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The traditional fee-for-service healthcare model reimburses providers based on the number of services they render, regardless of patient outcomes. On the other hand, in value-based healthcare, payment is determined by the complexity of the patient population that each provider serves. In this model, payment is tied to patient outcomes and the overall health of the population served by a healthcare provider. Risk adjustment and Hierarchical Condition Category (HCC) coding play crucial roles in value-based care by accounting for the varying health status and risk levels of patient populations. However, HCC coding comes with several complexities. Leveraging HCC coding services can help physicians navigate these complexities and ensure accurate risk adjustment, optimized revenue capture, improved care coordination, and compliance.

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Role of HCC Coding and Risk Adjustment in Value Based Care

HCC coding is used to calculate a risk-adjustment factor (RAF), a tool that predicts a patient’s cost of care. It is based on the provider-reported ICD-10 and HCC diagnosis codes. As the number of comorbidities (e.g., hypertension, diabetes) being managed and documented with HCC codes increases, the RAF score rises accordingly. A higher RAF score informs Medicare and commercial payers that the expected cost of care for the patient will exceed the benchmark set for the primary condition.

Here is an example of how this works: A 70-year-old patient has been diagnosed with congestive heart failure (CHF) (ICD-10 code I50.9) and hypertension (ICD-10 code I10). Both conditions are documented and coded as HCCs. The HCC coding will take into account the presence of these comorbidities, leading to an increased RAF score for this patient. The higher RAF score will inform payers that the expected cost of care for this patient will be higher due to the complexity of managing multiple health conditions.

By accounting for patient complexity, risk adjustment and HCC coding promote better care management, improves patient outcome, and encourage a patient-centric approach to healthcare delivery.

Complexities of HCC Coding

While HCC coding is valuable in value-based care and risk adjustment, it comes with several complexities:

  • Coding accuracy: CPT codes that describe the specific procedure or service performed establish the payment amount and the ICD-10 codes provide support for medical necessity. Of the approximately 70,000 ICD-10 codes, about 9,500 map to 79 HCC categories. HCC requires a strong foundation in ICD-10-CM coding. Not all ICD-10 codes link to an HCC but coders should be knowledgeable about which conditions do so they can capture complete information. Errors or omissions can lead to inaccurate risk assessments and payments.
  • Coding hierarchies: HCC coding involves a hierarchical structure, where diagnoses are categorized into condition categories based on their severity and expected healthcare costs. The CMS HCC risk adjustment V24 model includes 86 HCC group categories for chronic illnesses. The common chronic conditions for Medicare patients are:
    • Hypertension
    • Hyperlipidemia
    • Arthritis
    • Diabetes
    • Ischemic heart disease
    • Chronic Kidney Disease
    • Depression
    • Heart Failure
    • COPD
    • Alzheimer’s / Dementia
    • Atrial Fibrillation

The RAF score assigned to each category reflects the relative expected costs of managing patients with different health conditions. Understanding the correct hierarchy and identifying the most appropriate code within the hierarchy can be challenging. Coding must also adhere to coding and billing compliance regulations. Ensuring accurate coding is crucial to receive appropriate payments and avoid potential audits or payment recoupments.

  • Clinical documentation challenges: HCC coding requires accurate and specific documentation of patients’ medical conditions and diagnoses. Incomplete or unclear clinical documentation can hinder accurate HCC coding. It relies on the collection and integration of data from various sources, including medical records, laboratory tests, imaging reports, and physician documentation.. Clinicians must provide comprehensive and detailed information about patients’ conditions, comorbidities, and chronic illnesses to support proper coding. Coordinating this data and ensuring its accuracy can be challenging.
  • Coding updates: Medical codes change frequently and can complicate HCC coding. Further, if an update is released midway through a payment year, healthcare providers may face challenges in implementing the changes promptly. Any claims submitted after the update needs to adhere to the new guidelines. Risk adjustment scores reset every year. To ensure accurate HCC coding, providers need to stay current with the latest guidelines and changes.
  • Changes in patient health status: Patients’ health status may change over time, leading to different HCC codes. Managing these changes and updating codes accordingly requires vigilance and coordination among healthcare providers.

Due to these complexities, proper coding requires careful attention, training, and accurate clinical documentation to ensure its successful implementation.

Best Practices for HCC Coding

  • Ensure proper documentation: Comprehensive and detailed documentation of patients’ medical conditions is crucial. Create complete, accurate patient records that include medical histories, procedures, treatments, and chronic conditions, comorbidities, and complications. Documentation must support the diagnoses reported. Using the M.E.A.T. (monitoring, evaluation, assessment, and treatment) criteria application is a best practice to correctly code patient diagnoses and assign RAF scores. Thorough documentation forms the foundation for accurate HCC coding and subsequent reimbursement rates. Coding should comply with the ICD-10 coding guidelines.

It is important to note that a simple list of problems or diagnoses is not acceptable documentation. A comprehensive problem list should include the evaluation and treatment details for each condition, demonstrating the correlation with a specific diagnosis. While a problem list may offer an initial clinical overview, ongoing conditions require additional supporting documentation to validate their current status.

  • Report active diagnoses annually: Practices need to report active diagnoses annually, including chronic conditions. The American Academy of Family Physicians points out that the annual wellness visit is a good opportunity to capture all appropriate diagnoses. Preventive screenings, such as screening of risk factors for depression, aid in identifying additional diagnoses that contribute to a patient’s risk.
  • Code all conditions present at the encounter: As HCCs are additive, it is important to code all documented conditions that coexist at the time of the encounter/visit that affect patient care:
    • Code the reason(s) for visit
    • Add chronic conditions (HCCs) that are also addressed in documentation
    • Include ALL conditions affecting patient treatment or management.

Do not code conditions that were previously treated and no longer exist, unless a status code is available to represent the historical condition. History codes may be used as secondary codes if the condition or family history impacts current care or influences treatment.

  • Code to the highest level of specificity: Ensure that you always use the most specific codes to describe the diagnoses in the documentation and ensure the diagnoses are properly sequenced on the claim. Factors to consider when selecting the appropriate diagnosis code:
    • Type and underlying cause (e.g., diabetes type 1 or 2, due to underlying condition, postprocedural or due to genetic defects, etc.)
    • Control status
    • Severity
    • Site, location, or laterality
    • Associated co-morbid conditions
    • Substance use/exposure

Use combination codes when appropriate. Always follow “code also” and “use additional code” notes.

  • Take advantage of real-time reporting features available in value-based programs: These real-time features refer to the ability to access and analyze data on patient outcomes, healthcare costs, and provider performance in real-time or near real-time. They are designed to provide timely and actionable insights to healthcare organizations and providers participating in value-based care models. It’s important to note that implementing real-time reporting features requires robust data infrastructure, secure data exchange protocols, and compliance with data privacy regulations. By reducing the time between the patient visit and coding of the encounter, actionable insights on provider performance can be delivered promptly.

HCC coding services are a viable solution to ensure adherence to these best practices in the context of value-based care and risk adjustment. Medical billing outsourcing companies employ trained and experienced coders who possess the necessary expertise to accurately code complex medical conditions and diagnoses. This ensures coding accuracy, minimizes errors, and ensures fair payment adjustments based on patient risk levels. Experts help healthcare providers maintain compliance with coding and billing regulations, reducing the risk of audits and potential financial penalties.

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Natalie Tornese

Holding a CPC certification from the American Academy of Professional Coders (AAPC), Natalie is a seasoned professional actively managing medical billing, medical coding, verification, and authorization services at OSI.

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