22 Payment Systems & Risk Adjustment Practice Questions & Answers

1. 1. A hospital payment method is described as "prospective." What does that term mean about how the payment rate is determined?

   • A.The rate is negotiated separately with the payer before each individual admission.
   • B.The rate is a fixed monthly amount per enrolled member of the health plan.
   • C.The rate is calculated after discharge from the charges posted to the account.
   • D.The rate is set in advance from a classification of the patient or service.✓ Answer

   Prospective means the rate is established before the service is delivered, on the basis of a classification of the patient or the service (an MS-DRG, an APC), so the facility receives the same amount whether its actual cost for that case runs higher or lower. Retrospective cost-based reimbursement instead pays from charges after the fact, and capitation pays a fixed per-member-per-month amount regardless of what was done.

   Source: CMS Medicare Payment Systems (MLN Booklet), definition of a prospective payment system; AHIMA CCA Exam Content Outline eff. 5/1/2022, Domain 2Report a problem with this question

2. 2. After the grouper has ruled out the pre-MDC groups such as transplants and tracheostomy, which data element assigns an inpatient case to its major diagnostic category (MDC)?

   • A.The principal diagnosis established after study for the admission.✓ Answer
   • B.The discharge disposition code combined with the patient's age.
   • C.The secondary diagnosis carrying the highest severity level.
   • D.The most resource-intensive operating-room procedure performed.

   MS-DRG logic runs in a fixed order: pre-MDC groups are tested first, then the principal diagnosis assigns the MDC, then the case splits into the surgical or medical partition, and only then is severity applied. Because the principal diagnosis determines the MDC, an error in selecting it changes every downstream step of the assignment.

   Source: CMS ICD-10 MS-DRG Definitions Manual, "Defining the MS-DRGs" (MDC assignment from the principal diagnosis)Report a problem with this question

3. 3. A patient is admitted for chest pain; after study the physician documents that an acute myocardial infarction was chiefly responsible for the admission. The coder nevertheless reports chest pain as the principal diagnosis. What is the payment consequence?

   • A.The case groups to a different, generally lower-weighted MS-DRG.✓ Answer
   • B.The case still groups correctly because both codes appear on the claim.
   • C.The case is rejected outright since two diagnoses conflict on the claim.
   • D.The case is paid at the higher rate because the MCC list controls it.

   The UHDDS defines the principal diagnosis as the condition established after study to be chiefly responsible for occasioning the admission, and that code drives the MDC and therefore the MS-DRG. Reporting a symptom instead of the confirmed underlying condition moves the case into a different group, usually one with a lower relative weight, which is why principal diagnosis selection carries direct financial consequence.

   Source: UHDDS definition of principal diagnosis; ICD-10-CM Official Guidelines for Coding and Reporting, Section IIReport a problem with this question

4. 4. Which statement correctly describes how a diagnosis can function as a CC or an MCC in the MS-DRG system?

   • A.The admitting diagnosis acts as the CC whenever no secondary diagnoses exist.
   • B.An operating-room procedure code may act as an MCC when resource use is major.
   • C.A secondary diagnosis may act as a CC or MCC, but the principal diagnosis may not.✓ Answer
   • D.Any diagnosis on the claim may raise severity, whether principal or secondary.

   Severity subdivision works only on secondary diagnoses: a CC signals a moderate increase in resource use and an MCC a major one, and the principal diagnosis can never serve as its own CC or MCC. A secondary diagnosis that is too closely related to the principal diagnosis also appears on the CC Exclusion List and will not raise the tier, which is why an MCC on the claim does not automatically increase payment.

   Source: CMS ICD-10 MS-DRG Definitions Manual, Appendix C (CC/MCC lists and CC Exclusion List)Report a problem with this question

5. 5. On an inpatient claim a diagnosis is reported with present-on-admission (POA) indicator W. What does that indicator report?

   • A.The provider could not clinically determine whether the condition was present.✓ Answer
   • B.The documentation is insufficient for the coder to determine the answer.
   • C.The code is exempt from present-on-admission reporting requirements.
   • D.The condition was clearly not present at the time of inpatient admission.

