this table with regard to risk adjustment data collection.
Table 14. Outpatient Sources of Diagnostic Data
RAPS
Provider Type Covered Facilities 	Non-Covered Facilities*

RAPS
Provider Type Covered Facilities 	Non-Covered Facilities*
Hospital
Outpatient
Short-term (general and specialty)
Hospitals
Medical Assistance Facilities/Critical
Access Hospitals
Community Mental Health Centers 1**
Federally Qualified Health Centers 2/
Religious Non-Medical Health Care
Institutions (formerly Christian Science
Sanatoria) **
Long-term Hospitals
Rehabilitation Hospitals
Children’s Hospitals
Psychiatric Hospitals
Rural Health Clinic (Free-standing and
Provider-Based) 3**
Free-standing Ambulatory Surgical
Centers (ASCs)
Home Health Care
Free-standing Renal Dialysis
Facilities
Non-Covered Services
Laboratory Services
Ambulance
Durable Medical Equipment
Prosthetics
Orthotics
Supplies
Radiology Services
* 	These are examples of non-covered facilities and are not to be considered a
comprehensive list.
** Facilities use a composite bill that covers both the physician and the facility
component of the services, and services rendered in these facilities do not result in an
independent physician claim.
1. Community Mental Health Centers (CMHCs) provide outpatient services, including
specialized outpatient services for children, the elderly, individuals who are chronically
ill, and residents of the CMHC’s mental health services area who have been discharged
from inpatient treatment at an inpatient facility.
2. Federally Qualified Health Centers (FQHCs) are facilities located in a medically
underserved area that provide Medicare beneficiaries with preventive primary medical
care under the general direction of a physician.
3. Rural Health Clinics (RHCs) are Medicare certified facilities that are located in a
rural, medically underserved area that provide ambulatory primary medical care under the
general direction of a physician.

Determining Whether Facilities Are Acceptable for Risk Adjustment – MA
organizations are responsible for ensuring that data collected and submitted to CMS are
acceptable for the risk adjustment process. However, the NPI does not convey
information regarding the type of facility or provider specialty, so a new code called the
“taxonomy code” can be used to help identify types of providers. Both the legacy
provider number and the taxonomy code can be used in determining the appropriateness
of the covered hospital entities for the purposes of risk adjustment data collection. Table
15 illustrates the steps MA organizations may use to identify the provider numbers or
taxonomy codes for facilities.
Table 15. Determining Covered Hospital Entity Provider Numbers
Situation 	Issue 	Action
Situation 1 	The CCN or taxonomy
code is identified.
Determine if the number is in an acceptable
range for risk adjustment. If in the
acceptable range, submit the data.
Situation 2 	An in-network provider
submitted a claim but did
not include any provider
number or taxonomy
code.
Obtain the provider number or taxonomy
code and then determine if the number is in
an acceptable range for risk adjustment. If in
the acceptable range, submit the data.
NOTE: All network providers are required
to have provider numbers or taxonomy
codes; therefore, do not submit risk
adjustment data for this provider until these
numbers are obtained.
Situation 3 	An out-of-network
provider submits a claim
without a provider
number.
Plans must obtain a provider number or
taxonomy code.
National Provider Identifier – MA organizations should verify that diagnoses are
collected from Medicare certified hospitals/facilities and that data from all Medicare
certified network hospital/facilities include the associated Medicare provider identifiers
(NPI and taxonomy code; or the legacy provider number). They should also verify that
the Medicare certified hospitals/facilities providing the data are from acceptable facilities
and services. As stated above, plans may use either the Medicare provider numbers or
the taxonomy code to determine if facilities and services are acceptable for risk
adjustment.
Plan sponsors may wish to create a system for checking if the data are from acceptable
facilities and for acceptable services. They may check the legacy provider number

against the provider number ranges or check the taxonomy code against the taxonomy
code ranges, both of which identify what type of service has been rendered.
• 	If using the legacy provider number, please note that it has six characters.
o 	The first two characters are numerals and represent the state/territory as
illustrated in Table 16.
Table 16. Provider Number State Assignments
State 	Code 	State 	Code 	State 	Code
Alabama 	01 	Kentucky 	18 	Oklahoma 	37
Alaska 	02 	Louisiana 	19 	Oregon 	38
American Samoa 	64 	Maine 	20 	Palau 	N/A
Arizona 	03 	Maryland 	21 	Pennsylvania 	39
Arkansas 	04 	Massachusetts 	22 	Puerto Rico 	40
California 	05 	Michigan 	23 	Rhode Island 	41
Colorado 	06 	Minnesota 	24 	South Carolina 	42
Connecticut 	07 	Mississippi 	25 	South Dakota 	43
Delaware 	08 	Missouri 	26 	Tennessee 	44
District of
Columbia
09 	Montana 	27 	Texas 	45
Florida 	10 	Nebraska 	28 	Utah 	46
Georgia 	11 	Nevada 	29 	Vermont 	47
Guam 	65 	New Hampshire 	30 	Virgin Islands 	48
Hawaii 	12 	New Jersey 	31 	Virginia 	49
Idaho 	13 	New Mexico 	32 	Washington 	50
Illinois 	14 	New York 	33 	West Virginia 	51
Indiana 	15 	North Carolina 	34 	Wisconsin 	52
Iowa 	16 	North Dakota 	35 	Wyoming 	53
Kansas 	17 	Ohio 	36
o 	The third character may be a numeral or a letter. Provider numbers with a U,
W, Y, Z, 5, or 6 in the third character indicate that the service was provided in
a swing bed component of a hospital or a skilled nursing facility, which, are
not covered entities. The last three characters are numerals unique to the
facility.
• 	If using the taxonomy code, the bill type will be needed to identify if the service was
provided by a non-covered entity such as a swing bed component of a hospital or a
skilled nursing facility.
As an additional check, refer to Tables 17 and 18, which provide the only acceptable
ranges for hospital facilities. The tables reflect the range of legacy provider numbers for

risk adjustment covered hospital entities. Risk adjustment data are not acceptable when
received from facilities with numbers outside the ranges.
NOTE: Skilled nursing facilities, home health care, and hospital inpatient swing bed
components are not covered entities for risk adjustment data.
Table 17. Hospital Inpatient Covered Entities
Type Of Hospital Inpatient Facility Provider
Number Range
Taxonomy Code/
Type of Bill (TOB)
Short-term (General and Specialty) Hospital 	XX0001-
XX0899
XXS001-
XXS899
XXT001-
XXT899
282N00000X
273R00000X
273Y00000X
Medical Assistance Facilities/Critical Access
Hospitals
XX1225-
XX1399
282NC0060X
Religious Non-Medical Health Care
Institutions
XX1990-
XX1999
TOB 4XX
Long-term Hospitals 	XX2000-
XX2299
282E00000X
Rehabilitation Hospitals 	XX3025-
XX3099
283X00000X
Children’s Hospitals 	XX3300-
XX3399
282NC2000X
Psychiatric Hospitals 	XX4000-
XX4499
283Q00000X
Table 18. Hospital Outpatient Covered Entities
Type Of Hospital Outpatient Facility Provider Number
Range
Taxonomy Code/
Type of Bill (TOB)
Short-term (General and Specialty) Hospital 	XX0001-XX0899
XXS001-XXS899
XXT001-XXT899
282N00000X
273R00000X
273Y00000X
Medical Assistance Facilities/Critical Access
Hospitals
XX1225-XX1399 	282NC0060X
Community Mental Health Centers 	XX1400-XX1499
XX4600-XX4799
XX4900-XX4999
TOB 76X
Federally Qualified Health Centers/Religious Non-
Medical Health Care Institutions
XX1800-XX1999 	TOB 73X for FQHC
TOB 4XX for RNHCI
Long-term Hospitals 	XX2000-XX2299 	282E00000X
Rehabilitation Hospitals 	XX3025-XX3099 	283X00000X
Children’s Hospitals 	XX3300-XX3399 	282NC2000X

