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In the CMS risk-adjustment model, every patient gets a risk-adjustment factor (RAF) score that determines how much providers are reimbursed for their care.
In this guide, we’ll discuss how these RAF scores are determined, and how you can use them to calculate revenue from your Medicare Advantage Population.
For the purposes of this guide, we’ll be using an imaginary patient as an example: a 72-year-old male, who wasn’t previously disabled, is fully dual eligible, and has the following V28 HCCs:
Almost every variable that goes into RAF calculation will change based on the patient’s eligibility for Medicare Advantage.
The table below illustrates how each grouping impacts RAF calculations.
As a 75-year-old, fully dual-eligible male who wasn’t previously grouped as disabled, our example patient will fall into the ‘Community, FBDual, Aged’ column when calculating RAF values.
Before a patient even sees their healthcare provider, they’re given a baseline RAF value based on demographic factors including age and sex. Medicare divides patient ages into the following categories:
The example below shows how a patient’s age and sex helps determine their baseline RAF value:
Our patient a 72-year-old male with dual eligibility gets a demographic score of 0.626.
CMS divides ICD-10 codes into hierarchical condition categories (HCCs) and assigns each HCC a different value. Unfortunately, CMS uses a highly-complicated formula to assign RAF values to HCCs involving complex variables including VA adjustment factors, regional cost differences, and more. Furthermore, this formula, the value of each variable, and even the variables themselves change year-on-year.
Tables such as those found on the CMS website can help you keep track of these annual changes.
Once you’ve calculated the patient’s baseline RAF value, it’s time to calculate the RAF value of their HCCs. In our imaginary patient’s case, we get 1.907. Adding that to our demographic score of 0.626, we get a total of 2.533.
At the end of each year, CMS assesses whether each patient is eligible for the add-on’ RAF modifiers: the Disease Interaction modifier and the Payment HCC Count modifier. In HCC-V28, six combinations of HCCs are included in the Disease Interaction modifier: for example, heart failure and kidney disease.
The table below shows how such combinations can add to a patient’s RAF score:
Our patient is eligible for two disease interaction modifiers: one for the combination of diabetes and CHF, and the second for CHF and arrhythmias. These modifiers total 0.323, which brings our total to 2.856.
The Payment HCC Count modifier is an additional RAF value added when a clinician has documented a large number of different HCCs on a single patient. The modifier begins at 5 HCCs, with the added value increasing with each new HCC until it caps out at 10.
Our example patient has six HCCs, so he gets an additional 0.071 added to his RAF score.
That brings our total raw RAF to 2.927.
At this point, the RAF total is known as the raw risk score’. This raw’ RAF score undergoes two final alterations before the number is finalized:
Once these adjustments have been applied, you have your final RAF score. Let’s run these numbers for our imaginary patient.
Our patient’s raw RAF score is 2.972. We divide that by the normalization factor of 1.045 to get 2.801 .
Lastly, the MA coding adjustment factor is subtracted from this normalized’ RAF score. Remember, this figure is a consistent 5.9%.
5.9% of 2.801 = 0.165
2.801 – 0.165 =2.636
This number is our final RAF score. To calculate the revenue from this patient, we simply multiply this RAF score by the 2025 base rate of $10,402.34.
2.636 x $10,402.34 = $27,420.56
This figure represents the total revenue for this particular Medicare Advantage patient. By repeating this process for each patient in your MA population, you get the total revenue.