   The POA values are Y (present at admission), N (not present), U (documentation insufficient to determine), W (provider unable to clinically determine) and 1 (code exempt from POA reporting). W and Y receive the higher-paying assignment, while N and U do not, so distinguishing the clinical uncertainty of W from the documentation gap of U matters to payment.

   Source: ICD-10-CM Official Guidelines for Coding and Reporting, Appendix I: Present on Admission Reporting GuidelinesReport a problem with this question

6. 6. A stage III pressure ulcer is reported with POA indicator N and is the only MCC on the case. Under the Deficit Reduction Act hospital-acquired condition payment provision, how is the case paid?

   • A.It is paid per diem as a transfer instead of the full MS-DRG amount.
   • B.It is denied in full because the condition arose during the hospital stay.
   • C.It is grouped as if that diagnosis were absent, at a lower-paying MS-DRG.✓ Answer
   • D.It keeps the "with MCC" group but the hospital loses one percent of payment.

   When a listed hospital-acquired condition is the only CC or MCC on the case and was not present on admission, the grouper assigns the case as though that diagnosis had not been reported, dropping it to a lower-paying severity tier. This per-case DRG provision is separate from the HAC Reduction Program, which applies a hospital-wide one percent payment cut to the worst-performing quartile on quality measures.

   Source: Deficit Reduction Act of 2005 §5001(c); CMS Hospital-Acquired Conditions and Present on Admission Indicator Reporting fact sheetReport a problem with this question

7. 7. An MS-DRG carries a relative weight of 2.0. Conceptually, what does that number express?

   • A.The group's expected stay runs about two days longer than the average.
   • B.The group is paid about twice the hospital's billed charges for the stay.
   • C.The group requires two or more secondary diagnoses before it can be assigned.
   • D.The group consumes about twice the resources of the average Medicare case.✓ Answer

   A relative weight is an index of expected resource intensity in which 1.0 represents the average Medicare case, so 2.0 means roughly twice the average resource use. It is not tied to the individual hospital's charges, to length of stay in days, or to the number of codes reported.

   Source: CMS IPPS MS-DRG relative weights, 42 CFR 412.60Report a problem with this question

8. 8. A hospital's inpatient base rate is $6,000 and a discharge groups to an MS-DRG with a relative weight of 1.25. Using only these figures, what is the MS-DRG payment for the case?

   • A.$1,250
   • B.$4,800
   • C.$7,500✓ Answer
   • D.$6,000

   The basic IPPS calculation multiplies the MS-DRG relative weight by the hospital's base (standardized) rate: 1.25 x $6,000 = $7,500. Real payments then layer on wage-index, teaching, disproportionate share and outlier adjustments, but the relative weight times base rate product is the core of the formula.

   Source: CMS IPPS payment methodology, 42 CFR 412.64 (payment = MS-DRG relative weight x standardized amount)Report a problem with this question

9. 9. A hospital discharged four Medicare patients whose MS-DRGs carried relative weights of 1.0, 1.5, 2.0 and 3.5. What is the case-mix index for those four discharges?

   • A.2.0✓ Answer
   • B.4.0
   • C.1.75
   • D.8.0

   Case-mix index is the sum of the MS-DRG relative weights for all discharges divided by the number of discharges: (1.0 + 1.5 + 2.0 + 3.5) = 8.0, and 8.0 / 4 = 2.0. The sum alone (8.0) is the most common wrong answer because the division step is skipped.

   Source: CMS IPPS case-mix index definition (sum of MS-DRG relative weights divided by number of discharges)Report a problem with this question

10. 10. A hospital's case-mix index has fallen steadily over two quarters. Which interpretation is best supported by that finding alone?

    • A.Its discharge volume must have grown faster than its total inpatient revenue base.
    • B.Its patients received worse clinical care than the patients treated a year earlier.
    • C.Its cases may be less resource-intensive, or its documentation and coding may have weakened.✓ Answer
    • D.Its coders made arithmetic mistakes when averaging the relative weights of discharges.

