The Paradox of Coding — Policy Concerns Raised by Risk-Based Provider Contracts

Abstract

The medical claims that health care providers submit to insurers generally include a Current Procedural Terminology (CPT) code, which describes the medi- cal, surgical, or diagnostic service provided to the patient, as well as a series of International Classification of Diseases diagnostic codes. Un- der fee-for-service reimbursement, health care organizations and in- surers have traditionally focused on accurate CPT coding to ensure that reimbursement matches the services provided. In recent years, however, the medical diagnoses listed in claims have taken on in- creasing importance as capitated and risk-based payment systems have begun to use these codes to adjust the payments made to health plans and providers. The purpose of risk adjustment is to ensure that health plans that enroll sicker patients and provid- ers who care for such patients are compensated fairly. Health plans participating in Medicare Advan- tage, for example, are reimbursed at higher rates for enrolling peo- ple with multiple conditions and more complex diagnoses.