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 beneficiarys 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. 
 
  For Part B-only beneficiaries enrolled in a plan, the plan sponsor must submit 
o
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  MA plans  Evercare*  SHMO*  PACE and dual 
year  demonstrations* 
2000-2003  10% risk/90%  100%  100%  100% 
demographic  demographic  demographic  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  100% risk/0% demographic 
later  
*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 
  Add-on for 4-9 months 
o
  Add-on for 10+ months 
o
  ESRD Functioning Graft  Institutional 
  Add-on for 4-9 months 
o
  Add-on for 10+ months 
o
  ESRD Functioning Graft  New Enrollee 
  Add-on for 4-9 months 
o
  Add-on for 10+ months 
o
 
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  Model considers serious manifestations of a condition rather than all levels 
Disease (SSD)  of severity of a condition. 
Model   Include most body systems and conditions. 
Models are Additive  Individual risk scores are calculated by adding the coefficients associated 
with each beneficiarys 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  Risk adjusted payment is based on assignment of diagnoses to disease 
Diseases Considered   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  Interactions allow for higher risk scores for certain conditions when the 
Disabled   presence of another disease or demographic status, e.g., disabled status, is 
Interactions  indicative of higher costs. Disease interactions are additive factors and  increase payment accuracy. 
Demographic  Models include five demographic factors: age, sex, disabled status, original 
Variables   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 years diagnoses to predict the following years 
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 categorys ability to predict costs for Medicare Parts A and 
B benefits.  Condition categories that dont 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 organizations 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  Time Period Beneficiary Has Been Entitled  
Been Enrolled in Part B  to Benefits Under Part A Medicare** 
Medicare**  0 - 11 months   12 months 
0  11 months  new enrollee factors  Plans option: new enrollee 
or full risk adjustment 
factors 
 12 months  full risk adjustment  full risk adjustment factors 
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 beneficiarys 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 beneficiarys 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 beneficiarys 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 1st 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  CMS applies the same factor for OREC 1 and 
and current ESRD  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  Payment year 2008  Payment year 
  and earlier years  2009 and later 
years 
New enrollees  1.  Third Party Buy- 1.  MMA State files  1.  MMA State 
In file  2.  Plan-reported  files 
2.  Plan-reported    Retroactive  2.  Plan-reported 
Medicaid  updates through    Retroactive 
  Batch 01  the RPC  updates 
Full risk  transactions  1.  MMA State files  through the 
enrollees    Retroactive  2.  Third Party Buy- RPC 
updates through  In file 
the Retro  3.  Plan-reported 
Processing  Medicaid 
Contractor    Batch 01 
(RPC)  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.,  Field 47 (RA Factor Type code) = C, C1, C2, D, G1, G2, I, 
has 12 months of Part B in the data  I1, or I2 
collection period   and 
Field 23 (Default Risk Factor code) = blank 
Medicaid is used in calculating the risk  Field 19 = blank 
score if enrollee was Medicaid for at   
least one month in the data collection  Use Field 21 to determine Medicaid status   
period   
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  Field 47 (RA Factor Type code) = E, ED, E1, or E2 
not have 12 months of Part B in the data   
collection period    and 
   
And they were present in the Medicare  Field 23 (Default Risk Factor code) = blank 
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. 
Medicaid is used in assigning the  Field 19 = blank 
new enrollee risk score if the   
enrollee was Medicaid for at least  Use Field 21 to determine Medicaid status  
one month in the payment year.   
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- Field 23 is populated with 1, 2, 3, 4, 5, 6, or blank depending 
generated risk score, either because   on type of default score used (see the PCUG for more 
  information about the MMR file layout). 
 the enrollee was not present in the   
o
Medicare Beneficiary Database at the time  Prior to 2009: 
that RAS pulled data for calculating risk   
scores, i.e., they were neither entitled to  Field 47 (RA Factor Type code) = blank 
Part A nor enrolled in Part B at the time of   
the risk score run, or  and 
   