    Case-mix index measures the average resource intensity of the cases a hospital reports, so a decline points either to a genuinely less complex patient population or to documentation and coding that are no longer capturing the severity present in the record. That ambiguity is exactly why a falling CMI is a standard trigger for a coding and clinical documentation integrity review rather than a quality-of-care conclusion.

    Source: CMS IPPS case-mix index; AHIMA CCA Exam Content Outline eff. 5/1/2022, Domain 2Report a problem with this question

11. 11. A hospital submits one claim for an inpatient acute-care stay and, separately, one claim for an outpatient encounter at which three significant procedures were performed. How many payment groups can each claim generate?

    • A.One MS-DRG for the stay, and potentially several APCs for the encounter.✓ Answer
    • B.One APC per inpatient day, and one MS-DRG for the outpatient encounter.
    • C.One payment group for each claim, covering everything billed on that claim.
    • D.One MS-DRG per procedure for the stay, and one APC for the whole encounter.

    IPPS pays a single MS-DRG per inpatient discharge no matter how many procedures were performed or how long the patient stayed, while OPPS pays per service, so one outpatient claim can carry several separately payable APCs. This one-group-per-stay versus many-groups-per-encounter contrast is the structural difference between the two systems.

    Source: CMS Medicare Claims Processing Manual, Ch. 3 (IPPS) and Ch. 4 (OPPS)Report a problem with this question

12. 12. Which data on a hospital outpatient claim primarily drives assignment to an ambulatory payment classification (APC)?

    • A.The four-digit revenue codes for the departments that provided care.
    • B.The principal ICD-10-CM diagnosis established for the encounter.
    • C.The discharge status code describing where the patient went.
    • D.The CPT and HCPCS Level II codes for the procedures and services.✓ Answer

    APC assignment under OPPS is driven by the procedure and service codes reported, not by the diagnosis, which is the mirror image of MS-DRG logic. Diagnosis codes on an outpatient claim support medical necessity for the services billed rather than determining the payment group.

    Source: CMS Medicare Claims Processing Manual, Ch. 4, §10 (APC assignment from HCPCS/CPT codes)Report a problem with this question

13. 13. In a single operative session a hospital performs two procedures with status indicator T and one procedure with status indicator S. How does OPPS multiple-procedure discounting apply?

    • A.All three are paid at 50 percent because more than one procedure was performed.
    • B.The higher-weighted T is paid in full, the other T at 50 percent, and the S in full.✓ Answer
    • C.The highest-weighted procedure is paid in full and the other two at 50 percent.
    • D.All three are paid in full, since discounting applies only across separate visits.

    Status indicator T identifies significant procedures that are subject to multiple-procedure discounting: the highest-weighted T procedure is paid at 100 percent and each additional T procedure at 50 percent. Status indicator S identifies significant procedures that are never discounted, so the S procedure is paid in full no matter how many other procedures were done in the same session.

    Source: CMS Medicare Claims Processing Manual, Ch. 4, §10.6 (multiple procedure reduction); OPPS payment status indicators S and TReport a problem with this question

14. 14. Surgical supplies and recovery-room time on a hospital outpatient claim carry status indicator N. What does that indicate about payment?

    • A.They are paid only when an appropriate modifier is appended to the code.
    • B.They are packaged into the payment for the primary service billed.✓ Answer
    • C.They are paid separately at a flat add-on amount on top of the procedure.
    • D.They are non-covered by Medicare and must be billed directly to the patient.

    Status indicator N marks items and services whose cost is packaged into the APC payment for the primary service, so no separate payment is made even though the line appears on the claim. Packaging is the reason supplies, most low-cost drugs, anesthesia, recovery room and implantable devices generate no additional payment of their own under OPPS.

    Source: OPPS payment status indicator N (packaged service), CMS OPPS Addendum D1Report a problem with this question

15. 15. When do the MS-DRG system and the OPPS APC system take effect each year?