Type Of Hospital Outpatient Facility Provider Number
Range
Taxonomy Code/
Type of Bill (TOB)
Rural Health Clinics, Freestanding and Provider-
Based
XX3400-XX3499
XX3800-XX3999
XX8500-XX8999
TOB 71X
Psychiatric Hospitals 	XX4000-XX4499 	283Q00000X
The implementation of the NPI did not change the valid Hospital Inpatient and Outpatient
facilities for submission of risk adjustment data nor eliminate the process for receiving
and verifying information from Medicare health care providers that are in network.
Institutional providers that currently bill Medicare using more than one legacy identifier
in order to identify subparts of their facility are required to submit a taxonomy code on all
of the claims they submit to Medicare.
The Health Care Provider Taxonomy Code Set website,
http://www.wpc-edi.com/codes/taxonomy, serves as a reference to types of facilities and
taxonomy codes.
The American Hospital Directory website, http://www.ahd.com/freesearch.php3, serves
as a reference for hospital provider numbers.
Physician
The collection of physician data relevant for risk adjustment is associated with the
physician’s specialty. That is, all diagnoses that are in the risk adjustment model and
rendered as a result of a physician visit must be collected by the MA organization. This
includes data collected from non-network as well as network physicians.
Qualified physician data for risk adjustment requires a face-to-face visit with the
exception of pathology services (professional component only).
Only those physician specialties and other clinical specialists identified in Table 19 are
acceptable for risk adjustment.

Table 19. Acceptable Physician Specialty Types
Payment Year 2011 (dates of services 2010)
CODE 	SPECIALTY 	CODE 	SPECIALTY 	CODE 	SPECIALTY
1 	General Practice 	26 	Psychiatry 	67 Occupational
Therapist
2 	General Surgery 	27** Geriatric
Psychiatry 68 	Clinical Psychologist
3 	Allergy/Immunology 	28 	Colorectal Surgery 	72* 	Pain Management
4 	Otolaryngology 	29 Pulmonary
Disease 76* Peripheral Vascular
Disease
5 	Anesthesiology 	33* 	Thoracic Surgery 	77 	Vascular Surgery
6 	Cardiology 	34 	Urology 	78 	Cardiac Surgery
7 	Dermatology 	35 	Chiropractic 	79 	Addiction Medicine
8 	Family Practice 	36 	Nuclear Medicine 	80 Licensed Clinical
Social Worker
9** Interventional Pain
Management (IPM) 37 	Pediatric Medicine 	81 Critical care
(intensivists)
10 	Gastroenterology 	38 	Geriatric Medicine 	82 	Hematology
11 	Internal Medicine 	39 	Nephrology 	83 	Hematology/Oncology
12
Osteopathic
Manipulative
Therapy
40 	Hand Surgery 	84 	Preventive Medicine
13 	Neurology 	41 	Optometry 	85 	Maxillofacial Surgery
14 	Neurosurgery 	42 Certified Nurse
Midwife 86 	Neuropsychiatry
15 Speech Language
Pathologist 43
Certified
Registered Nurse
Anesthetist
89* Certified Clinical
Nurse Specialist
16 Obstetrics/Gynecolog
y 44 	Infectious Disease 	90 	Medical Oncology
17** Hospice And
Palliative Care 46* 	Endocrinology 	91 	Surgical Oncology
18 	Ophthalmology 	48* 	Podiatry 	92 	Radiation Oncology
19 	Oral Surgery 	50* 	Nurse Practitioner 	93 	Emergency Medicine
20 	Orthopedic Surgery 	62* 	Psychologist 	94 Interventional
Radiology
22* 	Pathology 	64* 	Audiologist 	97* 	Physician Assistant
24*
Plastic And
Reconstructive
Surgery
65 	Physical Therapist 	98 Gynecologist/Oncolog
ist
25 Physical Medicine
And Rehabilitation 66 	Rheumatology 	99 Unknown Physician
Specialty
* Indicates that a number has been skipped.
** Added effective January 1, 2010 dates of service

120.2 - Submission and Flow of Risk Adjustment Data
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
The following outlines the flow of risk adjustment data:
• 	Hospital/Physician submits data to MA organization using standard claims formats,
or through review of medical records.
• 	The MA organization submits required data at least quarterly to FERAS via Direct
Data Entry (DDE) or RAPS format.
• 	FERAS checks the file-level data, batch-level data, and first and last detail records on
each Batch Record within the file.
• 	If any data are rejected, the rejections are reported on the FERAS Response Report.
• 	After passing the FERAS checks, the file is submitted to RAPS where detail editing is
performed and applicable reports are generated.
• 	The RAPS Return File contains the entire submitted transaction and identifies errors.
• 	The RAPS Transaction Error Report communicates errors found in CCC records
during processing.
• 	The RAPS Transaction Summary Report summarizes the disposition of the diagnosis
clusters.
• 	The Duplicate Diagnosis Cluster Report identifies diagnosis clusters with the 502-
error message. Duplicate clusters are accepted but not stored.
• 	The RAPS Monthly Plan Activity Report and Cumulative Plan Activity Report
provides a summary of the status of submissions by submitter ID and plan number.
• 	Distributed monthly and quarterly, the Error Frequency Report provides an overview
of all errors associated with files submitted in test and productions.
• 	RAPS database stores all finalized diagnosis clusters.
• 	RAS calculates the Risk Adjuster Factors by executing the CMS-HCC model.
• 	MARx is used in the calculation of payments and determination of plan payments.
120.2.1 - Data Exchange Requirements
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)

Prior to submitting risk adjustment data to CMS, CMS requires MAOs to:
• 	Complete and submit an Electronic Data Interchange (EDI) Agreement to the
Customer Service and Support Center (CSSC) within 1 month of their contract’s
HPMS effective date.
o 	The EDI Agreement is a contract between the MAO and CMS attesting to
the accuracy of the data submitted.
o 	An officer (e.g., CEO) that represents the MAO must sign the EDI
Agreement
• 	Submit test data within three months of the HPMS effective date.
• 	Submit production files within four months of the HPMS effective date and
continue to submit at least one time per quarter.
If the MAO uses a third party submitter:
• 	A Letter of Authorization on company letterhead from the plan is required
indicating that the third party vendor is going to submit on their behalf.
• 	The MAO must complete the EDI Agreement.
• 	The third party submitter must complete the Submitter ID Application Form.
If the MAO establishes a new contract number, the MAO must submit a new EDI
agreement. If the submitter’s system successfully submitted test data previously, CMS
does not require additional testing.
Note: CMS holds the MA organization accountable for the content of submissions
regardless of who submits the data.
120.2.2 - Format
(Rev. 118; Effective: ICD-10: Upon Implementation of ICD-10, ASC X12: January 1,
2012 (for ASC X12 5010); Implementation: ICD-10: Upon Implementation of ICD-10,
ASC X12: January 1, 2012 (for ASC X12 5010))
In accordance with CMS’ 2008 Call Letter, MA organizations must submit risk
adjustment data electronically using one of two formats to enable CMS to more
efficiently process the data at CSSC and ensure appropriate payment under the risk
adjustment payment models. MA organizations must submit data electronically using
either the RAPS format or the Direct Data Entry (DDE) option. Both of these formats are
used for all provider types.
Table 20 describes each field of the current RAPS file layout.