 the enrollee has RAS factors for  Field 23 (Default Risk Factor code) = Y (indicates that a 
o
community and institutional, but has a  default risk score was assigned by the payment system) 
newly-reported ESRD status (RAS did not   
know to generate a CMS-HCC ESRD risk  Note:  Default risk scores may be needed throughout the 
score for the beneficiary)    payment year, since RAS may not be able to generate the 
  appropriate risk scores during the initial and mid-year risk 
The payment system will not have the  score runs.  At final payment reconciliation (conducted in the 
appropriate risk score passed to it from RAS  year following the payment year), all beneficiaries enrolled 
for these beneficiaries; the payment system  during the payment year  both full risk and new enrollees - 
will assign the appropriate default risk score  will receive RAS-generated risk scores, i.e., no default risk 
in these cases (aged/disabled, ESRD).  scores are assigned at final payment reconciliation.  
Medicaid  is  used  in  assigning  the  Field 21 = blank 
default risk score if the enrollee was   
Medicaid for at least one month in  Use Field 19 to determine Medicaid status  
the payment year.   
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  ...Then Drop the Associated Disease Group(s) 
Column...   Listed in This Column 
HCC Disease  Label  HCC Disease  Label 
Group  Group 
17  Diabetes with  19  Diabetes without 
Ketoacidosis  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 beneficiarys 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  Definition 
Factor Code 
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 benficiarys 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 
The demographic and disease factors are additive; the LTI and LIS factors are 
General  multipliers. 
Rules  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 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. 
LTI 
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. 
Two LIS factors (full subsidy and partial subsidy)  one or the other is assigned to 
LIS  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 
Group 2 
Aged  Disabled  Group 1 
Partial subsidy eligible 
 65  < 65  Full 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 
beneficiarys 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 
beneficiarys 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 persons 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 beneficiarys risk score is 
calculated to estimate that specific beneficiarys 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 beneficiarys 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  Medicaid  Non-Medicaid  Total 
respondents to HOS-
M 
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 organizations 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 organizations 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 organizations frailty score. 
 
Beneficiarys risk score = 2.3 
PACE organizations 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 years normalization factors are announced in that years 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  
 
 
Risk Adjustment Processing  National Medicare Utilization 
Common Medicare  Minimum Data Set (MDS)  
  System (RAPS) Database  Database (NMUD)  
Environment  (Long Term Institutional Data) 
(Diagnosis Data)  (Fee-for-Service Diagnosis Data) 
(Dem ographic Data)  
 
 
Be neficiary  MDS Long Term  Beneficiary 
Demographic Input  Diagnosis Input 
  Institutional File 
File  File 
 
 
 
  Risk Adjustment System  
  (RAS)  
(Risk Score Calculation) 
 
 
 
  Medicare Advantage 
Health Plan Management 
Prescription Drug System 
  System (HPMS) 
(MARx) 
  (Payment Calculation)  (Bid Data) 
  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  Beneficiary identification number issued by the Railroad 
(HIC) Number  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 patients 
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 
Service through date  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. 
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 
 
 
 
MA Plan Submits Risk Adjustment Data to CMS  
 
in RAPS Format or Direct Data Entry (DDE) 
 
 
 
Front End Risk Adjustment System (FERAS)  
 
conducts initial edit checks 
 
 
 
Risk Adjustment Processing System (RAPS) 
 
conducts detailed edit checks 
 
 
 
Risk Adjustment Processing System (RAPS) Database  
 
stores diagnosis clusters 
 
 
 
Risk Adjustment System (RAS) extracts diagnostic data  
 
from RAPS Database and calculates risk score 
 
 
 
