If you’ve been following CMS risk adjustment updates over the past few years, the CY 2027 Advance Notice probably felt… familiar.

• Blended models? Still here.
• Encounter data? Still gaining ground.
• PACE-specific considerations? Still acknowledged.

What has changed is the pace (no pun intended).

With the CY 2027 proposal, CMS is clearly accelerating the move toward encounter data (EDS) as the primary foundation for risk adjustment, while still giving PACE organizations time to adapt.

This isn’t a pivot, but it is a deliberate tightening of the timeline.

Here’s what that means in practice for PACE.

The core strategy is consistent, but the mix is shifting

CMS is not changing how PACE risk scores are calculated. PACE risk adjustment will continue to rely on a blended model strategy, combining legacy models and data sources with newer CMS-HCC and RxHCC models that depend on encounter data and FFS claims.

What is changing is the weighting inside that blend.

For CY 2027, CMS increases reliance on newer MA-aligned models, signaling that while the transition remains phased, the destination is no longer theoretical.

CMS-HCC (Non-ESRD): A 50/50 blend

The CMS-HCC model is the core framework CMS uses to estimate expected medical costs based on documented diagnoses and demographic factors. It is the primary drive of payment accuracy in Medicare Advantage and PACE.

For non-ESRD participants, CMS proposes to calculate risk scores using:

• 50% from the 2017 CMS-HCC model (v22) – Diagnoses sourced from RAPS, encounter data, and FFS claims
• 50% from the 2024 CMS-HCC model (v28) – diagnoses sourced from encounter data and FFS claims only

Notably, CMS had previously signaled a 75/25 blend for CY 2027. Shifting to 50/50 effectively extends the transition by one year, balancing operational readiness for PACE with CMS’s broader push for payment accuracy and alignment across Medicare Advantage.

ESRD models: Following the same pattern

Separate CMS-HCC models are used for participants with End-Stage Renal Disease (ESRD) to account for the uniquely high and variable costs associated with dialysis, transplant, and post-transplant care.

For participants with ESRD, the same blended approach applies:

• 50% from the 2019 ESRD CMS-HCC models
• 50% from the 2023 ESRD CMS-HCC models

As with non-ESRD, the newer models rely exclusively on encounter data and FFS claims — reinforcing the growing importance of encounter data quality across all PACE populations.

Frailty adjustment: Still central, still blended

The cornerstone of PACE risk adjustment has been and will continue to be frailty adjustment. The reality is that diagnosis codes alone cannot fully capture PACE participant complexity.

Frailty is assessed using limitations of Daily Living (ADLs), including bathing, dressing, eating, transfers, walking, and toileting. These are captured for PACE participants through the Health Outcomes Survey-Modified (HOS-M). CMS then calibrates the frailty factors by analyzing residual costs not explained by the CMS-HCC model and aligning those costs with the number of ADL limitations observed

Because those residual costs change when the CMS-HCC model changes, frailty factors must evolve alongside each model version.

For CY 2027, CMS proposes a 50/50 blended frailty score for PACE:

• 50% using factors from the 2017 CMS-HCC model
• 50% using factors from the proposed 2024 CMS-HCC model

Over time, CMS intends to fully transition PACE to the frailty factors associated with the CMS-HCC models used for non-PACE Medicare Advantage organizations, continuing a broader shift toward encounter-data-driven risk adjustment.

Part D (RxHCC): Same strategy, newer models

The RxHCC model performs a similar role for prescription drug spending, estimating expected pharmacy costs based on diagnoses, demographics, and clinical complexity.

Part D risk adjustment follows the same transition path:

• 50% from the 2018/2019 RxHCC model – (RAPS, encounter data, and FFS claims)
• 50% from the 2023/2024 RxHCC model (MA-PD segment) – (Encounter data and FFS claims only)

PACE-specific RxHCC relative factors remain published in Attachment VI, ensuring transparency into how these updates apply to PACE Part D populations.

Where the acceleration is most visible: Encounter Data (EDS)

Across the Advance Notice, the CMS fact sheet, and supporting guidance, CMS is unmistakably signaling that encounter data is becoming the backbone of risk adjustment.

For CY 2027:

• Risk scores continue to use blended diagnosis sources
• Unlinked Chart Review Records (CRRs) remain accepted for PACE (especially for services without claims, such as PACE center care)
• CMS continues to encourage complete, accurate, and timely submission to EDS (with technical assistance available)

At the same time, CMS is explicit about the end state:

Over the next three years, PACE organizations will transition to risk scores calculated only from encounter data and FFS claims, fully aligned with Medicare Advantage.

PACE isn’t being rushed, but the runway is clearly shortening.

A smarter way to navigate what comes next

If all of this feels complicated, it’s because it is.

Understanding CMS policy is just the beginning. Operationalizing ongoing change as risk adjustment continues to evolve toward newer models, greater reliance on encounter data, and tighter alignment with Medicare Advantage is where the real complexity lives.

At IntusCare, our IRIS risk adjustment technology and services are designed to translate evolving CMS policy into practical, defensible workflows, so teams don’t have to constantly chase guidance, reinterpret rules, or rebuild processes as the models shift.

Whether you’re already deep in this work or planning for what comes next, the goal is the same: confidence that your workflows are keeping pace as requirements change, without adding unnecessary burden to your teams.

If you’d like to talk through what CY 2027 (and what comes after) means for your organization, we’re here.

Book an IRIS demo