As the healthcare industry shifts away from fee-for-service reimbursement models and towards value-based care, it is more important than ever to have accurate coding and documentation. This includes using hierarchical condition categories (HCCs) for risk adjustment purposes.
HCCs are used by CMS and commercial payers to forecast medical costs for Medicare Advantage and participants. They are based on ICD-10-CM diagnosis codes submitted by providers on claims submissions.
Accuracy of Diagnosis Codes
As the healthcare industry continues shifting towards value-based reimbursement, many physician practices face new models that put more financial risk on physicians. This often includes accountable care organizations (ACOs), bundled payments, or value-based purchasing (VBP). These models increasingly utilize HCC coding and other methodologies to evaluate performance and determine compensation.
HCC coding uses ICD-10-CM diagnosis codes to assign a patient’s projected annual health care costs, also known as their Risk Adjustment Factor (RAF) score. Insurance companies use this data and other demographic factors to determine their projected cost of paying for a particular patient’s health care services.
The medical coder must have the correct patient chart information for accurate data. This requires detailed documentation and specific International Classification of Diseases, 10th Revision (ICD-10) codes for each documented condition. The accuracy of these codes is crucial to the success of any medical coding or risk adjustment program.
If a coder does not select the right ICD-10) codes, it could lead to inaccurate RAF scores, which can have profound financial implications for the healthcare organization. For example, if a physician documents that the patient has back pain but does not select the code for a herniated disc, then the RAF score will be higher than it should be. This can result in the physician being paid at a lower rate or not receiving payment.
Reimbursement for Unnecessary Services
Hierarchical condition category (HCC) coding can significantly impact reimbursements because it reflects the number and severity of conditions in the patient’s medical record. The underlying assumption is that more severe conditions lead to higher risk scores and, thus, more potential reimbursement for healthcare organizations that manage them. Unfortunately, the truth is that many providers don’t capture diagnoses with enough specificity for HCC coding.
Physicians must ensure the codes they submit to a health plan are as accurate as possible. The health plan then transmits those diagnosis codes to the government agency overseeing the risk adjustment payment model the enrollee is enrolled in. The government then calculates a risk score for each beneficiary by multiplying the weight of each disease grouping and the number of diagnosed conditions.
Those calculations determine the capitation amount that Medicare Advantage plans reimburse each beneficiary. These payments are then used to offset actual medical expenses for the enrollees.
Because a patient’s HCC score can directly impact the reimbursement they receive from CMS, healthcare coders must utilize precise and consistent coding methodologies. Aside from the financial benefits, optimizing HCC coding can also help paint a more complete picture of the patient’s condition complexity and predict healthcare resource utilization over time. Understanding and leveraging HCC coding is essential for healthcare organizations as the industry shifts towards value-based care.
Keeping Up with Changes
HCC coding is a complex process. It is based on a patient’s medical record and submitted for reimbursement using corresponding International Classification of Diseases 10th Revision (ICD-10) diagnosis codes. These codes are organized into diagnosis groups related to body systems and disease processes and then subdivided into condition categories based on similar cost patterns. Each HCC category represents a set of conditions that have been shown to impact long-term healthcare costs, such as c and severe acute conditions.
Healthcare services developed the HCC model to help forecast and adjust capitation payments for Medicare Advantage plan enrollees who are characterized as high-risk. It identifies patients at a greater risk of future health-related spending. It enables all parties to manage a patient’s care to coordinate, align, and focus on the most complex and costly cases.
It is important to note that a patient’s risk factor score is determined by both demographic information and the number of ICD-10-CM codes that map to an HCC unless a specific code is trumped by another legend in a hierarchy family. This means that a physician’s accurate and detailed documentation, along with coding to the highest level of specificity, is critical for proper risk adjustment coding.
Physicians and health system coders must stay current on the latest rules, regulations, policies, and updates regarding their responsibilities for capturing and documenting HCCs for each patient they see. This is especially true as more and more payers move toward value-based arrangements and require accurate documentation of HCCs to determine RAF scores and reimbursement rates.
Maintaining Compliance
As healthcare organizations continue to move toward value-based care and risk adjustment models, HCC coding accuracy must remain a top priority. HCC compliance ensures accurate payments based on clinical complexity and helps prevent costly denials and recoupments.
Medical coders should be familiar with HCC coding and know how to properly document and capture diagnosis codes to maximize revenue cycle performance. HCC coding is not the same as FFS coding; instead of focusing on the service code for each visit, it is all about the ICD-10-CM codes that physician’s document in their patients’ medical records. Physicians must capture and enter many diagnostic codes in each patient encounter.
The HCC model is hierarchical, meaning that some ICD-10-CM diagnoses have a different severity level than others. The highest severity condition in a family will trump, or take precedence over, the lower-level states within that family. For example, diabetes is an individual HCC, but it is also a member of the “Diabetes and Related Conditions” family of HCCs.
When a physician documents an ICD-10-CM code for a patient, the health plan’s IT system adds the diagnosis to an existing list of HCCs used in the model for that year. Then, the health plan transmits this list to the program administrator ( Medicare Advantage and HHS for commercial risk adjustment) for the risk score calculation.
