The nature of capitation and the risk adjustment payment method requires specific deadlines for data submission that correlate to dates of service and affect capitation payments. The Centers for Medicare and Medicaid Services (CMS) observes the following three deadlines each calendar year when calculating and delivering funding payments to Medicare Advantage plans:
- Data received by CMS by the first Friday in March affects the July funding payment;
- Data received by CMS by the first Friday in September affects the January funding payment;
- Data received by CMS by January 31st is considered a final reconciliation and the payment is received by the plan in August.
An example might help clarify the concepts:
The July 2012 funding payment that Medicare Advantage plans receive from CMS is based on the data that was received by CMS by March 2, 2012 and represents dates of service from the prior calendar year, January 1, 2011 to December 31, 2011. It’s important to understand that encounter data with dates of service outside the parameters in our example will be accepted by CMS but will not factor into the payment calculation at that time. So, if a plan submits data with dates of service in February 2012 by the March 2nd deadline, those diagnoses will not influence the July 2012 payment. They will be reflected in the January 2013 payment as explained below.
The January 2013 funding payment will be based on the data submitted for the first six months of the current calendar year in addition to the last six months of the last calendar year. The deadline for data submission for the January payment is the first Friday in September and will represent dates of service from July 1, 2011 through June 30, 2012.
And finally, the January 31st deadline is based on data submitted with date of services going back two calendar years; January 31, 2012 was the deadline for CMS to receive data for dates of service from January 1, 2010 through December 31, 2010. This is one last opportunity to transmit ICD-9-CM codes for information that was documented by the clinician, but coded incorrectly or not at all.
CMS follows a claim data review process called the Risk Adjustment Processing System (RAPS) to review the information that has been submitted by all plans. From the claims and encounters submitted by the plan, CMS identifies the diagnosis (ICD-9-CM) codes that qualify for Hierarchical Condition Categories (HCC’s). Each HCC carries a corresponding risk score which is then applied to the premium payment from CMS.
CMS recognizes about 3,100 risk-adjusted ICD-9-CM codes that are categorized into 70 HCCs.