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What Is RAF (Risk Adjustment Factor)?

The Risk Adjustment Factor (RAF) is a numerical score used by Medicare to predict a patient’s healthcare costs based on their chronic conditions and demographics. RAF scores are central to value-based care models—particularly in Medicare Advantage and Accountable Care Organizations (ACOs)—where reimbursement is tied to the projected risk and complexity of the patient population.

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Each patient’s RAF score is calculated annually using:

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A higher RAF score indicates greater clinical complexity, which in turn triggers higher payments to providers or health plans responsible for managing that patient’s care.

Key Components of RAF Scoring

The RAF score is built from several interlocking elements that together estimate a patient’s likely healthcare utilization. Understanding these components is essential for accurate coding and appropriate payment under Medicare risk adjustment.

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  • HCC-Eligible Diagnoses
    RAF scores are primarily derived from ICD-10 codes that map to Hierarchical Condition Categories (HCCs). Only documented, HCC-eligible chronic conditions contribute to the score.
     

  • Demographic Factors
    A patient’s age, sex, disability status, Medicaid dual eligibility, and institutional status influence their base RAF calculation.
     

  • Disease Interaction & Hierarchies
    Some conditions are grouped hierarchically, with only the most severe counting toward the RAF. In some cases, condition combinations increase the score due to higher care demands.
     

  • Annual Redocumentation Requirement
    CMS requires that chronic conditions be documented each calendar year. RAF scores reset annually, so failing to recapture valid conditions results in revenue loss.
     

  • Coding Accuracy & Compliance
    Overstating diagnoses can trigger audits, while undercoding reduces reimbursements. Clean documentation tied to the “MEAT” criteria (Monitor, Evaluate, Assess, Treat) supports both compliance and revenue integrity.

How RAF Scores Are Calculated in Practice

RAF scoring is based on a formula that assigns weighted values to a patient’s clinical conditions and demographics. Here’s how the process typically works in healthcare organizations:
 

  1. Clinical Encounter & Diagnosis Capture
    A provider evaluates a patient and documents any active chronic conditions using ICD-10 codes. Accuracy and specificity are critical—only certain codes are HCC-eligible and contribute to the RAF.
     

  2. HCC Mapping
    The documented ICD-10 codes are passed through the CMS HCC mapping system, which groups related diagnoses into categories that each carry a risk weight.
     

  3. Demographic Risk Score Added
    CMS adds demographic factors—such as age, sex, Medicaid status, and disability—to calculate the patient’s base score.
     

  4. Condition Interactions Applied
    In certain models, combinations of diseases (like diabetes and congestive heart failure) increase risk due to the complexity of care coordination. These interactions further raise the RAF.
     

  5. Final RAF Score Assigned
    The final score is the sum of all valid HCC weights and demographic adjustments. A score of 1.0 represents the baseline Medicare beneficiary; higher scores indicate more costly patients.
     

  6. Payment Adjusted
    The RAF score informs capitation payments for Medicare Advantage plans and benchmark adjustments for ACOs and risk-based providers.
     

If chronic conditions are not re-documented each year, the RAF resets and the provider may receive significantly lower reimbursement—despite delivering the same level of care.

Billing and Medicare Program Impact of RAF Scores

A patient’s Risk Adjustment Factor (RAF) score doesn’t appear on a claim form—but it plays a major role in how Medicare allocates funding to providers and plans. For organizations in risk-sharing arrangements, accurate RAF coding can be the difference between profitability and financial loss.
 

Billing Is the Foundation for RAF Accuracy

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  • RAF scoring is built entirely from ICD-10 codes submitted on claims, tied to HCCs.

  • There’s no separate field for the RAF score—it’s calculated behind the scenes using CMS’s risk engine.

  • The accuracy and completeness of diagnosis coding directly impact the final score.
     

Programs Affected by RAF Scores

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  • Medicare Advantage (MA) Plans
    CMS pays private insurers a per-member-per-month (PMPM) rate based on each enrollee’s RAF score. Plans with high-risk populations receive higher payments.

  • Accountable Care Organizations (ACOs)
    ACOs use RAF scores to adjust their shared savings benchmarks, ensuring that providers caring for more complex patients aren't unfairly penalized.

  • Direct Contracting and ACO REACH
    These advanced risk programs also use RAF scores to set spending targets and calculate performance payments.

  • Chronic Care and Value-Based Care Models
    Any program with risk stratification, population health scoring, or PMPM funding may incorporate RAF scores indirectly.

 

For B2B healthcare organizations—particularly those offering care coordination, billing optimization, or Medicare compliance tools—understanding how RAF scoring interacts with financial models is essential.

Frequently Asked Questions about RAF Scores

1. What is a good RAF score in Medicare?

A RAF score of 1.0 is considered average. Scores above 1.0 indicate higher expected healthcare utilization and typically result in higher payments to Medicare Advantage plans or ACOs. There’s no absolute “ideal” score—only what’s accurate for a patient’s condition burden.

2. How is a RAF score calculated?

RAF scores are calculated using a combination of HCC-coded diagnoses and demographic factors like age, sex, and Medicaid eligibility. Each element has a weight, and the total determines the patient’s risk score.

3. Do RAF scores affect provider payments?

Yes. While RAF scores don’t directly change a physician’s fee-for-service claim, they do determine capitation rates and benchmarks in Medicare Advantage, ACOs, and other value-based care programs.

4. How often are RAF scores recalculated?

Annually. CMS resets RAF scores every calendar year. To retain credit for chronic conditions, providers must re-document them in clinical encounters each year.

5. Can RAF scores be appealed or changed?

No. Once submitted and finalized by CMS, RAF scores are locked in for that payment year. However, organizations can conduct retrospective reviews to identify and prevent future omissions or undercoding.

6. What’s the difference between RAF and HCC?

HCCs are the building blocks—diagnosis categories assigned weights. The RAF score is the total sum of those weights, plus demographic adjustments. In short: HCCs feed into the RAF.

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