• 	The shaded fields in the table represent where the RAPS Return File provides new
information after data processes through RAPS.
There are two diagnosis cluster error fields because MA organizations can receive up to
two errors on any diagnosis cluster.
Table 20. RAPS File Layout
RAPS RECORD AAA – FILE HEADER
FIELD
NO
POSITION 	SUBMISSION
STATUS
FIELD
NAME
EXPLANATION
1 	1-3 	Required 	Record ID 	File-level information that identifies the
submitter. This field should always be
populated with “AAA.”
2 	4-9 	Required 	Submitter ID 	Identifies the submitter and should be
populated with the six-digit
alphanumeric SH# assigned by CSSC.
3 	10-19 	Required 	File ID 	10-digit alphanumeric character
identifying the specific file submitted.
This file name may not be repeated
within a 12-month period.
4 	20-27 	Required 	Transaction
Date
Specifies the date that the file was
submitted to Palmetto and formatted as
CCYYMMDD.
5 	28-31 	Required 	Production
Test Indicator
Must be populated with “PROD” or
“TEST.” Submission test data proceeds
through the entire process.
6 	32-512 	Spaces 	Filler 	Must be populated with 481 spaces.
The “Filler” field allows for additional
fields in the future.
RAPS RECORD BBB – BATCH HEADER
FIELD
NO
POSITION 	SUBMISSION
STATUS
FIELD
NAME
EXPLANATION
1 	1-3 	Required 	Record ID 	Batch-level information that identifies
the MA organization is populated with
“BBB.”
2 	4-10 	Required 	Sequence
Number
This field identifies the batch submitted.
The first batch in a file must begin with
0000001. All successive batch sequence
numbers in the file must be incremented
by one. This is a numeric field.
3 	11-15 	Required 	Plan Number 	Identifies the MA organization and
should be populated with the five-digit

RAPS RECORD BBB – BATCH HEADER
FIELD
NO
POSITION 	SUBMISSION
STATUS
FIELD
NAME
EXPLANATION
alphanumeric contract assigned by
CMS. (H#, R#, etc.).
4 	16-512 	Spaces 	Filler 	Must be populated with 497 spaces. The
“Filler” field allows for additional fields
in the future.
Table 20. RAPS File Layout (Continued)
RAPS RECORD CCC – DETAIL LEVEL
FIELD NO 	POSITION 	SUBMISSION
STATUS
FIELD
NAME
EXPLANATION
1 	1-3 	Required 	Record ID 	Detail-level information that identifies the
beneficiary information. This field should always
be populated with “CCC.”
2 	4-10 	Required 	Sequence
Number
This field identifies the detail record submitted.
The first detail record in a batch must begin with
0000001. All successive detail sequence numbers
in the batch must be incremented by one. This is a
numeric field. Limited to 1,000,000 per day.
3 	11-13 	RAPS RETURN 	Sequence
Number Error
Code
This field must be submitted with spaces. Upon
return, this field is populated with an error code if
RAPS finds an error in the sequence number, or
will remain blank if no errors were detected in the
sequence number.
4 	14-53 	Optional 	Patient Control
Number
This optional field may be used by the MA
organization to identify the claim submitted. The
field allows up to 40 alphanumeric characters.
5 	54-78 	Required 	HIC 	The Health Insurance Claim number for the
beneficiary. This is a 25-digit alphanumeric field.
Enter spaces, not zeros, in unused spaces.
6 	79-81 	RAPS RETURN 	HIC Error
Code
This should be submitted with spaces. Upon
return, this field is populated with an error code if
RAPS finds an error in the HIC number, or
remains blank if no errors were detected in the
HIC number.
7 	82-89 	Optional 	Patient DOB 	This optional field may be populated with the
patient’s date of birth and is used to verify that the
correct beneficiary identification was submitted. If
the field is populated, it must be formatted as
CCYYMMDD, and CMS edits this field against
the information on file at the MBD. If no DOB is
submitted, fill with spaces.
8 	90-92 	RAPS RETURN 	DOB Error
Code
This field must be submitted with spaces. Upon
return, this field is populated with an error code if
RAPS finds an error with DOB, or remains blank
if no errors were detected in the DOB.

Table 20. RAPS File Layout (Continued)
RAPS RECORD CCC – DETAIL LEVEL (CONTINUED)
FIELD NO 	POSITION 	SUBMISSION
STATUS
FIELD
NAME
EXPLANATION
9 	93-412 	DIAGNOSIS-
CLUSTER (10
occurrences)
The following 8 fields (9.0-9.7) may be repeated
10 times in the same “CCC” record with one
diagnosis per cluster. Each diagnosis cluster must
contain 32 characters or spaces. Plans must not
skip clusters when submitting active diagnosis
codes. If there are less than 10 diagnosis clusters
the remaining clusters are space filled. If there are
more than 10 diagnoses, a new “CCC” record must
be established.
9.0 	Required 	Provider Type 	This 2-digit alphanumeric field identifies the site
of service provided (01,02,10,20).
9.1 	Required 	From Date 	For hospital inpatient this describes the admission
date. For physician and hospital outpatient this
describes the date of service. Must be formatted as
CCYYMMDD.
9.2 	Required 	Through Date 	For hospital inpatient this describes the discharge
date. For physician and hospital outpatient this
may be left blank and the system will fill with the
“From Date.” Must be formatted as
CCYYMMDD.
9.3 	Conditional 	Delete
Indicator
This field allows the MA organization to delete a
diagnosis, for correction purposes, that has been
stored in the RAPS database. Enter a “D” or
space.
9.4 	Required when
ICD-9-CM is
used
Diagnosis
Code or Filler
This field is populated with the three-to five-digit
ICD-9-CM diagnosis code. The decimal is
implied and should not be included (e.g., 42732).
Fill with spaces when ICD-9-CM is not used.
Left justify.
9.5 	Required when
ICD-10-CM is
used
Diagnosis
Code or Filler
This field is populated with the three-to seven-digit
ICD-10-CM diagnosis code. The decimal is
implied and should not be included (e.g.,
4273432).
Fill with spaces when ICD-10-CM is not used.
Left justify
9.6 	RAPS RETURN 	Diagnosis
Cluster Error 1
This field must be submitted with spaces. Upon
return, this field is populated with one error code if
RAPS finds an error in the diagnosis cluster, or
remains blank if no errors were detected in the
diagnosis cluster.
9.7 	RAPS RETURN 	Diagnosis
Cluster Error 2
This field must be submitted with spaces. Upon
return, this field is populated with one error code if
RAPS finds an error in the diagnosis cluster, or
remains blank if no errors were detected in the
diagnosis cluster.
19 	413-437 	RAPS RETURN 	Corrected HIC
number
This field must be submitted with spaces. If the
MA organization has submitted an outdated HIC,
upon return, this field is populated with the most
current HIC number and the “HIC Error” field
contains an information error code.

