The Importance of Supplemental Diagnosis Code Submissions for ACA Risk Adjustment

Introduction

The Affordable Care Act Risk Adjustment (ACA RA) model predicts annualized plan liability expenditures using plan members’ age, sex, and diagnosis codes, which are used as a proxy for health status. The diagnoses are identified for ACA RA through medical claims, known as encounters, that are submitted to the Centers for Medicare & Medicaid Services (CMS) by the plans. Collecting all relevant diagnoses is critical to the accuracy of ACA RA. In this blog, we discuss circumstances when diagnoses are not fully captured or are incorrectly captured on the encounter data submissions to CMS. In these situations, it is possible for plans to make supplemental data submissions of diagnosis codes. We also discuss the impact of those submissions on plan-level risk scores, which heavily influence the risk adjustment payment a plan may receive or have to pay in the ACA RA program (see overview of the ACA RA program here).

What is the Supplemental Diagnosis File?

The supplemental diagnosis file allows issuers to submit supplemental diagnosis information to the EDGE server for consideration in the Risk Adjustment Program.

What are acceptable circumstances for a supplemental diagnosis submission?

There are two (2) acceptable circumstances for supplemental diagnoses:

• Medical Record Review. A diagnosis is discovered as the result of medical record review by the issuer, which was not captured on the original encounter submission. The review is conducted subsequent to medical billing or through routine medical record review. When conducting a medical record review, the issuer must evaluate all diagnoses on the original claim and delete any diagnosis not supported by the medical record, as well as add diagnoses not originally submitted. That is, a supplemental diagnosis submission can result in a deleted diagnosis as well as an additional diagnosis from what was submitted on the original encounter submission.

• Electronic Data Interchange (EDI) limitations. The EDI system, which issuers use to submit encounter data to CMS, may have a cap on the number of diagnosis codes that can be accepted and submitted. In this case, issuers may submit supplemental diagnoses that were on the submitted encounter transaction but truncated in the translator/EDI front-end.

A supplemental diagnosis submission must be associated with a claim or encounter for services that occurred during an enrollee’s period of enrollment in a risk adjustment eligible plan. Therefore, a supplemental diagnosis must be linked to a previously submitted and accepted EDGE server encounter. Also, as with any diagnosis code on an encounter, submission of a supplemental diagnosis code must be supported by medical record documentation and comply with standard coding principles and guidelines.

What is needed to submit a Supplemental Diagnosis Code?

The submission of supplemental diagnosis code information must include the original ‘Claim ID’ that was adjudicated and resulted in a paid amount or reported encounter. Supplemental diagnosis information is submitted via the EDGE Server Supplemental Diagnosis File, or ESSFS. CMS only permits the submission of supplemental diagnoses when specific conditions are met with regards to dates and medical claims.

• A supplemental diagnosis submission must be linked to a previously submitted and accepted EDGE server medical claim
• The original medical ‘Claim ID’ from the previously submitted and accepted EDGE server medical claim must be included in the supplemental diagnosis submission
• The medical service(s) that result in a supplemental diagnosis submission must have occurred during the data collection period for a given benefit year (e.g., January 1 through December 31, 2022, for the 2022 benefit year)
• The supplemental diagnosis submission must be associated with a paid claim or encounter for services that occurred during an enrollee’s period of enrollment in an RA-covered plan; SDCs from denied claims are not acceptable.
• The submission of a supplemental diagnosis code must include ‘Date of Service – From’ and ‘Date of Service – To’ dates for the service that resulted in the supplemental diagnosis submission; these dates must fall within the ‘Statement Covers From’ and ‘Statement Covers Through’ dates at the claim header level on the linked original medical claim that resulted in the encounter

What is the impact of supplemental data file on ACA RA?

In order to illustrate the importance of supplemental diagnosis code submission to the ACA RA program, we analyzed data in the Enrollee-Level External Data Gathering Environment (EDGE) Limited Data Set (LDS). The EDGE LDS contains de-identified enrollment and encounter data that is derived from the data collected and used for the ACA RA program.

According to data from benefit year 2018, the submitted supplemental diagnosis information would impact 1.4 million Hierarchical Condition Category (HCC) codes, with the vast majority (86%) of these HCC codes being added on by a supplemental diagnosis submission, as opposed to HCC codes being deleted due to a supplemental diagnosis being deleted. The additions comprise approximately 9% of the total HCCs identified by submitted diagnoses, either through the encounter or supplemental submissions. Because these additions are slightly biased towards diagnoses associated with HCCs having larger risk adjustment factors, the net effect of the additions (after taking into account deletes) to the average plan’s relative risk score additions would be an approximately 10% increase.

Below are the 5 HCCs associated with the largest change in value due to net additions in supplemental diagnosis submissions:

• (HCC 254) Amputation Status, Lower Limb/Amputation Complications
• (HCC 251) Stem Cell, Including Bone Marrow, Transplant Status/Complications
• (HCC 18) Pancreas Transplant Status/Complications
• (HCC 34) Liver Transplant Status/Complications
• (HCC 183) Kidney Transplant Status

These largely represent lifelong conditions with very large risk adjustment factor values. Given the high costs associated with managing the care for members with these conditions, it is imperative that these codes are captured. In general, the conditions that are added or deleted with supplemental diagnosis files are chronic conditions. Plans may consider using such lists (specific to their organization) to target additional training for clinicians on best practices for documenting diagnosis codes on medical records. In addition, these lists can be used to ensure that appropriate levels of disease management are being provided to plan members.

In subsequent blogs, we will be looking at additional years of EDGE data, as well as differences in supplemental diagnosis data in the individual and small group markets.