As the healthcare industry shifts to value-based payment models, HCC coding has become more prevalent. This model originated in 2004 to help payers forecast healthcare costs for patients with complex medical conditions or multiple chronic illnesses.
This model relies on patient-specific risk scores that reflect health complexity and risk-adjusted quality performance. It also captures demographic information such as age and medical condition documented through face-to-face encounters with a healthcare provider.
What is HCC?
HCC (hierarchical condition category) coding is a risk-adjustment model used by health insurance and Medicare Advantage programs to pay providers more or less depending on a patient’s health status. Medicare Advantage uses this model of plans, private health plans and Medicaid to determine how much a patient will be reimbursed.
A patient’s RAF score is determined by analyzing their age, gender and disease conditions using their medical records. This information is then used to predict a patient’s yearly cost.
As a result, the more chronic health conditions a patient has, the higher their risk score will be. These chronic conditions require more attention and resources to keep the patient healthy and are more likely to develop complications or require additional treatment.
As healthcare moves toward value-based care, providers must be able to demonstrate the complexity of their patients. This is why HCC coding has become so important. It helps paint a complete picture of a patient’s long-term health needs, including complexities such as social determinants of health.
What are the HCCs?
HCCs are a risk-adjustment model used by the Centers for Medicare and Medicaid Services (CMS) since 2004 to help estimate the healthcare costs of specific patients. Today, CMS and most commercial payers use this model to set capitation payments for Medicare Advantage plans, Medicare Shared Savings Programs, Medicaid, and private health insurance.
Hierarchical Condition Category coding (HCC) groups similar diagnosis codes together to help predict risk and expected healthcare costs for patients with chronic conditions. This method is applied to various healthcare reform initiatives, including value-based payment models.
In a nation where reimbursements are moving away from an entirely fee-for-service (FFS) model, HCC coding is essential for communicating patient complexity and providing patient-centered care. By correctly describing a patient’s complexity, providers can more appropriately characterize risk and enhance shared savings.
However, HCC coding requires more than documenting presenting symptoms during an office visit. It also requires clinicians to report chronic conditions affecting a patient’s health. Please do so to ensure patient care is maintained. This is why many practices and facilities have developed documentation programs to educate physicians about improved coding and documentation practices.
What are the RAF scores?
HCC coding uses ICD-10 codes to delineate health statuses and chronic conditions. These chronic conditions are assigned a payment value based on their severity and impact on healthcare costs.
The Centers for Medicare and Medicaid Services (CMS) use these hierarchical condition categories to determine a patient’s risk score and the projected healthcare cost they will incur. This is a way to ensure that the amount of money an organization will have to pay in the future is reasonable.
To determine a patient’s RAF, CMS considers their demographic and disease risk scores. A patient with a healthy demographic will have a lower RAF, and a sicker patient will have a higher RAF.
RAF scores are calculated annually to estimate a patient’s expected healthcare costs over time and then factored into their total expected reimbursement for that year. The higher the RAF, the more resources an organization will spend to deliver care.
The RAF score is crucial in determining how much an organization will receive in reimbursement each year and must be accurate. A low RAF score will result in a lower reimbursement than the organization deserves. This can be especially problematic for value-based care organizations that oversee patients’ complex and interdisciplinary care across multiple settings and clinical teams.
What are the ICD-10-CM codes?
ICD-10-CM codes are medical coding standards that classify diagnoses, procedures and services provided by physicians and other healthcare providers. They are maintained by the Centers for Medicare and Medicaid Services (CMS) and the National Center for Health Statistics (NCHS).
ICD codes are standardized representations of medical diagnoses and other information needed to document clinical situations. These codes are essential to healthcare billing, treatments, and statistics collection.
The ICD-10-CM is a comprehensive system with more than 68,000 codes and has flexibility for expansion. It is based on the International Classification of Diseases (ICD) created by the World Health Organization.
ICD-10-CM codes are segmented into chapters based on body systems and conditions. For example, if you were working in an outpatient physical therapy setting, you would submit ICD-10-CM codes from Chapter 13: diseases of the musculoskeletal system and connective tissue.
What are the coding rules?
As the healthcare industry evolves into value-based payment models, HCCs and risk adjustment are becoming more relevant than ever. As such, medical practices need to understand the coding rules.
Hierarchical condition category (HCC) coding involves using the ICD-10-CM code set to identify risks for each patient. This helps assign risk values, or RAF scores, used in value-based payment models to determine reimbursement for Medicare beneficiaries.
In addition, HCC coding requires medical practices to follow the International Classification of Diseases, Tenth Edition (ICD-10) coding guidelines when selecting diagnosis codes for each visit. Please do so to avoid assigning an incorrect risk level to the patient, which can negatively impact future payments.
However, many office-based physicians need to gain coding expertise or documentation skills. As such, it’s often difficult for them to accurately capture all HCC diagnoses–even those that occur outside of an inpatient setting. This can cause several issues, including omissions or gaps in clinical care, coding errors and poor template diagnoses. These coding problems can affect a practice’s RAF score and reduce health plan payments.
