Health care reform calls for fundamental changes in health insurance and provider payment, in which risk adjustment plays an important role. This paper, prepared by Milliman for the Massachusetts Medical Society, discusses the use of risk adjustment in provider payment reforms. It is intended for provider organizations that are about to enter into global payments or are already in such a program.

The paper discusses the main characteristics of risk adjustment models and the key considerations when applying risk adjustment in global payments, such as:

• The selection of a risk adjustment methodology
• The choice between concurrent and prospective models and how payments are organized
• Input data for risk adjustment, clinical validity, and the importance of coding
• The credibility of risk adjustment with regard to partial eligibility and patient assignment
• How risk adjustment works together with other risk mitigation programs, such as reinsurance and use of a risk corridor

Related paper: Risk adjustment: Important considerations for global payments to providers