Alignment Healthcare CEO Expects Delayed CMS Risk Adjustment Overhaul to Resume Soon

In a recent earnings call, John Kao, CEO of Alignment Healthcare, expressed his thoughts on the Centers for Medicare & Medicaid Services (CMS) decision to delay the proposed overhaul of the risk adjustment model for Medicare Advantage (MA). The move, while initially seen as a setback, is being interpreted by industry leaders like Kao as a temporary pause rather than an abandonment of the initiative. This delay reflects CMS's commitment to addressing concerns and feedback from stakeholders, particularly around the issue of "upcoding" practices that can inflate insurer payouts.

Kao noted that CMS’s decision to postpone the overhaul in the final version of the MA Advance Notice is a direct response to industry feedback. The original proposal aimed to build on the V28 risk adjustment changes, which have been gradually implemented and have had significant implications for insurers in the Medicare Advantage market. Despite the delay, Kao remains optimistic that CMS will revisit and implement these changes in the near future.

"We are seeing a clear commitment from CMS to ensure that coding practices are not being used as a competitive advantage," Kao stated during the call. "This is a positive step for the industry and for companies like Alignment that prioritize high-quality, cost-effective care."

Addressing Upcoding: A Focus on Fairness

The issue of upcoding has been a significant concern in the Medicare Advantage sector. Upcoding refers to the practice where healthcare providers or insurers use more complex billing codes to justify higher payments from CMS. This can lead to inflated costs and misallocation of resources, ultimately affecting the sustainability and fairness of the program.

Kao emphasized that addressing this issue is crucial for maintaining the integrity of the Medicare Advantage program. "CMS has been consistent in their message that coding should reflect true patient health status, not be a tool for financial gain," he said. This focus on fair and accurate coding aligns with Alignment Healthcare's business model, which emphasizes providing high-quality care at lower costs.

The company's recent financial performance underscores its ability to thrive under such regulatory scrutiny. For the first quarter of 2026, Alignment posted a profit of $11.4 million, a significant improvement from the $9.1 million loss reported in the same period last year. This turnaround is attributed to the company’s focus on efficient and effective healthcare delivery.

What Comes Next

While CMS has not set a specific timeline for reviving the new risk adjustment model, Kao expects the agency to act swiftly. He anticipates that the updated model could be reintroduced in time for the next Advance Notice, with potential implementation beginning in 2029. This timeline would allow insurers and healthcare providers adequate time to prepare and adjust their practices accordingly.

For Alignment Healthcare, the focus remains on delivering high-quality care while maintaining financial sustainability. Kao believes that a fair and transparent risk adjustment system will benefit all stakeholders, particularly patients who rely on Medicare Advantage for their healthcare needs.

"The goal is to create an environment where organizations are rewarded for providing the best possible care at the most efficient cost," Kao concluded. "This is not only good for the industry but also essential for the long-term health and well-being of our beneficiaries."