The Illness-Adjustment Loop


For Clinicians and Organizations


Observe. Orient. Decide. Act.




The OODA loop is an essential tool for strategic analysis.


Twenty plus years ago, when I first looked over our first Medicare Advantage contract, it appeared to be a complex mess.


But with all the deferred revenue payments, the data-driven revenue adjustments and action/reaction format, it read uncannily like a form of an OODA loop.


So I applied that paradigm and came up with our own strategic map.


And everything became crystal clear.


I called it the Illness-Adjustment, or I-A Loop.


And getting inside it is how I became, well . . . me.


You already know that there’s a delay of up to 18 months between submitting the diagnosis for an illness and a change in the capitation payments.


As for paying the costs of that illness during the interim, you’re on your own until the capitation adjustment kicks in.


Your ultimate success or failure in Medicare Advantage lies in two tactics:


  • Identifying and addressing your patient’s chronic illnesses as early in their course as possible, and then documenting and submitting the appropriate diagnostic codes—and doing both years before the conditions begin to generate substantial costs.


  • Identifying acute illnesses that may be associated with increased capitation, managing them appropriately to keep your treatment costs below the fee-for-service average (i.e. preventing them from needing hospitalization) and making sure you appropriately document and submit the diagnostic codes.


With these tactics, you’ll anticipate the costs of those chronic illnesses BEFORE the inevitable exacerbations actually generate them. You’ll also be booking increased capitation revenue from your acute illnesses long after the costs have been paid.  And if the costs of caring for those acute illnesses are less than average, the additional revenue will provide you with a net gain.



Congratulations, you’re inside the I-A loop.


By adjusting before an illness becomes acute, you’ve created a steady financial buffer that’ll help keep you in the black through the ups and down of your patient’s care costs.


The ultimate result of doing so? You’ll pay closer attention to your patient’s health status—-and they’ll be the better for it.


It’s almost like the system is designed that way.


Now, I’m not talking about submitting codes for diagnoses that aren’t there—that’s fraud.


I’m saying watch your patient’s health closely, identify chronic illnesses early, acute conditions when they occur—-and do what you need to keep those patients well.


Work the system as it’s designed—that’s how you and your patients will succeed extravagantly.








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