The Centers for Medicate and Medicaid (CMS) developed the Hierarchical Condition Categories (HCC) to calculate risk scores and adjust capitation payments made for beneficiaries enrolled in Medicare Advantage (MA) plans. The CMS Risk Adjustment Model includes nearly 80 HCC categories of chronic illnesses with thousands of diagnosis codes. HCC coding allows physicians to risk-adjust their senior patients in terms of how much it will cost to care for them in the future. Practices must focus on HCC codes to receive appropriate reimbursement payments for patients enrolled in MA plans. Today, HCC codes are playing an increasingly important role in value-based compensation.

How the Risk Adjustment HCC Coding Model Works

The CMS-Risk Adjustment (RA) model uses several factors to determine a patient’s risk score, which is a relative measure of how much expense the patient may generate in the future. The factors that determine risk adjustment include a combination of demographic data and diagnoses (based primarily on ICD-10 codes taken from claims data).

  • HCC categories: based on the diseases reported by the provider for one year. Top HCC categories include major depressive and bipolar disorders, asthma and pulmonary disease, diabetes, congestive heart failure, and breast and prostate cancer
  • Disease interactions: Interactions between disease categories within the hierarchy which recognize and assess the severity of multiple conditions
  • Demographic variables: The patient’s age, sex, disability and location (home versus institutional)
  • Diagnostic sources: CMS recognizes diagnoses from a hospital’s inpatient, outpatient and physician settings only
  • Prospective model: The diagnoses from the previous year are used to extrapolate the possible payments to the MA plan for the following year; HCC must be captured every 12 months for CMS to reimburse the MA plan

Patients can have multiple HCC categories assigned to them to indicate multiple chronic conditions. The sum of the values of the different HCC diagnoses plus the value assigned based on demographic factors makes up the patient’s HCC score. The average RAF (risk adjustment factor) score is 1.0. A patient with an RAF score of 2.0 is predicted as costing twice as much in the next year as a patient with a score of 1.0.

Importance of Accurate Data Capture by Physicians

Effective capture of HCC codes leads to increased payments for high-risk patients. To report the right HCC codes, physicians need to collect accurate patient information and diagnostic data from patients. They have to identify as many diagnoses in a particular patient as possible, because the higher the score, the higher the reimbursement for the health plan. Inaccurate reporting of HCC chronic conditions and their associated HCC codes could lead to significant foregone revenue opportunities as the capitated payment may not be sufficient to cover the cost of providing care for the patient.

Get Professional Support to Prepare for HCC Coding

ICD-10 brought increased code specificity and increased requirements for detailed documentation. Physician groups, along with the MA plans with which they work, stand to collectively lose a significant amount of revenue if they don’t adapt to HCC coding guidelines. This is where HCC coding services can help.

Reliable medical coding companies have certified coders to conduct field visits and perform medical chart review to identify documentation deficiencies and report any existing chronic conditions that may have gone unreported to the plan.

With each revision of the CMS-HCC model, HCC coding can be an onerous task for physicians. Medical coding service providers provide healthcare providers with expert support to develop their HCC coding and documentation competencies. Certified coders are:

  • Up-to-date on HCC coding and risk adjustment coding guidelines
  • Well-versed in the mapping tools that help to properly identify HCCs
  • Experts in educating physicians on the importance of proper clinical documentation and its impact on reimbursement.

With accurate HCC coding being crucial for value-based reimbursement, accurate medical billing promotes patient care as well as the practice’s financial health.