    • A.MS-DRGs on January 1 and OPPS APCs on October 1.
    • B.MS-DRGs on October 1 and OPPS APCs on January 1.✓ Answer
    • C.Both systems update on October 1 of the fiscal year.
    • D.Both systems update on January 1 of the calendar year.

    IPPS runs on the federal fiscal year, so the MS-DRG grouper and the ICD-10-CM and ICD-10-PCS code updates all take effect October 1. OPPS runs on the calendar year, so APC changes take effect January 1 along with the annual CPT update, and a coder working both settings must track two separate update calendars.

    Source: 42 CFR Part 412 (IPPS annual update, October 1); 42 CFR Part 419 (OPPS annual update, January 1)Report a problem with this question

16. 16. A hospital bills the facility charges for an outpatient surgery, and the surgeon's group practice bills the professional service. Which claim forms are used?

    • A.CMS-1500 (837P) for both, because a physician performed the surgery.
    • B.UB-04 (837I) for both, because one facility hosted both services.
    • C.UB-04 (837I) for the hospital and CMS-1500 (837P) for the practice.✓ Answer
    • D.CMS-1500 (837P) for the hospital and UB-04 (837I) for the practice.

    The UB-04 (CMS-1450), transmitted electronically as the 837I, is the institutional claim used by hospitals, skilled nursing facilities and home health agencies, and it carries the revenue codes and type of bill that facility payment logic needs. The CMS-1500, transmitted as the 837P, is the professional claim for physician and non-physician practitioner services, so the same episode of care generates two different claims.

    Source: CMS Medicare Claims Processing Manual, Ch. 25 (UB-04/837I) and Ch. 26 (CMS-1500/837P)Report a problem with this question

17. 17. What is the purpose of risk adjustment in the CMS-HCC model used for Medicare Advantage plans?

    • A.To cap the number of chronic conditions a plan may report each year.
    • B.To rank plans by quality so beneficiaries can compare star ratings.
    • C.To set capitated payments that reflect each enrollee's expected cost.✓ Answer
    • D.To reimburse the plan for each service its enrollees actually received.

    Risk adjustment sets prospective capitated payments so that a plan enrolling sicker members is paid more than one enrolling healthier members, which removes the incentive to avoid costly patients. The model is predictive rather than service-based: diagnoses collected in the base year forecast the expected cost of the following payment year, and a risk adjustment factor of 1.0 represents the average beneficiary.

    Source: 42 CFR 422.308; CMS-HCC risk adjustment model overviewReport a problem with this question

18. 18. A Medicare Advantage member's diabetes with chronic kidney disease was documented and submitted last year, but no provider documented the condition at any encounter during the current year. What is the effect on the member's risk score?

    • A.The condition drops out, because HCCs must be recaptured every calendar year.✓ Answer
    • B.The condition carries forward, since chronic diseases do not resolve over time.
    • C.The condition drops out only if the member changed plans during the year.
    • D.The condition carries forward for three years before it must be redocumented.

    HCCs do not carry forward: every risk-adjusting diagnosis must be documented at a qualifying face-to-face encounter and submitted again in each calendar year, or it contributes nothing to that year's risk score. This annual reset is what makes recapture of chronic conditions a core documentation task, and it is the single most commonly missed rule in risk adjustment.

    Source: CMS Medicare Managed Care Manual, Ch. 7 (risk adjustment data; diagnoses collected each calendar year)Report a problem with this question

19. 19. Which documentation supports reporting a diagnosis for risk adjustment under the CMS-HCC model?

    • A.A medication list showing a drug ordinarily prescribed for the condition.
    • B.A current problem list entry in the electronic health record listing the condition.
    • C.An abnormal laboratory result consistent with the condition being reported.
    • D.A signed face-to-face encounter note showing the condition is monitored or treated.✓ Answer

    A risk-adjusting diagnosis must come from a face-to-face encounter documented and signed by an acceptable provider, and the note must show the condition is current and actively managed, which is what the MEAT criteria capture: monitor, evaluate, assess or address, treat. A problem list, a lab result or a medication list alone is not provider confirmation that the condition was addressed at the encounter, and conditions documented as history of or resolved do not risk-adjust.

