Accepted but Excluded: How CMS Filters Encounter Diagnoses

Unlinked Encounters, Chart Review Records, and Risk Adjustment: A Complete Technical Walkthrough of CMS Logic

Introduction: Why This Topic Suddenly Matters

CMS’s recent clarification on unlinked encounters has not introduced new mechanics—but it has made explicit what was previously implicit:

Encounter acceptance does not guarantee risk adjustment eligibility.

This distinction has significant implications for Medicare Advantage Organizations (MAOs), especially those relying heavily on chart review diagnoses, retrospective submissions, or unlinked records to support RAF.

To fully understand the impact, one must look across multiple CMS guidance sources together—not in isolation:

  • Encounter Data System (EDS) submission rules

  • Chart Review Record (CRR) technical specifications

  • Internal Control Number (ICN)–based linking

  • MAO-004 filtering logic

  • HCPCS/CPT service-line validation

  • 277CA acknowledgment reporting

Individually, each document explains how to submit data.
Together, they explain why some diagnoses never count.

1. Encounter Data Is a Structured, Multi-Phase System — Not a Flat File

CMS processes encounter data through two systems:

1.1 Encounter Data Front-End System (EDFES)

  • Accepts X12 837 files

  • Performs:

    • File-level validation

    • Record-level validation

  • Assigns Internal Control Numbers (ICNs) to accepted records

  • Generates:

    • TA1

    • 999

    • 277CA reports

1.2 Encounter Data Processing System (EDPS)

  • Performs:

    • Line-level checks

    • Duplicate detection

    • Business rule validation

  • Generates:

    • MAO-001 (duplicates)

    • MAO-002 (processing status)

    • MAO-004 (risk adjustment filtering results)

Passing EDFES and EDPS edits only means the data is processable—not payable.

2. Internal Control Numbers (ICNs): The Spine of CMS Traceability

Every accepted Encounter Data Record (EDR) or Chart Review Record (CRR) receives an ICN.

CMS explicitly uses ICNs to:

  • Track accepted encounters

  • Reference prior submissions

  • Replace or void records

  • Link chart review records

  • Maintain audit trails

ICNs are returned on 277CA acknowledgment reports and are required for any subsequent action on a record.

CMS does not evaluate records in isolation—it evaluates ICN families.

3. How CMS Technically Links Records (EDI 837 Mechanics)

3.1 Key EDI Fields Used for Linking

CMS relies on the following fields in the 837:

  • ICN (returned by CMS)

  • Bill Frequency Code (CLM05-3)

    • 1 = Original

    • 7 = Replacement

    • 8 = Void

  • REF segments

    • REF*F8*<ICN> → links to a prior accepted record

  • Diagnosis (HI) segments

3.2 ICN Linking Example (From CMS Logic)

  • ICN 106 → Original linked chart review record

  • ICN 107 → Replacement (CLM05-3 = 7) referencing ICN 106

  • ICN 108 → Void (CLM05-3 = 8) referencing ICN 107

Result:

  • ICN 108 → ICN 107 → ICN 106

  • CMS processes these as a single logical record chain

4. Chart Review Records (CRRs): CMS’s Explicit Rules

CMS defines two CRR types:

4.1 CRR-Add

  • Adds diagnoses

  • May be:

    • Linked

    • Unlinked

4.2 CRR-Delete

  • Deletes diagnoses

  • Must always be linked

  • CMS does not permit unlinked deletes

4.3 How CMS Identifies CRRs

CRRs are designated using:

  • PWK01 / PWK02 = 09 / AA

  • Loop 2300

5. Linked vs Unlinked CRRs: Structural Differences

5.1 Linked CRR-Add

  • Contains:

    • REF*F8*<ICN>

  • Modifies an existing encounter or CRR

  • Diagnoses inherit:

    • Service context

    • Dates of service

    • Provider

    • Service lines

5.2 Unlinked CRR-Add

  • Contains:

    • No ICN

    • No REF*F8

  • Adds diagnoses without referencing any encounter

  • Contains:

    • Diagnoses only

  • CMS explicitly states:

“Unlinked CRRs are only used to add risk adjustment eligible diagnosis codes.”

Important:
CMS does not say unlinked CRRs are payable—only that they are submit-able.