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 
Covered Facilities  Non-Covered Facilities* 
Type 
Hospital  Short-term (general and specialty)  Skilled Nursing Facilities (SNFs) 
Inpatient  Hospitals  Hospital Inpatient Swing Bed 
Religious Non-Medical Health  Components 
Care Institutions (formerly  Intermediate Care Facilities 
Christian Science Sanatoria) 
Respite Care 
Long-term Hospitals 
Hospice 
Rehabilitation Hospitals 
Childrens Hospitals 
Psychiatric Hospitals 
Medical Assistance Facilities/ 
Critical Access Hospitals 
*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 
Covered Facilities  Non-Covered Facilities* 
Provider Type  RAPS 
Covered Facilities  Non-Covered Facilities* 
Provider Type 
Hospital  Short-term (general and specialty)  Free-standing Ambulatory Surgical 
Outpatient  Hospitals  Centers (ASCs) 
Medical Assistance Facilities/Critical  Home Health Care 
Access Hospitals  Free-standing Renal Dialysis 
Community Mental Health Centers 1**  Facilities 
Federally Qualified Health Centers 2/ 
Religious Non-Medical Health Care 
Institutions (formerly Christian Science 
Sanatoria) ** 
Long-term Hospitals 
Rehabilitation Hospitals 
Childrens Hospitals 
Psychiatric Hospitals 
Rural Health Clinic (Free-standing and 
Provider-Based) 3** 
Non-Covered Services 
Laboratory Services  Orthotics 
Ambulance  Supplies 
Durable Medical Equipment  Radiology Services 
Prosthetics 
*  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 CMHCs 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  Determine if the number is in an acceptable 
code is identified.  range for risk adjustment.  If in the 
acceptable range, submit the data. 
Situation 2  An in-network provider  Obtain the provider number or taxonomy 
submitted a claim but did  code and then determine if the number is in 
not include any provider  an acceptable range for risk adjustment.  If in 
number or taxonomy  the acceptable range, submit the data. 
code.  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  Plans must obtain a provider number or 
provider submits a claim  taxonomy code. 
without a provider 
number. 
 
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. 
 
  The first two characters are numerals and represent the state/territory as 
o
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  09  Montana  27  Texas  45 
Columbia 
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     
 
  The third character may be a numeral or a letter. Provider numbers with a U, 
o
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 
 
Provider  Taxonomy Code/  
Type Of Hospital Inpatient Facility 
Number Range  Type of Bill (TOB) 
Short-term (General and Specialty) Hospital  XX0001- 282N00000X 
XX0899  273R00000X 
XXS001- 273Y00000X 
XXS899 
XXT001-
XXT899 
Medical Assistance Facilities/Critical Access  XX1225- 282NC0060X 
Hospitals  XX1399 
Religious Non-Medical Health Care  XX1990- TOB 4XX 
Institutions  XX1999 
Long-term Hospitals  XX2000- 282E00000X 
XX2299 
Rehabilitation Hospitals  XX3025- 283X00000X 
XX3099 
Childrens Hospitals  XX3300- 282NC2000X 
XX3399 
Psychiatric Hospitals  XX4000- 283Q00000X 
XX4499 
 
