In the past few years the role of Hierarchical Condition Categories, or HCCs, in payer reimbursement has done nothing but intensify. Health care in recent years has made a huge push in the direction of quality over quantity. What this ultimately means is that HCCs are not going away anytime soon. Healthcare finance and health information professionals are becoming increasingly savvy in their knowledge and strategies pertaining to physician collaboration and accurate documentation in an attempt to stay ahead. The HCC model aims to provide healthcare reimbursement reform initiatives geared specifically to risk adjustment contracts. Some commercial health plans apply HCCs to accurately predict the cost of care to risk based patients. It is first important to understand that the federal government uses two HCC models: CMS-HCC and HHS-HCC. At the most basic level these models aim to implement a risk adjustment score in an attempt to predict future health care costs for various patient healthcare plans. The CMS-HCC model pertains to Medicare Advantage (MA) for those primarily 65 years and older and includes over 9,000 ICD-10 codes that relate directly to 83 HCC codes. In contrast, the CMS-HCC model is maintained by the Department of Health and Human Services. This particular model relates to commercial payer populations within the health exchanges.  CMS-HCC uses CPT or current procedural terminology, ICD-10 codes, and has 131 HCC codes in 2019.

So how are risk adjustment programs actually using and implementing HCCs? We have to fist look at which risk adjustment payment programs are currently using HCCs to calculate reimbursement. These programs include Medicare Advantage Plan (MA) and small group and individual market populations within the ACA (Commercial). These models function simply by using ICD-10 codes submitted on claims and assign the appropriate HCC’s for individuals with serious or chronic illnesses. Once that is determined a risk factor score or “RAF” (Risk Adjustment Factor) is then assigned based on the individual’s health factors and demographic information. Patients with more serious conditions or chronic illnesses are generally assigned a higher risk factor and risk adjustment score. This model is revolutionary in the sense it allows CMS to pay plans for the risk of the beneficiaries they enroll, instead of an average amount for Medicare beneficiaries. Because of this, CMS is now able to base payments for enrollees with different expected costs. This all sounds great, but it is important to understand that the RAF data for programs like the above are based on active diagnoses. Ultimately, what this means is that providers must ensure the information is accurate and updated annually. Under this reimbursement model the providers are required to complete specific treatment protocols with patients and thoroughly document all relevant diagnoses for the patient’s medical record. Accuracy of the documentation is vitally important.

To ensure the highest level of reimbursement, the devil is in the details. Our next blog post will cover the financial impact and the five steps that influence the adjustment up or down. Stay tuned.