Certified Risk Adjustment Coder (CRC)

During a retrospective chart audit, if a diagnosis is not supported by medical records, what is the potential extrapolated cost saving for the health plan with 1,500 members?

1. $1,500

2. $350

3. $525,000

4. There is not a financial penalty

The correct answer is: $525,000

The choice indicating an extrapolated cost saving of $525,000 is rooted in understanding how inaccurate or unsupported diagnoses can significantly impact healthcare costs for a health plan. When a diagnosis is not substantiated by the documentation in the medical records, it creates an opportunity for cost savings if the health plan can reduce the reimbursements associated with that unsupported diagnosis. In a health plan managing a population of 1,500 members, if a certain diagnosis contributes significantly to capitation payments or risk-adjusted payments, eliminating unsupported claims can yield considerable financial benefits. This is especially true if the diagnosis in question leads to extensive care or treatment that incurs substantial costs. The extrapolation is calculated based on the average cost or reimbursement rate attributed to that unsupported diagnosis multiplied by the number of affected members. If it's determined that unsupported diagnoses collectively lead to inflated costs amounting to around $525,000 within the member population, acknowledging this saving is crucial for maintaining the financial health of the plan. This calculation reflects a comprehensive analysis of medical necessity, proper documentation, and its implications on overall healthcare spending, showcasing the vital relationship between accurate coding and financial management in a health plan.