Table 18.  Hospital Outpatient Covered Entities 
 
Provider Number  Taxonomy Code/  
Type Of Hospital Outpatient Facility 
Range  Type of Bill (TOB) 
Short-term (General and Specialty) Hospital  XX0001-XX0899  282N00000X 
XXS001-XXS899  273R00000X 
XXT001-XXT899  273Y00000X 
Medical Assistance Facilities/Critical Access  XX1225-XX1399  282NC0060X 
Hospitals 
Community Mental Health Centers  XX1400-XX1499  TOB 76X 
XX4600-XX4799 
XX4900-XX4999 
Federally Qualified Health Centers/Religious Non- XX1800-XX1999  TOB 73X for FQHC 
Medical Health Care Institutions  TOB 4XX for RNHCI 
Long-term Hospitals  XX2000-XX2299  282E00000X 
Rehabilitation Hospitals  XX3025-XX3099  283X00000X 
Childrens Hospitals  XX3300-XX3399  282NC2000X  Provider Number  Taxonomy Code/  
Type Of Hospital Outpatient Facility 
Range  Type of Bill (TOB) 
Rural Health Clinics, Freestanding and Provider- XX3400-XX3499  TOB 71X 
Based  XX3800-XX3999 
XX8500-XX8999 
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 
physicians 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 
Occupational 
1  General Practice  26  Psychiatry  67 
Therapist  
Geriatric 
2  General Surgery       27**  68  Clinical Psychologist 
Psychiatry 
3  Allergy/Immunology  28  Colorectal Surgery   72*  Pain Management 
Pulmonary  Peripheral Vascular 
4  Otolaryngology  29   76* 
Disease  Disease 
5  Anesthesiology   33*  Thoracic Surgery  77  Vascular Surgery 
6  Cardiology  34  Urology  78  Cardiac Surgery 
7  Dermatology  35  Chiropractic  79  Addiction Medicine 
Licensed Clinical 
8  Family Practice  36  Nuclear Medicine  80 
Social Worker 
Interventional Pain  Critical care 
    9**  37  Pediatric Medicine  81 
Management (IPM)  (intensivists) 
10  Gastroenterology  38  Geriatric Medicine  82  Hematology 
11  Internal Medicine  39  Nephrology  83  Hematology/Oncology 
Osteopathic 
12  Manipulative  40  Hand Surgery  84  Preventive Medicine 
Therapy 
13  Neurology  41  Optometry  85  Maxillofacial Surgery 
Certified Nurse 
14  Neurosurgery  42  86  Neuropsychiatry 
Midwife 
Certified 
Speech Language  Certified Clinical 
15  43  Registered Nurse   89* 
Pathologist  Nurse Specialist 
Anesthetist 
Obstetrics/Gynecolog
16  44  Infectious Disease  90  Medical Oncology 
y 
Hospice And 
   17**   46*  Endocrinology  91  Surgical Oncology 
Palliative Care 
18  Ophthalmology   48*  Podiatry  92  Radiation Oncology 
19  Oral Surgery   50*  Nurse Practitioner  93  Emergency Medicine 
Interventional 
20  Orthopedic Surgery   62*  Psychologist  94 
Radiology 
  22*  Pathology   64*  Audiologist    97*  Physician Assistant 
Plastic And 
Gynecologist/Oncolog
  24*  Reconstructive  65  Physical Therapist  98 
ist 
Surgery 
Physical Medicine  Unknown Physician 
25  66  Rheumatology   99 
And Rehabilitation  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 contracts 
HPMS effective date. 
 
  The EDI Agreement is a contract between the MAO and CMS attesting to 
o
the accuracy of the data submitted. 
 
  An officer (e.g., CEO) that represents the MAO must sign the EDI 
o
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 submitters 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  POSITION  SUBMISSION  FIELD  EXPLANATION 
NO  STATUS  NAME 
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  Specifies the date that the file was 
Date  submitted to Palmetto and formatted as 
CCYYMMDD. 
5  28-31  Required  Production  Must be populated with PROD or 
Test Indicator  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  POSITION  SUBMISSION  FIELD  EXPLANATION 
NO  STATUS  NAME 
1  1-3  Required  Record ID  Batch-level information that identifies 
the MA organization is populated with 
BBB. 
2  4-10  Required  Sequence  This field identifies the batch submitted.  
Number  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  POSITION  SUBMISSION  FIELD  EXPLANATION 
NO  STATUS  NAME 
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   FIELD  EXPLANATION 
STATUS  NAME 
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  This field identifies the detail record submitted. 
Number  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  This field must be submitted with spaces.  Upon 
Number Error  return, this field is populated with an error code if 
Code  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  This optional field may be used by the MA 
Number  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  This should be submitted with spaces.  Upon 
Code  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 
patients 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  This field must be submitted with spaces.  Upon 
Code  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   FIELD  EXPLANATION 
STATUS  NAME 
9  93-412  DIAGNOSIS-   The following 8 fields (9.0-9.7) may be repeated 
CLUSTER (10  10 times in the same CCC record with one 
occurrences)  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  This field allows the MA organization to delete a 
Indicator  diagnosis, for correction purposes, that has been 
stored in the RAPS database.  Enter a D or 
space. 
9.4    Required when  Diagnosis  This field is populated with the three-to five-digit 
ICD-9-CM is  Code or Filler  ICD-9-CM diagnosis code.  The decimal is 
used  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  Diagnosis  This field is populated with the three-to seven-digit 
ICD-10-CM is  Code or Filler  ICD-10-CM diagnosis code.  The decimal is 
used  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  This field must be submitted with spaces.  Upon 
Cluster Error 1  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  This field must be submitted with spaces.  Upon 
Cluster Error 2  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  This field must be submitted with spaces.  If the 
number  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   FIELD  EXPLANATION 
STATUS  NAME 
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  POSITIO SUBMISSION   FIELD NAME  EXPLANATION 
NO  N  STATUS 
1  1-3  Required  Record ID  Batch trailer information should be 
populated with YYY. 
2  4-10  Required  Sequence  A 7-digit numeric character 
Number  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  This field should total the number of 
Total  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  POSITIO SUBMISSION   FIELD NAME  EXPLANATION 
NO  N  STATUS 
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  This field should total the number of 
Total  batches in the file.  This field is  RAPS RECORD ZZZ  FILE TRAILER 
FIELD  POSITIO SUBMISSION   FIELD NAME  EXPLANATION 
NO  N  STATUS 
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 patients treatment for inpatient discharges before the ICD-10 
implementation date and for outpatient and physician services before that date.  
Diagnosis codes describe the patients 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  Exact date of patient visit or the last 
  or the first date service  date of service for a series of services 
Physician  began for a series of   
  services 
 
