Risk Score and Normalization

Risk Scores and Normalization Factor 

• Normalization factor is based on the National Average FFS Risk Score and is not limited to just estimated DCE assigned lives.  

• The Normalization factor is designed to center scores around 1.0 for the population being evaluated. 

• • A normalized risk score of 1.0 means that beneficiary/physician is at the average risk level for the population 
  • A normalized risk score of 2.0 means that beneficiary/physician is at twice the average risk level for the population 

• National Average FFS Risk Scores being used:  

• • 2017: 1.136307 ​
  • 2018: 1.149652 ​
  • 2019: 1.179996 ​
  • 2020: 1.196384​ 
  • 2021: 0.915175 ​

Calculations

Unadjusted Physician Risk Score = (Aggregated unadjusted beneficiary risk score / number of beneficiaries)

Normalized Risk Score = (Unadjusted Physician Risk Score / National average FFS risk score

Adjusted Physician Cost = (Aggregated unadjusted physician cost / Normalized Risk Score)

Example of 2021 Risk Score Normalization

Physician A

• Beneficiaries = 1, 2, 3 and 4
• Aggregated unadjusted beneficiary risk score = 1.123 + 1.023 + 0.987 + 0.957 = 4.09
• Unadjusted Physician Risk Score = 4.09 / 4 = 1.0225
• Normalization factor for 2021 = 0.915175
• Normalized Risk Score = 1.0225 / 0.95175 = 1.0743
• Aggregated unadjusted physician cost = 132,554 + 213,243 + 218,612 + 123,432 = $687,481
• Adjusted physician cost = 687,481 / 1.0743 = $640,269

Physician B

• Beneficiaries = 5, 6 and 7
• Aggregated unadjusted beneficiary risk score = 0.998 + 1.342 + 1.256 = 3.596
• Unadjusted Physician Risk Score = 3.596 / 3 = 1.1987
• Normalization factor for 2021 = 0.915175
• Normalized Risk Score = 1.1987 / 0.915175 = 1.3098
• Aggregated unadjusted physician cost = 174,633 + 194,432 + 212,283 = $581,348
• Adjusted physician cost = 581,348 / 1.3098 = $443,845