    Source: CMS risk adjustment data requirements (face-to-face encounter by an acceptable provider); AHIMA, "Documentation and Coding Practices for Risk Adjustment and Hierarchical Condition Categories" (MEAT)Report a problem with this question

20. 20. A member's record supports two diagnoses that fall within the same CMS-HCC disease hierarchy, one more severe than the other. How does the model count them?

    • A.The more severe HCC counts and the less severe one is zeroed out.✓ Answer
    • B.Both HCCs count, and their coefficients are added into the risk score.
    • C.Neither counts, because two codes in one hierarchy conflict on the record.
    • D.The two are averaged into a single coefficient for that disease group.

    Within one disease hierarchy the model counts only the highest-ranked HCC, so the more severe condition trumps and zeroes out the lesser ones in that family and reporting both adds no payment. HCCs drawn from unrelated hierarchies are additive, which is why capturing a breadth of distinct conditions matters more than restating degrees of the same one.

    Source: CMS-HCC model hierarchy rules (only the highest-ranked HCC within a hierarchy is counted)Report a problem with this question

21. 21. Which pairing of a post-acute setting with the instrument that drives its prospective payment is correct?

    • A.Long-term care hospital payment is driven by the MDS patient assessment.
    • B.Skilled nursing facility payment is driven by the MDS patient assessment.✓ Answer
    • C.Inpatient rehabilitation payment is driven by the OASIS assessment data set.
    • D.Home health payment is driven by the IRF-PAI patient assessment instrument.

    Assessment-driven systems classify the patient from a standardized instrument rather than from the codes on a claim: skilled nursing uses the MDS under PDPM, inpatient rehabilitation uses the IRF-PAI to build case-mix groups, and home health uses OASIS under PDGM for 30-day payment periods. Long-term care hospitals are claims-driven instead, paid through MS-LTC-DRGs.

    Source: CMS Prospective Payment Systems: SNF PPS (PDPM/MDS), IRF PPS (CMG/IRF-PAI), HH PPS (PDGM/OASIS), LTCH PPS (MS-LTC-DRG)Report a problem with this question

22. 22. A coding manager directs a coder to resequence the secondary diagnoses so a case falls into a higher-weighted MS-DRG, although the health record does not support the change. Under the AHIMA Standards of Ethical Coding, what should the coder do?

    • A.Refuse the change and code the record as documented, escalating the request.✓ Answer
    • B.Make the change and add a note in the record explaining the rationale.
    • C.Make the change, since sequencing is a judgment call left to the coder.
    • D.Query the physician with the higher-weighted diagnosis suggested in it.

    The AHIMA Standards of Ethical Coding prohibit assigning or sequencing codes for the purpose of increasing reimbursement or misrepresenting the patient's clinical picture, and resequencing to reach a higher-weighted group without record support is upcoding, commonly called DRG creep. Where documentation is genuinely ambiguous the remedy is a compliant, non-leading physician query that does not suggest a particular answer, not a coder's assumption or a suggested diagnosis.

    Source: AHIMA Standards of Ethical Coding, principles on accurate code assignment and prohibition of coding to maximize reimbursement; AHIMA Guidelines for Achieving a Compliant Query PracticeReport a problem with this question

Practice questions based on the AHIMA Certified Coding Associate (CCA) Exam Content Outline, the ICD-10-CM and ICD-10-PCS Official Guidelines for Coding and Reporting, and the AHIMA Standards of Ethical Coding. This site is not affiliated with or endorsed by AHIMA. Code sets and their official guidelines are revised every year, so no question here keys a specific code value — always assign codes from the current code books, encoder and official guidelines in effect for the date of service, never from a practice test. Confirm current eligibility and exam requirements with AHIMA before you test. About the CCA credential →