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  Type of Bill 
Code 
Hospital Inpatient  Hospital Inpatient  01  111 or 11Z 
Principle Diagnosis 
Hospital Inpatient  Hospital Inpatient Other  02  111 or 11Z 
Diagnosis 
Hospital  Hospital Outpatient  10  131, 13Z, 141 or 
Outpatient  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  CMS defines a Duplicate Diagnosis Cluster as one that shares all of 
Duplicate  the same attributes (HIC Number, Provider Type, From and Through 
Diagnosis Cluster  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  300-Level Errors 
Resolution  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  MA organizations should only resubmit the diagnosis clusters that 
Modifying Data  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 
 
Initial Submission  First Payment  Final Submission 
CY  Dates of Service 
Deadline  Date  Deadline 
2009  01/01/08 - 12/  03/06/09  07/01/09  01/31/10 
31/08   
 
2010  07/ 01/08 -  09/04/09  01/01/10  N/A 
06/30/09   
 
2010  01/01/09 -  3/05/10  07/01/10  01/31/11 
12/31/09   
 
2011  07/01/09 -  09/03/10  01/01/11  N/A 
06/30/10   
 
2011  01/01/10 -  03/04/11  07/01/11  01/31/12 
12/31/10   
 
 
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    Indicates file is accepted or  Same business day for Secure 
Report  rejected  Website and FTP users 
  Identifies reasons for rejection   
  Report layout format  Next business day for 
Connect:Direct and Gentran users  
RAPS Return File    Contains the entire submitted  Next business day after 
transaction  submission 
  Identifies 300-, 400-, and 500-
level errors 
  Flat file layout 
RAPS Transaction    Communicates errors found in  Next business day after 
Error Report  CCC records during processing  submission    Displays only 300-, 400-, and 
500-level error codes 
  Report layout 
RAPS Transaction    Summarizes the disposition of  Next business day after 
Summary Report  diagnosis clusters  submission 
  Report layout 
RAPS Duplicate    Identifies diagnosis clusters with  Next business day after 
Diagnosis Cluster  502-error message  submission 
Report    Clusters accepted, but not stored 
  Report layout 
RAPS Monthly Plan    Provides monthly summary of  Available for download the 
Activity Report  the status of submissions by  second business day of the month 
submitter ID and Plan Number 
  Report layout 
RAPS Cumulative    Provides cumulative summary  Available for download the 
Plan Activity Report  of the status of submissions by  second business day of the month 
submitter ID and Plan Number 
  Report layout 
RAPS Monthly Error    Provides a monthly summary of  Available for download the 
Frequency Reports  all errors associated with files  second business day of the month 
submitted in test and production 
  Report layout 
RAPS Quarterly    Provides a quarterly summary of  Available for download the 
Error Frequency  all errors on all file  second business day of the month 
Reports  submissions within the 3-month  following each quarter 
quarter 
  Report layout 
 
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  RAPS Mailbox  Next business day 
Error Report  RPT####.RPT.RAPS_RETURN_FLAT  following data 
RPT####.RPT.RAPS_RETURN_FLAT (zip  submission  format) 
RPT#####.RPT.RAPS_ERROR_RPT 
RPT#####.RPT.RAPS_ERROR_RPT (zip 
format) 
 