6. Replacement and Void Rules for CRRs

Replacement:

  • Only CRR-Add may be replaced

  • Uses CLM05-3 = 7

  • Can replace:

    • Linked CRR-Add

    • Unlinked CRR-Add

Void:

  • Uses CLM05-3 = 8

  • Can void:

    • CRR-Delete

    • Linked CRR-Add

    • Unlinked CRR-Add

CMS strictly separates replace vs void logic.

7. MAO-004: Where Risk Adjustment Is Decided

The MAO-004 report is where CMS designates each diagnosis as:

  • Allowed (A)

  • Disallowed (D)

  • Not Applicable (N)

  • Blank (context-dependent)

This designation occurs after submission, regardless of acceptance status.

8. Full MAO-004 Filtering Flow (Slides 31–37)

FLOW 1: Service Type Check

Service Type = N ?
 ├─ YES → Allowed/Disallowed = N
 │        Reason = N
 │        END
 └─ NO → Continue

FLOW 2: Submission Date Check

Submission Date > Risk Adjustment Deadline ?
 ├─ YES → Disallowed = D
 │        Reason = D
 │        END
 └─ NO → Continue

FLOW 3: Encounter Type Switch

Encounter Type ∈ {2,5,7,8,9} ?
 ├─ YES → Allowed/Disallowed = Blank
 │        Reason = Blank
 │        END
 └─ NO (1,3,4,6) → Continue

FLOW 4: Institutional Inpatient

Type of Bill ∈ {11x, 41x}
 └─ Allowed = A
    Reason = Blank

FLOW 5: Professional & DME

Any accepted service line has RA-eligible HCPCS/CPT ?
 ├─ YES → Allowed = A
 │        Reason = Blank
 └─ NO
     ├─ After quarterly update, RA HCPCS appears ?
     │    ├─ YES → Allowed = A
     │    │        Reason = Q
     │    └─ NO → Disallowed = D
     │             Reason = H

FLOW 6: Institutional Outpatient

Type of Bill ∈ {12x,13x,43x,71x,73x,76x,77x,85x}
Any accepted service line has RA HCPCS/CPT ?
 ├─ YES → Allowed = A
 │        Reason = Blank
 └─ NO
     ├─ After quarterly update, RA HCPCS appears ?
     │    ├─ YES → Allowed = A
     │    │        Reason = Q
     │    └─ NO → Disallowed = D
     │             Reason = H

9. Why Unlinked CRRs Fail This Logic

Unlinked CRR-Adds:

  • Have no service lines

  • Have no HCPCS/CPT

  • Have no encounter type

  • Have no Type of Bill

Therefore:

  • They cannot pass Professional/DME or Outpatient service-line checks

  • They frequently end as:

    • Disallowed (H)

    • Not Applicable

This is system behavior, not discretionary policy.

10. 277CA Reports Reinforce the Same Model

277CA reports:

  • Assign ICNs

  • Identify rejected diagnoses

  • Require corrections to reference prior records

  • Emphasize:

    • Diagnosis specificity

    • Valid HCPCS/CPT

    • Valid service dates

CMS repeatedly enforces contextual validity, not diagnosis-only validity.

11. Risk Adjustment Models Depend on Filtered Encounter Data

CMS risk scores are calculated using:

  • Encounter data diagnoses (after filtering)

  • RAPS

  • FFS

CMS explicitly states:

  • Diagnoses are selected using CPT/HCPCS filtering

  • Encounter data is filtered before model input

Thus:

A diagnosis that does not survive MAO-004 filtering never reaches the HCC model.

12. What CMS Is Actually Saying (Without Using the Words)

Across all documents, CMS is consistent:

  • Diagnoses must be:

    • Traceable

    • Service-anchored

    • ICN-linked

  • Acceptance ≠ payment

  • Plans—not CMS—bear responsibility for defensibility

Unlinked encounters are technically valid but structurally weak.

Final Conclusion

CMS has not banned unlinked encounters.

CMS has clarified their consequence.

If a diagnosis cannot be defended through encounter linkage, service lines, and HCPCS/CPT validation, it will not reliably contribute to risk adjustment—regardless of acceptance status.

This is not new policy.
It is the inevitable result of CMS’s system design—now made explicit.

Submission & reportingSudeeksha KoricherlaComment