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Risk Adjustment Factor

What is a risk adjustment factor?

A risk adjustment factor is a calculation of an individual’s health status as a number, or risk score, that helps predict costs for healthcare services. Health plans adjust the risk incurred from insuring members with expected higher healthcare costs by insuring members with expected lower healthcare costs.   

Hierarchal condition categories (HCCs) help determine the risk adjustment factor under the Centers for Medicare and Medicaid Services (CMS). 

Why is risk adjustment factor important to healthcare?

Risk adjustment factor is important to healthcare because it lets healthcare payors balance healthcare costs across all their members. In turn, risk adjustment factor ensures payors can provide sufficient access to care and coverage for their plan members.