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Capitation Payment under the Risk Adjustment Model - Updated May 2004

Organizations that are paid under the ESRD risk adjustment system will be paid using a three tier approach corresponding to whether a beneficiary is in dialysis status, is receiving a transplant, or is in functioning graft status. Payment will be one hundred percent, or fully, risk-adjusted.

For a patient receiving dialysis, a model calibrated solely on dialysis patients has been developed. The model is similar to the CMS–Hierarchical Condition Category (HCC) model used for the Medicare Advantage (MA) program (formerly the Medicare+Choice program) that accounts for demographics and diseases in assigning a risk factor. (Additional information on the CMS-HCC model for MA plans may be found at http://www.cms.hhs.gov/healthplans/rates/.) The CMS-HCC Dialysis Model is for beneficiaries who were enrolled in Part A and Part B fee-for-service Medicare and not on hospice from January 1 through December 31 of the previous year. Monthly payment is computed by multiplying the risk score derived from this model with an ESRD base rate for each state.

There is also a CMS-HCC Dialysis Model for New Enrollees that is used for beneficiaries without sufficient Medicare history for risk adjustment. The CMS-HCC Dialysis Model for New Enrollees is used for those beneficiaries who do not have a full year of base year claims data.

If a beneficiary receives a kidney transplant, the plan is paid using the Transplant Model for the month of the transplant and the two subsequent months, regardless of whether the beneficiary returns to dialysis status during the time period. The payment factor for a transplant is based on the average Medicare costs of transplant admissions and the two months subsequent to discharge. The transplant factor is applied to the dialysis rate book.

After the three-month transplant period, the plan is paid under a model similar to the MA general CMS-HCC model but with added factors indicating that the beneficiary has a functioning graft and whether the transplant was more or less than ten months prior. The functioning graft factor is applied to the M+C capitation ratebook (http://www.cms.gov/healthplans/rates/2004-states/).

If the graft fails and CMS receives notice of the start of dialysis, payment reverts to the CMS-HCC Dialysis Model. If there is a second transplant, the Transplant Model will again apply.

For the list of ICD-9 diagnosis codes that are assigned incremental payments by the risk models see the following website: http://www.cms.gov/healthplans/riskadj/. The list of ICD-9 codes with the corresponding HCCs is in the file: icd9hcc.zip.

Payment Calculation

1. Determine the patient’s current treatment modality (dialysis, transplant, functioning graft).
2. If in dialysis or transplant status, determine the base rate from the ESRD dialysis ratebook
   (Exhibit 1) (.pdf 40 KB).

If in functioning graft status, determine the base rate from the Medicare Advantage ratebook http://www.cms.gov/healthplans/rates/.
3. Multiply by the risk score determined from the appropriate model http://www.cms.gov/healthplans/rates/2005/cover-enclosure4.asp
   
   

   [Note: The 2005 relative factors will be used for the demonstration in 2004.]:

Table IV-1: CMS-HCC Dialysis Model for beneficiaries who were enrolled in Part A and Part B fee-for-service Medicare and not on hospice from January 1 through December 31 of the previous year.

Table IV-2: CMS-HCC Dialysis Model for New Enrollees for beneficiaries who do not meet the criteria for using the CMS-HCC Dialysis Model.

Table IV-3: Transplant Model

Table IV-4: CMS-HCC Community and Institutional Models for Functioning Graft

Note the following:
1. The CMS-HCC model is an additive model.

Total risk factor for a beneficiary =
factor for an age/sex group
+ factors for all disease groups that apply
+ factor for Medicaid (if applicable)
+ factor for aged person who was originally eligible due to ESRD or disability (if applicable)
+ factors for certain combinations of diseases or disease and age (if applicable)
+ graft factor (for functioning graft model).
2. Disease hierarchies must be accounted for when calculating the risk score according to the dialysis and functioning graft models (see Table IV-5)
3. Age computation is the attained age (integer) as of February 1 of payment year.
4. Originally-disabled status is determined by the original reason for entitlement indicator in the Medicare enrollment database.
5. The Medicaid factor takes effect if a beneficiary had at least one month of Medicaid status in the year prior to payment or in the payment year for new Medicare beneficiaries.
6. If Medicare is a secondary payor, the risk-adjusted payment rate is calculated the same way and is then multiplied by 0.215.

Example:

1. In 2004, a 67-year-old male who resides in Baltimore County, Maryland has ESRD and has been a Medicare beneficiary on dialysis for the past seven years. He is not on Medicaid. The man has diabetes with acute complications, congestive heart failure, vascular disease with complications, and chronic obstructive pulmonary disease.

   Using Exhibit 1: (.pdf 40 KB)
   Maryland ESRD rate = $6,130.46

   Using Table IV-1 since beneficiary is on dialysis and we have a full year of base year claims data:

   Risk Factor = 0.769 [Male 65-69] + 0.105 [HCC17 Diabetes with Acute Complications] + 0.083 [HCC80 Congestive Heart Failure] + 0.145 [HCC104 Vascular Disease with Complications] + 0.072 [HCC108 Chronic Obstructive Pulmonary Disease] + (-0.049) [Originally Entitled due to ESRD] = 1.125

   Total monthly payment = $6,130.46 x 1.125 = $6,896.77

2. Six months later this man receives a kidney transplant.

Using Table IV-3 for the transplant month and the two subsequent months:

Month 1 payment = $6,130.46 x 7.510 = $46,039.75
Month 2 payment = $6,130.46 x 1.016 = $6,228.55
Month 3 payment = $6,130.46 x 1.016 = $6,228.55


3. This man maintains functioning graft status and resides in the community.

Using 2004 M+C monthly capitation and rescaling factors (http://www.cms.gov/healthplans/rates/2004ma-states/): Part A + Part B rates = $663.33

Using Table IV-4 since beneficiary has a functioning graft:

Risk factor = 0.346 [Male 65-69] + 0.391 [HCC17 Diabetes with Acute Complications] + 0.417 [HCC80 Congestive Heart Failure] + 0.677 [HCC104 Vascular Disease with Complications] + 0.376 [HCC108 Chronic Obstructive Pulmonary Disease] + 0.253 [INT1 DM, CHF] + 0.241 [INT3 CHF, COPD] + 3.425 [65+, 4-9 months since transplant] = 6.126

Total monthly payment = $663.33 x 6.126 = $4,063.56