RAPS RECORD CCC – DETAIL LEVEL (CONTINUED)
FIELD NO 	POSITION 	SUBMISSION
STATUS
FIELD
NAME
EXPLANATION
20 	438-512 	Spaces 	Filler 	Must be populated with 75 spaces. The “Filler”
field allows for additional fields in the future.
Table 20. RAPS File Layout (Continued)
RAPS RECORD YYY – BATCH TRAILER
FIELD
NO
POSITIO
N
SUBMISSION
STATUS
FIELD NAME 	EXPLANATION
1 	1-3 	Required 	Record ID 	Batch trailer information should be
populated with “YYY.”
2 	4-10 	Required 	Sequence
Number
A 7-digit numeric character
identifying the batch submitted. Must
match the “BBB” record.
3 	11-15 	Required 	“H” Number 	“H” number assigned by CMS to
identify the MA organization. Must
match the “H” number in the
corresponding “BBB” record (i.e., the
“BBB” record with the same
sequence number).
4 	16-22 	Required 	CCC Record
Total
This field should total the number of
CCC records in the batch. This field
is numeric and should be filled with
leading zeroes (e.g., 0000001).
Limited to 1,000,000 per day.
5 	23-512 	Spaces 	Filler 	Must be populated with 490 spaces.
The “Filler” field allows for
additional fields in the future.
RAPS RECORD ZZZ – FILE TRAILER
FIELD
NO
POSITIO
N
SUBMISSION
STATUS
FIELD NAME 	EXPLANATION
1 	1-3 	Required 	Record ID 	File Trailer Information should be
populated with “ZZZ.”
2 	4-9 	Required 	Submitter ID 	Identifies the submitter and must
match the 6-digit alphanumeric SH#
in the AAA record.
3 	10-19 	Required 	File ID 	10-digit alphanumeric character
identifying the specific file submitted.
Must match the File ID in the “AAA”
record.
4 	20-26 	Required 	BBB Record
Total
This field should total the number of
batches in the file. This field is

RAPS RECORD ZZZ – FILE TRAILER
FIELD
NO
POSITIO
N
SUBMISSION
STATUS
FIELD NAME 	EXPLANATION
numeric and should be filled with
leading zeros (e.g., 0000001).
5 	27-512 	Required 	Filler 	Must be populated with 486 spaces.
The “Filler” field allows for
additional fields in the future.
Data must be submitted as described in the tables above. When data is entered
improperly, the plan receives errors as the data is processed through FERAS or RAPS. If
errors are discovered in FERAS, the file will be returned to the plan. Job aids with list of
FERAS and RAPS error codes are available at http://www.csscoperations.com. Once at
the web site, select “Training Information,” then select the latest “Risk Adjustment
Training Information” link, and then select “Job Aides.”
120.2.3 - Diagnosis Cluster
(Rev. 118; Effective: ICD-10: Upon Implementation of ICD-10, ASC X12: January 1,
2012 (for ASC X12 5010); Implementation: ICD-10: Upon Implementation of ICD-10,
ASC X12: January 1, 2012 (for ASC X12 5010))
The diagnosis cluster contains the core information regarding each diagnosis submitted
by an MA organization. The following components are included in the cluster:
• 	Provider Type
• 	From Date
• 	Through Date
• 	Delete Indicator
• 	Diagnosis Code
A maximum of 10 diagnosis clusters are allowed per CCC record. Each cluster must
include the items identified above. If any of these attributes are submitted more than
once for the same HIC number, a duplicate diagnosis cluster error will occur.
ICD-9-CM Diagnosis Codes - International Classification of Diseases-9th Edition-
Clinical Modification (ICD-9-CM) codes are 3- to 5-digit codes used to describe the
clinical reason for a patient’s treatment for inpatient discharges before the ICD-10
implementation date and for outpatient and physician services before that date.
Diagnosis codes describe the patient’s medical condition, not the service performed.
Diagnosis codes drive the risk scores, which drive the risk adjusted reimbursement from
CMS to MA organizations.
ICD-10-CM will be used for inpatient discharges and for outpatient and physician
services on or after the ICD-10 implementation date. ICD-10-CM codes are 3-7 digit
codes.

Service From and Through Dates – Defines the start and end dates for a provided
service. The correct submission format for the “From” and “Through” dates of service is
CCYYMMDD. The “Through Date” defines the data used in the data collection year for
risk adjustment purposes. Table 21 describes the “From” and “Through” dates.
Table 21. From and Through Dates
PROVIDER TYPE 	FROM DATE 	THROUGH DATE
Hospital Inpatient 	Admission Date 	Must have a through date and must
be the discharge date
Hospital Outpatient 	Exact date of patient visit
or the first date service
began for a series of
services
Exact date of patient visit or the last
date of service for a series of services
Physician
Hospital Inpatient dates of service must reflect the final bill. Interim bills are not
acceptable for risk adjustment data.
MA organizations may submit several occurrences of the same diagnosis in one cluster
with a 31-date span. The “From” date will reflect the first occurrence and the “Through”
date will reflect the final occurrence within the 31 days.
Delete Indicator – To delete a diagnosis, for correction purposes, that has been stored in
the RAPS database, a “D” is entered. If not correcting a diagnosis, then a space is
entered.
Provider Type – For risk adjustment purposes, MA organizations are responsible for
collecting data from the acceptable data sources (hospital inpatient, hospital outpatient,
and physician) and determining the provider type based on the source of data.
Type of Bill (TOB), which is coded on the encounter record during the collection of
hospital data, may be used to assist in translating the correct provider type.
Table 22 lists the acceptable sources of data, provider types, provider type codes, TOB.
Table 22. Provider Type and Code
Source of Data 	Provider Type 	Provider Type
Code
Type of Bill
Hospital Inpatient 	Hospital Inpatient
Principle Diagnosis
01 	111 or 11Z
Hospital Inpatient 	Hospital Inpatient Other
Diagnosis
02 	111 or 11Z
Hospital
Outpatient
Hospital Outpatient 	10 	131, 13Z, 141 or
14Z
Physician 	Physician 	20 	N/A

120.2.4 - Valid Diagnosis Codes
(Rev. 118; Effective: ICD-10: Upon Implementation of ICD-10, ASC X12: January 1,
2012 (for ASC X12 5010); Implementation: ICD-10: Upon Implementation of ICD-10,
ASC X12: January 1, 2012 (for ASC X12 5010))
Valid diagnosis codes are those that are published for the fiscal years pertaining to the
CMS-HCC risk adjustment model in use for a particular payment year. Current model
diagnosis codes are codes that CMS accepts as valid, and are also included in the current
version of the CMS-HCC model; only these diagnosis codes affect the risk score in a
particular payment year. Future model diagnosis codes are codes that are currently valid,
but are not included in the current version of the CMS-HCC model and, therefore, do not
count toward the risk score.
A current model diagnosis code must meet the following criteria:
1. 	The diagnosis is included in the CMS-Hierarchical Condition Category (CMS-
HCC), Prescription Drug (CMS-RxHCC) or End Stage Renal Disease (CMS-
HCC ESRD) risk adjustment models.
2. 	The diagnosis must be received from one of the three provider types (hospital
inpatient, hospital outpatient, and physician) covered by the risk adjustment
requirements.
3. 	The diagnosis must be collected according to the risk adjustment data collection
instructions.
A list of current and future diagnosis codes for the CMS-HCC, ESRD, and RxHCC risk
adjustment models for any given payment year includes published National Center for
Health Statistics (NCHS)/CMS codes that are valid for the payment year. The list is
posted on the CMS website at:
http://www.cms.hhs.gov/MedicareAdvtgSpecRateStats/06_Risk_adjustment.asp#TopOfP
age
Figure 3 provides a snapshot of the required diagnoses for a given payment year.

