We recently evaluated the impact of risk adjustment of social determinants of health (SDOH) on financial outcomes for Medicaid accountable care organizations (ACOs) and managed care organizations (MCOs). We calibrated risk-adjustment models with the addition of SDOH risk factors, then simulated financial outcomes for ACOs/MCOs across synthetic state Medicaid managed care markets with and without the SDOH risk adjustment. Our research was published in a paper for the Society of Actuaries Research Institute.

Read the full article here.

Key findings

• Integration of SDOH into Medicaid risk adjustment provided a small but measurable reduction in volatility and variation of financial results versus a recalibrated model without SDOH (morbidity-only).
• The improvement in fit, while modest, is greatest for populations with below-average morbidity risk and above-average SDOH-related risk.
• Prospective risk scores for these beneficiaries were too low under morbidity-only models but closer to parity after incorporating SDOH, suggesting that SDOH risk factors may help right-size revenue for populations with costs that reflect utilization of services below their healthcare needs as indicated by prior-year diagnoses.