Hierarchical Condition Category (HCC) and Risk Adjustment Coding are Paramount to MACRA Success

Posted on 25 Nov, 2017 |comments_icon 5|By Elizabeth

Today’s coders need to get up speed on risk adjustment coding and HCC coding selection because clinical documentation in your HCC coding, including RAF scores, will impact your payment under MACRA.

Role of HCC Coding in Reimbursement Under MACRA Programs

  • Proactive attention to ICD-10 coding specifics, physician documentation improvement, and Hierarchical Condition Category (HCC) coding will help practices implement a successful QPP strategy
  • Coding for HCC mapping can have a big impact on reimbursement under MIPS and AAMPs. Since HCCs factor into the risk adjustment score used by CMS to predict future costs, it is imperative that coding professionals code to specificity and understand HCC code mapping and selection.

Be proactive. It’s imperative that coding professionals code to specificity and understand HCC coding mapping and selection because these have a tremendous impact on reimbursement under MIPS and AAMPs.

Work with your physicians to ensure you capture the appropriate, most specific ICD-10 diagnosis. Physician documentation, or the billing provider’s documentation, must be the best it can be to support the provided services and to confirm your selection of the appropriate HCC coding category.

What is Risk Adjustment (RA)?

The RA program is designed to ensure that premiums cover patients who require above average care. It simultaneously lowers premiums for patients expected to require fewer resources, and thus is geared to provide healthcare access to all patients while protecting the financial well-being of providers and payors.

Specifically, RA refers to an actuarial tool used to determine a risk score that can predict healthcare costs based on factors pulled from claims and medical records collected by physician offices, hospital inpatient visits, and various outpatient settings. These factors include demographics, severity or “disease burden”, and ICD-10-CM codes. Forms of risk adjustment methodologies include DRGs, CMS-HCCs, HHS-HCCs, CDPS, and VBP.

Under the RA payment model, patients in the same hospital or medical practice can have different payment rates, depending on their RAF scores, which project the amount of care expected to be involved in maintaining their health.

After Medicare Advantage Plans started requiring Risk Adjustment Factor (RAF) scores for reimbursement, Accountable Care Organizations (ACOs) and the Hospital Value-Based Purchasing (HVBP) program followed suit. The protocol, since adopted by a growing number of commercial payors, is here to stay.

Government and private insurances reimbursing according to risk adjustment payment methodologies:

  1. Ambulatory Care Groups (ACGs)
  2. Chronic Illness and Disability Payment System (CDPS) (Managed Medicaid)
  3. Diagnostic Cost Groups (DxCGs)
  4. Hierarchical Condition Categories (HCCs)
  • CMS HCCs (Managed Medicare “Part C”)
  • HHS HCCs (Managed Commercial in Health Insurance Exchange)
  • RxHCCs (Prescription drug benefit “Part D”)

Providers must now identify all chronic conditions and severe diagnoses for their patients to establish health profiles that predict costs in the subsequent year. Providers and medical coders who fail to capture relevant conditions will receive lower reimbursement.

Bottom line: Knowledge of the risk adjustment process is the best defence against violations and compromised revenue.

The payment to healthcare providers is driven by members’ risk scores. The higher the risk adjustment score, the more severe the illness and potential cost of care. The lower the risk adjustment score, the less severe the illness and potential cost of care. In other words, low risk scores reflect patients who are healthier. They could, however, just as easily reflect inadequate documentation or coding.

You need proper and specific documentation. Specific diagnoses drive HCC selections, and therefore determine your risk adjustment scores.

You have an opportunity, if not an obligation, to capture chronic conditions and other issues. Make every effort to verify that your RAF scores match the health status of your patients. You don’t want low RAF scores if your patients are unhealthy.

Factors for Calculating Risk Scores

The purpose, again, of the risk adjustment model is to ensures adequate payment based on expected medical costs. Without risk adjustment, payment would be based on demographics alone—meaning, a patient’s age, sex, and other characteristics. It’s not in anyone’s best interest to discount chronic and severe illnesses. We want to consider all health factors related to a patient.

Risk Adjustment Scores

  • Organizational average RAF score
  • 1 = patient expected to use average resources
  • <1 = patient expected to use fewer resources
  • >1 = patient expected to use greater than average resources
  • RAF Score = patient score for a full year, combination of:
  1. Demographics – age, sex, disability, Medicaid eligibility
  2. Health Status – diagnoses reported determines HCC category

CMS and other agencies that pay according to the RA model look at the RAF score. A patient with a RAF score of 1 is an average patient expected to require average resources. Those with RAF scores under 1 will require less than average resources, and those with RAF scores higher than 1 will require above average resources.

Knowing the appropriate RAF score for your patients enables you to compare them with the RA model, and thus determine costs for the subsequent year. Each score comprises two components: demographics and health status, which is the diagnoses that determine the selection of HCCs. Not all diagnoses have an HCC, only those that predict future cost. Transient conditions, such as appendicitis or a UTI, have no predictive value and therefore are irrelevant to risk assessments. The same is true of symptoms with discretionary diagnosis and treatment. Ruled out diagnoses, of course, are also excluded.

If you’re confused by the CMS risk adjustment programs, TCI’s end-to-end Risk Adjustment Primer will get you up to speed and equip you to navigate the risk assessment data that factors into patient risk scores.



Elizabeth works on an array of projects at TCI, researching and writing about modern reimbursement challenges. Since joining TCI in 2017, she has also covered the nuts and bolts of cybersecurity, compliance with federal laws, and how to tap into the advantages of telehealth services.

More from this author

View More

5 thoughts on “Hierarchical Condition Category (HCC) and Risk Adjustment Coding are Paramount to MACRA Success

  1. I enjoy you because of all your valuable effort on this web page. Gloria enjoys engaging in investigation and it’s really obvious why. My partner and i learn all of the powerful manner you give priceless guidance through your web site and in addition foster participation from other ones on the theme then our simple princess is in fact being taught so much. Have fun with the rest of the year. You’re carrying out a remarkable job.

  2. Thank you so much for giving everyone an extraordinarily remarkable opportunity to read from this web site. It really is so great and jam-packed with a good time for me personally and my office fellow workers to search the blog more than three times in 7 days to read the fresh issues you will have. And indeed, I’m certainly fascinated considering the striking tactics you give. Selected 1 facts in this posting are undeniably the best we have had.

  3. I want to show my passion for your generosity giving support to women who should have help on this subject matter. Your personal dedication to getting the solution all over turned out to be exceedingly practical and has without exception encouraged men and women much like me to arrive at their desired goals. This invaluable information entails this much to me and further more to my peers. Thank you; from each one of us.

  4. Thank you for every one of your effort on this website. My mother takes pleasure in going through internet research and it’s easy to understand why. My spouse and i learn all relating to the lively medium you produce precious tips and hints on the website and attract participation from other individuals on this theme and our favorite daughter is truly discovering a lot of things. Take pleasure in the remaining portion of the year. You’re conducting a glorious job.

  5. I needed to draft you a very little note just to say thanks once again considering the magnificent tricks you’ve documented on this website. This has been simply open-handed with you to present openly exactly what many people might have distributed as an e book to help with making some money on their own, mostly now that you could have done it if you ever decided. These guidelines likewise acted like the easy way to fully grasp that other people online have the identical eagerness just as mine to see a lot more around this problem. I know there are a lot more fun periods ahead for people who looked over your blog post.

Leave a Reply

Newsletter Signup