Figure 3. Example of Required Current and Future Model Diagnoses

120.2.5 - Tips for Reducing Duplicate Diagnosis Cluster Errors
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
As part of the requirement that plans submit accurate risk adjustment data, CMS requires
that plans work to minimize the submission of duplicate diagnosis clusters. CMS
considers a plan submission that contains 5% or greater duplicate diagnosis clusters to be
a high level of duplicate submissions and to be in violation of the requirement to submit
accurate data.
Failure to submit accurate and timely risk adjustment production files may result in: 1)
incorrect payments to your MA organization; 2) loss of monthly prospective revenue
relating to beneficiary-health status; 3) payment recovery through a lump-sum recovery;
4) cessation of monthly payments throughout the remainder of a coverage year; and/or 5)
adjusting payments in a subsequent year. Non-compliance with these requirements may
result in CMS restricting future risk adjustment submissions by your MA organization.
Table 23, below, provides tips to assist plan sponsors in tracking diagnosis clusters so
that they can be compliant with the guidance on the 5 percent benchmark for duplicate
diagnosis cluster errors. CMS communicates to submitters a 502-error code for each
diagnosis cluster that shares the same attributes as one previously submitted and stored in
the RAPS database. CMS reviews files weekly and identifies diagnosis clusters; each
502-error code counts toward the 5 percent benchmark. If the submitter is a third party
and the file contains records for multiple plans, the review will occur at the plan level
within the file.
Table 23. Tips for Ensuring Compliance with the 5 Percent Benchmark
for Duplicate Diagnosis Cluster Error Guidance
Tips 	Description
Identify a
Duplicate
Diagnosis Cluster
CMS defines a Duplicate Diagnosis Cluster as one that shares all of
the same attributes (HIC Number, Provider Type, From and Through
Dates and Diagnosis) as one previously submitted and stored in the
RAPS database.
Review Reports 	Review current and previous RAPS Return Files to determine which
clusters RAPS stored. If RAPS stored the cluster, MA organizations
should not resubmit.
Understand Error
Resolution
300-Level Errors
Resubmit all clusters associated with the record, this would not
create a duplicate diagnosis because none of the records were
previously stored.
400-Level Errors
Only resubmit the specific cluster that resulted in the 400-level error

message. Do not resubmit all clusters within the record, only the
clusters that contain errors.
Understanding
Modifying Data
MA organizations should only resubmit the diagnosis clusters that
require a modification.
For example, an MA organization submits eight clusters, and the
following week the organization notices the date of service submitted
was incorrect in one of the clusters, the organization must submit that
specific cluster with a “D” in the delete indicator field, and submit a
new cluster with the correct date.
Resubmitting all of the remaining seven clusters would create seven
duplicates.
120.2.6 - Health Insurance Portability and Accountability Act (HIPAA)
(Rev. 118; Effective: ICD-10: Upon Implementation of ICD-10, ASC X12: January 1,
2012 (for ASC X12 5010); Implementation: ICD-10: Upon Implementation of ICD-10,
ASC X12: January 1, 2012 (for ASC X12 5010))
Effective October 16, 2003, when HIPAA transaction standards became mandatory, all
electronic claims/encounters sent from providers/physicians to MA organizations (health
plans) constitute a HIPAA covered transaction. Any MA organization that receives an
electronic claim/encounter from a provider/physician must use the current applicable
ASC X12 837 format.
MA organizations cannot request that a physician resubmit data previously submitted
(same patient, same diagnosis) using a different format (e.g., HCFA 1500) if the
physician initially submits data in ASC X12 professional format for purposes of risk
adjustment data collection.
In accordance with Final Rule 45 CFR Part 152, effective March 17, 2009, CMS adopted
X12 Version 5010 for HIPAA transactions. The final rule mandates covered entities MA
organizations (health plans) comply no later than January 1, 2012.
120.2.7 - Submission Timeline
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
MA organizations must submit data at least quarterly to CMS. Each quarterly submission
should represent approximately one-fourth of the data that the MA organization will
submit during a data collection year. MA organizations will be monitored to ensure
compliance. Table 24 provides the submission schedule for all diagnosis data submitted

for all risk adjustment models. This includes data for both the Part C CMS-HCC and
ESRD models and the Part D Drug risk adjuster.
Table 24. Risk Adjustment Implementation Calendar
CY 	Dates of Service Initial Submission
Deadline
First Payment
Date
Final Submission
Deadline
2009 	01/01/08 - 12/
31/08
03/06/09 	07/01/09 	01/31/10
2010 	07/ 01/08 -
06/30/09
09/04/09 	01/01/10 	N/A
2010 	01/01/09 -
12/31/09
3/05/10 	07/01/10 	01/31/11
2011 	07/01/09 -
06/30/10
09/03/10 	01/01/11 	N/A
2011 	01/01/10 -
12/31/10
03/04/11 	07/01/11 	01/31/12
120.2.8 - Status Reports of Risk Adjustment Submissions
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
CMS communicates the status of risk adjustment submissions via reports delivered to
submitters’ mailbox. The reports remain in the submitters’ mailbox for 14 days. MA
organizations may access reports through CSSC. Table 25 provides an overview of the
Risk Adjustment reports received from the Front End Risk Adjustment System (FERAS)
and the Risk Adjustment Processing System (RAPS).
Table 25. Reports Overview
Report 	Description 	Frequency
FERAS Response
Report
• 	Indicates file is accepted or
rejected
• 	Identifies reasons for rejection
• 	Report layout format
Same business day for Secure
Website and FTP users
Next business day for
Connect:Direct and Gentran users
RAPS Return File 	• 	Contains the entire submitted
transaction
• 	Identifies 300-, 400-, and 500-
level errors
• 	Flat file layout
Next business day after
submission
RAPS Transaction
Error Report
• 	Communicates errors found in
CCC records during processing
Next business day after
submission

• 	Displays only 300-, 400-, and
500-level error codes
• 	Report layout
RAPS Transaction
Summary Report
• 	Summarizes the disposition of
diagnosis clusters
• 	Report layout
Next business day after
submission
RAPS Duplicate
Diagnosis Cluster
Report
• 	Identifies diagnosis clusters with
502-error message
• 	Clusters accepted, but not stored
• 	Report layout
Next business day after
submission
RAPS Monthly Plan
Activity Report
• 	Provides monthly summary of
the status of submissions by
submitter ID and Plan Number
• 	Report layout
Available for download the
second business day of the month
RAPS Cumulative
Plan Activity Report
• 	Provides cumulative summary
of the status of submissions by
submitter ID and Plan Number
• 	Report layout
Available for download the
second business day of the month
RAPS Monthly Error
Frequency Reports
• 	Provides a monthly summary of
all errors associated with files
submitted in test and production
• 	Report layout
Available for download the
second business day of the month
RAPS Quarterly
Error Frequency
Reports
• 	Provides a quarterly summary of
all errors on all file
submissions within the 3-month
quarter
• 	Report layout
Available for download the
second business day of the month
following each quarter
Examples of risk adjustment reports are available in the Edits and Reports module of the
Risk Adjustment Training Participant Guide at http://www.csscoperations.com. Once at
the web site, select “Training Information,” then select that latest “Risk Adjustment
Training Information” link, and then select “Participant Guides.”
120.3 - Risk Score Verification Tools
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
MA organizations can use a variety of tools to ensure that the risk score reported by CMS
is in close alignment with the score that the organization expects to receive. Table 26
identifies the tools, method of access, and availability. Sections 120.3.1 through 120.3.3
provide information on how an organization can use the tool to increase the accuracy of
payment projections.
Table 26. Risk Score Verification Tools
Report Name 	Access 	Availability
RAPS Return File/RAPS Transaction
Error Report
RAPS Mailbox
RPT####.RPT.RAPS_RETURN_FLAT
RPT####.RPT.RAPS_RETURN_FLAT (zip
Next business day
following data
submission

