Risk adjustment mechanisms predict whether a given patient, or group of patients, is likely to be more or less costly to treat than the average population and provides a way to adjust payment accordingly. The Centers for Medicare & Medicaid Services (CMS) risk adjustment model is a hierarchical condition category (HCC) score. Use of the HCC model is expanding, and there is concern over whether it functions as intended. If CMS-HCC risk scores do not accurately reflect patient health status because of factors such as coding practices or capacity, then payments may not be associated with the true cost of treatment.

Existing evidence suggests that there may be cause for concern. Rural populations experience worse health outcomes than their urban counterparts. By contrast, rural Medicare beneficiaries have lower average CMS-HCC risk scores than urban beneficiaries, suggesting that rural beneficiaries are healthier and less costly. Additionally, preliminary analyses suggest that smaller physician practices, which are disproportionately located in rural areas, have the lowest average CMS-HCC risk scores. On the other hand, rural Medicare beneficiaries are younger than urban beneficiaries, and it may be the case that patients with more complexity systematically seek care in urban areas.

This brief investigates potential differences in urban and rural CMS-HCC risk scores at the provider's patient panel level. We used the 2015 Medicare Physician and Other Supplier Public Use File to compare patient panel CMS-HCC risk scores between urban and rural providers across provider specialties, census divisions, and Merit-Based Incentive Payment System (MIPS) participation requirements.