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A fundamental part of developing capitation rates for risk-based managed care programs is the selection and usage of historical data to be used as the base data.1 Relative to other sources of data that may be used in developing capitation rates—summarized managed care entity (MCE) utilization and cost experience, fee-for-service data, statutory financial statements, etc.—encounter data provides the most transparent view of an MCE's provision of healthcare services. Encounter data is also the basis for many other required activities resulting from managed care programs, including risk adjustment, quality measurement, value-based purchasing, program integrity, and policy development.
However, encounter data that is incomplete, missing information, or reported incorrectly can render the data of limited use in evaluating an MCE’s financial experience and delivery system performance. Recognizing that quality encounter data is imperative in creating greater transparency in Medicaid managed care programs, the Centers for Medicare and Medicaid Services (CMS) has made ensuring encounter data quality a high priority for states and MCEs. Guidance prior to the release of the final managed care rule (final rule) required an actuary certifying managed care rates to document how base experience used in the rate development process was validated for completeness, accuracy, and consistency across data sources.2 The final rule provides a comprehensive modernization of Medicaid managed care rules and regulations, including addressing encounter data quality and submission requirements in detail.3 Additionally, the final rule permits financial penalties for poor encounter data quality, in the form of withholding federal financial participation (FFP) from states that do not comply with new standards.
In this article, we summarize new regulatory requirements for Medicaid encounter data from the final rule, identify best practices for state Medicaid agencies and MCEs in the development and submission of encounter data, and envision how improvements to Medicaid managed care encounter data quality may change the industry.
The table in Figure 1 summarizes key new standards for encounter data from the final rule. We focus on five issues: provider entities required to submit encounter data, encounter data submission elements, quality control, noncompliance penalties, and the applicability period.4
|Figure 1: Summary of Regulations on Encounter Data|
|Provider entities required to submit encounter data||
|Encounter data submission elements||
The final rule addresses several encounter data issues that we observe frequently in our work with state Medicaid agencies and MCEs:
With encounter data submission requirements becoming effective July 1, 2017, states, MCEs, and their business partners will need to increase focus and rigor in managing encounter data processes to avoid penalties or sanctions in the near future.
With CMS’s increased focus on encounter data accuracy and completeness, adopting sound administrative management practices will undoubtedly assume greater prominence for both states and MCEs. States in particular are becoming both receivers and submitters of encounter data and will need to ensure that “downstream” entities are prepared to support this highly visible CMS requirement and that their internal processes result in compliant encounter data submissions to CMS. In our consulting work with states and MCEs nationally, we have identified a set of administrative “best practices” for encounter data management and submission. They are outlined below.
State Medicaid agencies
Best practice state Medicaid agencies work to develop clear and consistent guidelines for encounter data reporting and monitoring, including the following:
Medicaid managed care entities
Best practice MCEs strive to create quality encounter data as early in the data collection process as possible. Factors that may drive improvements in the data collection process include:
While many state agencies and MCEs have adopted some, or even many, of these practices, in our experience even large sophisticated organizations are still evolving and refining their operations to optimally support encounter data processing requirements.
The final rule addresses a number of topics, including: transparency in the MCE rate development process, quality measurement and improvement, and delivery system reform. At the center of these issues is the ability for stakeholders to have a clear picture of the services, costs, and quality associated with providing healthcare to Medicaid beneficiaries. This can only be done with complete and accurate encounter data. We believe the encounter data requirements in the final rule will lead to a more data-driven environment in Medicaid managed care, with the following key outcomes:
Encounter data requirements in the final rule reflect significant changes with important ramifications for states, MCEs, and business partners. Prudent organizations should examine their current capabilities in relation to the new CMS requirements and take action to identify and remediate issues that might impact their ability to meet the new requirements.
Encounter data standards: Implications for state Medicaid agencies and managed care entities from final Medicaid managed care rule
Encounter data provides the most transparent view of a managed care entity's delivery of healthcare services, but encounter data that is incomplete, missing information, or reported incorrectly can severely limit its effectiveness.