format)
RPT#####.RPT.RAPS_ERROR_RPT
RPT#####.RPT.RAPS_ERROR_RPT (zip
format)
RAPS Monthly and Cumulative Plan
Activity Reports
RAPS Mailbox
RPT####.RPT.RAPS_MONTHLY
RPT####.RPT.RAPS_MONTHLY (zip
format)
RPT####.RPT.RAPS_CUMULATIVE
RPT####.RPT.RAPS_CUMULATIVE (zip
format)
Second business day
of the month
Monthly Membership Report
(MMR)
• 	MMR Non-Drug
• 	Drug Reports
Through MARx 	Monthly
Model Output Report (MOR)
• 	Part C HCC MOR
• 	RAS RxHCC MOR
Through MARx 	Monthly
Risk Adjustment SAS Programs 	http://www.cms.hhs.gov/MedicareAdvtgSpec
RateStats
Medicare Rates & Statistics – Risk
Adjustment Downloads for CMS-HCC,
ESRD, RxHCC
2006-present

120.3.1 - RAPS Reports
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
MA organizations can use the RAPS Transaction and Management Reports Return to
verify the diagnostic data stored in the model. Table 27 describes the RAPS Reports used
as verification tools.
Table 27. RAPS Reports as Verification Tools
Report 	Description
RAPS Return
File
• 	Contains all transactions submitted by the MA organization.
• 	Errors identified during the RAPS process appear next to the field in which
the error occurred, which indicates the diagnosis did not store.
• 	File delivered in the same flat file format used for the RAPS input.
• 	Unique diagnosis clusters returned without an error are stored in the RAPS
database at CMS.
• 	CMS uses the diagnosis clusters that contain relevant diagnosis codes to
calculate risk adjustment factors when running the CMS-HCC model or
ESRD model.
• 	MA organizations may download the file into a Microsoft Access or Excel
database since the report is a flat file.
• 	MA organizations should establish a record of each diagnosis that was
stored in the CMS-HCC model for each enrollee.
• 	Larger organizations also use the file in mainframe databases.
• 	Organizations that employ automated update processes for their databases
typically use the Return File.
RAPS
Transaction
Error Report
• 	Contains only the records that contain errors, causing one or more diagnosis
clusters to reject.
• 	Organizations that employ non-automated update processes when
maintaining diagnosis files typically use the Transaction Error Report.
• 	An individual at the health plan generally downloads the report, prints it,
and manually updates the diagnosis records to indicate which diagnoses
were rejected.
RAPS Monthly
and Cumulative
Plan Activity
Reports
• 	Confirms the total number of diagnoses stored in the CMS-HCC model.
Creating a database with the diagnoses will serve several purposes:
The MA organization will have a history of all diagnosis clusters submitted and stored,
which can be used to prevent future submissions of duplicate diagnosis clusters.
The MA organization will have the data required to determine which diagnoses were
stored for each beneficiary for the payment period.

MA organizations can compare their internal database developed from the RAPS Return
File to the number of diagnoses stored on the Monthly and Cumulative reports. The
cumulative report reflects the total number of diagnoses stored to date for the contract
number (e.g., H number). The database should reflect all diagnosis clusters stored for the
plan sponsor for the data collection period.
120.3.2 - MARx Reports
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
MARx generates several monthly reports that provide information for verifying
diagnostic and demographic data used in the payment model calculations. Table 28
describes the Monthly Membership Report (MMR).
Table 28. Monthly Membership Report
Description
• 	Provides information to reconcile the Medicare membership and payment record to the
records maintained by CMS.
• 	Available in two formats – report and data file, both containing drug and non-drug data.
• 	The report and data file formats provide summary and detail-level information on
beneficiaries belonging to the MA organization.
• 	Summary
o 	Payments and adjustments applicable to the organization’s Medicare membership, shows
total number of payments for beneficiaries receiving hospice, ESRD or institutionalized
status.
• 	Detail
o 	Detailed list of beneficiaries for who payment was made for a month (prospective for
that month or an adjustment payment for a previous month).
o 	Allows for comparison of organization’s beneficiary records with CMS’ records.
• 	Non-Drug MMR
o 	Contains information such as rebates, payments and adjustments, Part A and Part B
information, risk adjustment factors for Part A and Part B, and other detailed beneficiary
information.
• 	Drug MMR
o 	Contains information such as basic premiums, estimated reinsurance, payments and
adjustments, low-income cost sharing percentage, low-income cost sharing subsidy, risk
adjustment factors, and other detailed beneficiary information.
Figures 4 and 5 highlight the location of key information on the formatted MMRs for
reconciling reports with enrollee information.
At the top of the report, the name of the report appears along with whether the report is
for drug or non-drug data. The plan number, Plan Benefit Package (PBP), and Segment
along with the plan name appear under the report name.

At the top left of the report is the group number and contract number. The run date
appears as year/month/date with the payment month in the top left of the report. The
page number is to the right.
There are two lines of information for each beneficiary in the detail report and that
information is staggered. For example, the HICN appears on one line and beneath that
line appears the surname of the beneficiary.
The MMR for Non-Drugs reports on flags for Health Status and the Drug reports on the
LIS or LTI multiplier for calculation in the beneficiary risk factor.
If a beneficiary has one of the flags for a Health Status, which is sometimes called
“special status,” this is identified with a “Y” on the report.

Figure 4. Sample Drug MMR – Key Fields

Figure 5. Sample Non-Drug MMR - Key Fields

Table 29 describes the Model Output Report (MOR) and Figure 6 highlights the location
of key information on the formatted MOR
Table 29. Model Output Report
Description
• 	Used in conjunction with the MMR and beneficiary-specific information (residence-
community vs. institution, Medicaid status, disability, etc.) to verify risk scores.
• 	Part C Risk Adjustment MOR
o 	Displays HCCs used by RAS to calculate risk adjustment factors for each beneficiary.
o 	Displays the HCC Disease Groups used by the CMS-HCC model and disease and
demographic interactions.
o 	Provides detailed beneficiary level information on:
• 	Enrollee identifiers (HICs, name, date of birth).
• 	Appropriate sex and age group, as well as other demographic factors for an individual
(if applicable).
• 	Provides detailed information on the specific disease groups and disease interactions
triggered for an enrollee.
• 	Disease hierarchies are not identified separately. If a hierarchy exists, only the most
severe manifestation in the hierarchy is displayed on the report.
For organization receiving frailty payments:
Organizations receiving frailty adjustment should review their overall risk score, which
represents the output of the CMS-HCC model and the frailty score.
Beneficiaries under the age of 55 and beneficiaries who have an institutional factor do not
receive frailty scores.
Organizations receiving frailty adjustment can find their contract-level frailty score on
HPMS.
A final reconciliation of HCCs may prove to be a useful analysis for plan sponsors.
• 	RAS RxHCC MOR
• 	Displays the RxHCCs for each beneficiary used by RAS to calculate risk adjustment
factors for each beneficiary.
• 	RxHCCs can be used by plans to verify a beneficiary’s risk score provided on the MMR.
• 	Summing the risk factors for an individual beneficiary yields a total risk adjustment
score.