RAPS Monthly and Cumulative Plan  RAPS Mailbox  Second business day 
Activity Reports  RPT####.RPT.RAPS_MONTHLY  of the month 
RPT####.RPT.RAPS_MONTHLY (zip 
format) 
RPT####.RPT.RAPS_CUMULATIVE 
RPT####.RPT.RAPS_CUMULATIVE (zip 
format) 
 
Monthly Membership Report  Through MARx  Monthly 
(MMR)   
  MMR Non-Drug 
  Drug Reports 
Model Output Report (MOR)  Through MARx  Monthly 
  Part C HCC MOR 
  RAS RxHCC MOR 
Risk Adjustment SAS Programs   http://www.cms.hhs.gov/MedicareAdvtgSpec 2006-present 
RateStats 
Medicare Rates & Statistics  Risk 
Adjustment Downloads for CMS-HCC, 
ESRD, RxHCC   
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    Contains all transactions submitted by the MA organization.  
File     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    Contains only the records that contain errors, causing one or more diagnosis 
Transaction  clusters to reject. 
Error Report     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    Confirms the total number of diagnoses stored in the CMS-HCC model. 
and Cumulative 
Plan Activity 
Reports 
 
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 
  Payments and adjustments applicable to the organizations Medicare membership, shows 
o
total number of payments for beneficiaries receiving hospice, ESRD or institutionalized 
status. 
  Detail 
  Detailed list of beneficiaries for who payment was made for a month (prospective for 
o
that month or an adjustment payment for a previous month). 
  Allows for comparison of organizations beneficiary records with CMS records. 
o
  Non-Drug MMR 
  Contains information such as rebates, payments and adjustments, Part A and Part B 
o
information, risk adjustment factors for Part A and Part B, and other detailed beneficiary 
information. 
  Drug MMR 
  Contains information such as basic premiums, estimated reinsurance, payments and 
o
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 
  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 
o
demographic interactions. 
  Provides detailed beneficiary level information on: 
o
  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 beneficiarys risk score provided on the MMR. 
  Summing the risk factors for an individual beneficiary yields a total risk adjustment 
score. 
   
Beneficiaries Charles W. 
Figure 6. Sample Model Output Report 
Wood and Lillian L. Tree, 
  listed on this sample MOR 
did not trigger HCCs since 
1***GROUP=H8888,CONTRACT=H8888,  
the previous model run. 
1RUN DATE: 20031219  RISK ADJUSTMENT MODEL OUTPUT REPORT  
However, CMS accounts 
PAGE: 1   for the beneficiaries age 
PAYMENT MONTH: 200401   PLAN: H8888 CHAMPION INSURANCE   and sex in the total risk 
score reported on the MMR. 
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  
Three HCCs triggered for this 
HCC080 Congestive Heart Failure    
fi i  
HCC092 Specified Heart Arrhythmias  
One interactive HCC triggered for this 
INTERACTIONS: INTI01 DM_CHF 
b fi i  
 
Beneficiary Albert A. Grass, has triggered three HCCs and one interaction. CMS will reflect 
the rate for these HCCs i n the beneficiarys risk score, communicated on the MMR. 
   
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    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 beneficiarys 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 
beneficiarys 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 beneficiarys 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 patients 
treatment.  The codes do not describe the service performed, just the patients 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 patients  treatment.  The codes do not describe the service performed, just the patients 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 beneficiarys 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  Upon  N/A 
from ASC X12 Version 4010 to 5010  Implementation 
of ICD-10 
R116MCM 02/28/2014  Conversion from ICD-9 to ICD-10 and  10/012014  N/A 
from ASC X12 Version 4010 to 5010  
Rescinded and replaced by Transmittal 118 
R114MCM 06/07/2013  Chapter 7  Risk Adjustment  06/07/2013  N/A 
R57MCM  08/13/2004  Coverage of Clinical Trials, Hospital  N/A  N/A 
Inpatient Data, Diagnostic Coding, and 
Collection of Data 
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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