What Does a Risk Score Do & How Is It Calculated?
A risk score compares the predicted costs for participants of a PACE plan with that of the average costs for the population eligible for enrollment. In general, all risk adjustment begins with a risk assessment, which assigns a risk score to plan participants. To conduct a risk assessment, information that can be used to predict health care costs of enrollees is collected. This data typically includes demographics, diagnoses, prescription drugs, functional status, self-reported health status, and prior utilization or expenditures.
Risk scores are based on a combination of demographic and disease factors. The demographics and disease factors are used in a risk adjustment model to calculate a risk score for each member or participant in order to adjust payments to health plans and PACE programs. After all factors are established, the demographic and disease portions of the risk score are added together to calculate a raw risk score. Then, the raw risk score is divided by the normalization factor that is published in the Final Call Letter by CMS each year. Depending on the model and segment, the coding intensity adjustment may be applied, which is also published by CMS each year in the Final Call Letter. If the beneficiary is in a PACE organization, then a frailty factor may be added. When a final risk score is calculated, that risk score is multiplied by the appropriate monthly capitation rate in order to come up with the monthly risk adjusted payment.
CMS | How to Calculate a PACE Risk Score