Figure 6. Sample Model Output Report
1***GROUP=H8888,CONTRACT=H8888,
1RUN DATE: 20031219 RISK ADJUSTMENT MODEL OUTPUT REPORT
PAGE: 1
PAYMENT MONTH: 200401 	PLAN: H8888 CHAMPION INSURANCE
RAPMORP1
0 	LAST 	FIRST 	DATE OF
HIC 	NAME 	NAME 	I 	BIRTH SEX & AGE GROUP
123456789A 	WOOD 	CHARLES 	W 	XXXXXXX Male75-79
123456789B 	TREE 	LILLIAN 	L 	XXXXXXX Female75-79
111223333A 	GRASS 	ALBERT 	A 	XXXXXXXX Male 60-64
HCC DISEASE GROUPS:
HCC019 Diabetes without Complication
HCC080 Congestive Heart Failure
HCC092 Specified Heart Arrhythmias
INTERACTIONS: INTI01 DM_CHF
The flat file layouts and sample formatted MMR and MOR reports are located in the
Medicare Advantage and Prescription Drug Plans - Plan Communications User Guide
Appendices at:
http://www.cms.gov/MAPDHelpDesk/02_Plan_Communications_User_Guide.asp#TopO
fPage.
120.3.3 - Risk Adjustment Model Software
(Rev. 114, Issued; 06-07-13, Effective: 06- 07-13, Implementation: 06-07-13)
CMS provides a SAS software program for each of the CMS-HCC risk adjustment
models that allows organizations to verify and predict risk scores. Users must have a
SAS license to use the SAS program.
MA organizations may access the risk adjustment Risk Model software at:
http://www.cms.gov/MedicareAdvtgSpecRateStats/06_Risk_adjustment.asp#TopOfPage.
The software includes an HCCSOFT SAS program that uses several SAS Macros to
create HCC, RxHCC, and ESRD HCC risk score variables using coefficients from the
following regression models:
• 	Community
• 	Institutional
Beneficiaries Charles W.
Wood and Lillian L. Tree,
listed on this sample MOR
did not trigger HCCs since
the previous model run.
However, CMS accounts
for the beneficiaries’ age
and sex in the total risk
score reported on the MMR.
Three HCCs triggered for this
fi i
One interactive HCC triggered for this
b 	fi i
Beneficiary Albert A. Grass, has triggered three HCCs and one interaction. CMS will reflect
the rate for these HCCs in the beneficiary’s risk score, communicated on the MMR.

• 	New enrollee
The HCCSOFT software supplies user parameters to the main SAS Macro program
MACROSFT. This macro program takes user-provided files and assigns HCCs or
RxHCCs for each beneficiary. The program follows five major steps when calculating
risk scores:
1. 	Assigns each beneficiary to an appropriate age/sex grouping, and adds in the
interactions for Medicaid, disabled, and previously disabled
2. 	Crosswalks diagnoses to Condition Categories using SAS formats that were
previously stored in the FORMAT library
3. 	Creates HCCs by imposing hierarchies on the Condition Categories
4. 	Creates the interactions
5. 	Computes three scores for each beneficiary: community, institutional, and new
enrollee
Note: For beneficiaries without relevant diagnoses from RAPS or FFS claims data, zeros
are assigned to all HCCs and RxHCCs.
130 - Glossary of Terms
(Rev. 118; Effective: ICD-10: Upon Implementation of ICD-10, ASC X12: January 1,
2012 (for ASC X12 5010); Implementation: ICD-10: Upon Implementation of ICD-10,
ASC X12: January 1, 2012 (for ASC X12 5010))
Beneficiary Demographic Input File - Contains beneficiary demographic data captured
from Common Medicare Environment. The demographic data is used by the Risk
Adjustment System (RAS) to calculate a beneficiary’s risk score and to determine
payment.
Beneficiary Diagnosis Input File - Contains beneficiary diagnosis data captured from
Risk Adjustment Processing System (RAPS) and National Medicare Utilization Database
(NMUD). The diagnosis data is used by the Risk Adjustment System to calculate a
beneficiary’s risk score and to determine payment.
Common Medicare Environment (CME) – Tables sourced from the Medicare
Beneficiary Database (MBD) and the Enrollment Database (EDB) that provide
beneficiary demographic and enrollment data.
Connect: Direct - A type of electronic connection between MA organizations and CMS
used to submit risk adjustment data and receive information. This connection involves
mainframe-to-mainframe connection with a submission response from FERAS.

Data Collection Period - The 12 month period from which CMS uses diagnoses
submitted by MA organizations to calculate a beneficiary’s risk score.
Data Submission - The process in which MA organizations submit required data
elements to CMS for risk adjustment purposes.
Data Validation - The process of validating that enrollee diagnosis codes submitted for
payment by MA organizations are supported by the medical record documentation.
Diagnosis Cluster - Core information submitted by MA organizations for each diagnoses
submitted. The following are included: provider type, from date of service, through date
of service, delete indicator, and diagnosis code.
Dialysis Status - CMS risk adjusts payments for a beneficiary using the CMS-HCC
dialysis model when we are notified that the beneficiary is receiving dialysis.
Direct Data Entry (DDE) - An electronic data exchange between providers and health
plans where health plans enter RAPS data directly into an online screen for processing.
Disabled Status - Demographic factor for beneficiaries who became eligible for
Medicare based on a disability.
Disease Hierarchy - International Classification of Diseases Clinical Modification
(ICD-9-CM or ICD-10 CM as applicable) diagnosis codes that address multiple levels of
severity for a disease with varying levels of associated medical costs.
Dual Eligible - An MA eligible individual who is also entitled to Medical Assistance
under a State Plan under Title XIX (Medicaid). A chart describing the various categories
of individuals who are collectively known as dual-eligibles can be found at:
https://www.cms.gov/MedicareEnRpts/Downloads/Buy-InDefinitions.pdf.
Electronic Data Interchange (EDI) Agreement - An agreement MA organizations have
with CMS to follow provisions for submitting risk adjustment data through one of CMS’
accepted types of electronic connections.
End Stage Renal Disease (ESRD) - Permanent kidney failure requiring dialysis or a
kidney transplant.
Enrollment Database (EDB) – A data repository that contains Medicare entitlement
information for beneficiaries entitled to Medicare.
File Transfer Protocol (FTP) - A type of electronic connection between MA
organizations and CMS used to submit risk adjustment data and receive information. The
connection uses modem-to-modem (i.e., dial up) or lease line connection with a
submission response from FERAS.

