Value Based Reimbursement - Simplified - Part 3

Posted by Bobby von Bremen on Sep 1, 2017 12:10:36 PM

Part 3: Five Things Every Healthcare Organization Needs to Know about HCC Coding


The Center for Medicare and Medicaid Services (CMS) first implemented hierarchical condition category (HCC’s) in 2004 as the methodology to risk adjust Medicare capitation payments to private health care companies offering Medicare Advantage plans.  Since that time, the HCC model has been refined and it’s utilization expanded to include the risk adjustment of patients in a variety of Pay-for-Value plans including Accountable Care Organizations (ACO’s), Comprehensive Primary Care Plus (CPC+), and many others.  Getting HCC coding correct is essential to a medical group’s financial success in any of these programs. 


Accurate HCC coding information can help you create a more complete picture of the complexity of your patient population, improve the value of your problem list, and better manage your patients’ chronic diseases. In additional to these benefits, better documentation that captures the full complexity of your patients’ conditions often leads to appropriately higher reimbursement to cover the costs of treating patients in these programs.

While no blog post can ever teach you how to implement HCC coding in your organization—or tell you everything you need to know about it—we can point out a few basics that may help you better understand this complex payment model:

  • More than 9,000 ICD-10 diagnosis codes map to CMS’s 79 HCC codes. The latter represent categories of chronic and acute health conditions (such as diabetes and congestive heart failure), and are used to project healthcare costs for patients during current and future coverage periods.
  • HCC coding methodology uses a patient’s documented 12-month diagnostic coding history and demographic details to predict future financial utilization and risk. More specifically, it creates a risk adjustment factor (RAF) “score” for a patient that reflects his or her complexity. In the case of Medicare Advantage, this score is then multiplied by a base rate to set the per-member-per-month (PMPM) capitated reimbursement for the next period of coverage. Aggregating this across an entire payer-defined population determines the fixed revenue associated with the population.
  • CMS requires that every patient’s medical record includes documentation by a qualified healthcare provider to support the submitted diagnoses. Providers must therefore thoroughly document each patient’s health conditions and assign one or more ICD-10 diagnosis codes to be submitted on any claims.
  • Documentation that supports the presence of a condition and includes the provider’s assessment and/or plan for managing it must be provided at least once each calendar year for CMS to recognize that the patient continues to have that condition.
  • A patient may be assigned multiple HCC codes and certain disease combinations can elevate the RAF scores. The specific calculations CMS uses to establish a patient’s RAF score can be complex.   However, the primary role of the medical group is to ensure the patient’s record has the complete, accurate and specific diagnosis codes (ICD-10) that reflect the full picture of the patient’s health.   A patient with a poorly document diagnosis history will always look like a healthy patient to CMS. Robust documentation and coding will ultimately lead CMS to calculate the correct RAF for the patients.  

If you have questions—or would like more information about how RCxRules can help your organization ensure that every clinical encounter has the appropriate and specific diagnosis codes necessary to derive an accurate HCC score—please contact us.





Topics: Clean Data, Automation, Revenue Cycle, Value-Based Reimbursement, HCC Coding, Risk Adjustment