Frailty Adjuster - Predicts Medicare expenditures of community populations with
functional impairments that are unexplained by the risk adjustment methodology alone.
The frailty adjuster is included as part of risk adjusted payments for PACE organizations
and, through 2011, for certain demonstration organizations. Beginning in 2012, certain
Fully Integrated Dual Eligible Special Needs Plans (FIDE SNPs) are eligible to receive
frailty adjustment.
Front End Risk Adjustment (FERAS) - Performs the initial file editing for risk
adjustment data submitted by Medicare Advantage and Medicare Advantage-Prescription
Drug plans and transmits files to the Risk Adjustment Processing System (RAPS).
Full Risk - Medicare beneficiaries that have 12 months of Part B coverage during the
data collection period.
Gentran - A type of electronic connection between MA organizations and CMS used to
submit risk adjustment data and receive information. Gentran users are issued a mailbox
and it is used as a vehicle to transmit and receive reports on RAPS data sent to CMS.
Health Plan Management System (HPMS) - CMS information system used by
Medicare Advantage and Prescription Drug plans to upload bid, Plan Benefit Package,
and marketing information, and is used by CMS to send information to plans.
Hierarchical Condition Category (HCC) - Groupings of clinically similar diagnoses in
each risk adjustment model. Conditions are categorized hierarchically and the highest
severity takes precedence over other conditions in a hierarchy. Each HCC is assigned a
relative factor which is used to produce risk scores for Medicare beneficiaries, based on
the data submitted in the data collection period.
Health Insurance Portability and Accountability Act (HIPAA) - Health Insurance
Portability and Accountability Act of 1996 (HIPAA, Title II) required the Department of
Health and Human Services to establish national standards for electronic health care
transactions and national identifiers for providers, health plans, and employers. It also
addressed the security and privacy of health data and contained health insurance reforms
intended to promote access and portability of insurance coverage. The implementation of
HIPPA improved the use of electronic data exchange in the national health care system.
International Classification of Diseases-9th Edition-Clinical Modification (ICD-9-
CM) Codes - 3 to 5-digit codes used to describe the clinical reason for a patient’s
treatment. The codes do not describe the service performed, just the patient’s medical
condition. Diagnosis codes drive the risk scores, which drive the risk adjusted
reimbursement from CMS to MA organizations. ICD-9-CM codes are used for inpatient
discharges before the implementation date of ICD-10, and for outpatient and physician
services before that date.
International Classification of Diseases-10th Edition-Clinical Modification (ICD-10-
CM) Codes - 3- to 7-digit codes used to describe the clinical reason for a patient’s

treatment. The codes do not describe the service performed, just the patient’s medical
condition. Diagnosis codes drive the risk scores, which drive the risk adjusted
reimbursement from CMS to MA organizations. ICD-10-CM codes are used for inpatient
discharges on and after the implementation date of ICD-10, and for outpatient and
physician services on and after that date.
Long-term Institutionalized (LTI) Status - CMS identifies whether a Medicare
beneficiary is in a long term institution for both model development and risk score
calculation purposes. CMS considers a beneficiary as having long term institutional
status if they have been in an institution for 90 days or more. CMS obtains this
information from the Minimum Data Set (MDS), which stores dates of 90-day
assessments reported by nursing homes.
Low-income Subsidy (LIS) - Provides financial assistance for beneficiaries who have
limited income and resources; individuals eligible for this low-income subsidy will
receive assistance with paying for their monthly premium, yearly deductible, prescription
coinsurance and copayments and coverage in the gap.
Medicaid - Title XIX of the Social Security Act is a Federal/State entitlement program
that pays for medical assistance for certain individuals and families with low incomes and
resources.
Medicare Advantage Prescription Drug (MARx) System - Receives beneficiary level
risk adjustment factors from RAS for use in Part C and Part D payment calculations.
Medicare Beneficiary Database (MBD) – A data repository that contains eligibility and
enrollment data for Medicare beneficiaries.
Minimum Data Set (MDS) - A part of the Resident Assessment Instrument (RAI)
developed by CMS to assist Medicare/Medicaid certified nursing homes in developing a
comprehensive care plan for each resident.
Minimum Data Set (MDS) Long Term Institutional File - Identifies beneficiaries that
resided in a long term institution for 90 days or more, which classifies them as long term
institutional (LTI) beneficiaries. The file is used to identify Medicare beneficiaries that
reside in LTI for risk adjustment purposes.
National Medicare Utilization Database (NMUD) - Contains Medicare claims data,
including diagnostic data submitted by fee-for-service providers for beneficiaries new to
Medicare Advantage with less than 12 months of risk adjustment data. The diagnostic
data stored in NMUD is translated to the risk adjustment format.
National Provider Identifier (NPI) - The NPI is a 10-digit, intelligence free numeric
identifier (10 digit number). Intelligence free means that the numbers do not carry
information about health care providers, such as the state in which they practice or their
provider type or specialization.

New Enrollee - A Medicare beneficiary who has less than 12 months of Part B
entitlement during the data collection period.
Normalization Factor - Factor used to correct population and coding changes between
the data years used in model calibration and the payment year.
Original Reason for Entitlement Code (OREC) - A demographic factor added to the
risk score for beneficiaries 65 years of age or older who were originally entitled to
Medicare due to disability. The factor varies based on the age and sex of the beneficiary.
Post-Graft (Functioning Graft) - A beneficiary is in post-graft status when they have
received a kidney transplant or kidney/pancreas transplant at least three months ago and
did not return to dialysis status since the transplant. There is a separate segment of the
CMS-HCC ESRD model for people who have functioning kidney grafts.
Principal Inpatient Diagnostic Cost Group (PIP-DCG) - The PIP-DCG model was a
precursor to the CMS-HCC risk adjustment model CMS used the PIP-DCG model from
2000-2003. In this model, CMS used diagnoses from hospitalizations to identify a
particularly ill and high cost subset of beneficiaries for whom CMS will make higher
payments in the next year. The system recognized admissions for which inpatient care is
most frequently appropriate and which are predictive of higher future costs.
Program of All-Inclusive Care for the Elderly (PACE) - A unique capitated managed
care benefit for frail and elderly individuals provided by a public entity or private entity.
PACE features a comprehensive medical and social service delivery system using an
interdisciplinary team approach in an adult day health center that is supplemented by in-
home and referral services in accordance with participants' needs.
Reconciliation - The CMS process of updating beneficiaries’ statuses and processing the
resulting payment adjustments.
Risk Adjustment Processing System (RAPS) – An application that stores diagnoses
data submitted by MA Organizations. Upon completion of the initial file processing,
FERAS sends the risk adjustment data to RAPS to perform low level edits to the file
header and record.
Risk Adjustment System (RAS) – A system used to calculate a beneficiary’s risk score
from enrollment and diagnosis data received from Common Medicare Environment
(CME), National Medicare Utilization Database (NMUD) system and Risk Adjustment
Processing System (RAPS). After the risk scores are calculated in RAS, they are sent to
MARx to use in calculating beneficiary level prospective payments.
Special Needs Plan (SNP) - An MA coordinated plan that limits enrollment to special
needs individuals, i.e., those who are dual-eligible, institutionalized, or have one or more

severe or disabling chronic conditions, as set forth at 42 CFR 422.4(a)(1)(iv) of the MA
regulation, and provides Part D benefits under 42 CFR Part 423.
Taxonomy Code - An external non-medical data code set designed for use in classifying
health care providers according to provider type or practitioner specialty in an electronic
environment, specifically within the American National Standards Institute, Accredited
Standards Committee health care transaction.
Transplant Status - A Medicare beneficiary is in Transplant Status for the three months
commencing with a kidney transplant.

Transmittals Issued for this Chapter
Rev # 	Issue Date 	Subject 	Impl Date 	CR#
R118MCM 09/19/2014 Conversion from ICD-9 to ICD-10 and
from ASC X12 Version 4010 to 5010
Upon
Implementation
of ICD-10
N/A
R116MCM 02/28/2014 Conversion from ICD-9 to ICD-10 and
from ASC X12 Version 4010 to 5010 –
Rescinded and replaced by Transmittal 118
10/012014 	N/A
R114MCM 06/07/2013 Chapter 7 – Risk Adjustment 	06/07/2013 	N/A
R57MCM 	08/13/2004 Coverage of Clinical Trials, Hospital
Inpatient Data, Diagnostic Coding, and
Collection of Data
N/A 	N/A
R47MCM 	02/20/2004 Miscellaneous Changes 	N/A 	N/A
R02MCM 	10/01/2001 Miscellaneous Changes 	N/A 	N/A
R01MCM 	07/02/2001 Initial Issuance of Chapter 	N/A 	N/A
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